Graphics-chip maker ATI Technologies ( ATYT) is struggling with its core business. But investors decided Thursday that it didn't matter all that much. ATI reported earlier in the day that net income fell 40% in its second quarter as sales of its flagship PC products stagnated and gross margins plunged. Despite the crummy results compared with the year-ago period, investors bid up ATI's stock as much as 12% following the company's report. In recent trading, the company's stock was up $1.32, or 8.4%, to $17.05. So what's going on? Well, as bad as they were, ATI's results weren't as bad as the Street expected. And the company did offer somewhat better than expected results for its coming quarter. But, perhaps most importantly, the company indicated that even if the core business wasn't doing great, its newer ventures into providing graphics chips for products such as cell phones and televisions are growing great guns. Indeed, ATI's revenue from these "consumer" businesses -- the segment into which it lumps sales of everything but its PC graphics chip -- more than doubled in the just-completed quarter from the year-ago period. With the PC market slowing -- and especially with Intel ( INTC) taking increasing share of the graphics market with chipsets integrated into its CPUs -- both ATI and chief rival Nvidia ( NVDA) have been trying to diversify their businesses. Both companies are players in the next generation of video game consoles, for instance with Nvidia partnering with Sony ( SNE) and ATI teaming up with both Microsoft ( MSFT) and Nintendo. Also, Nvidia has focused on mobile phones, signing deals with the likes of Motorola ( MOT) and Sony Ericsson. In addition to mobile-phone makers, ATI has signed deals with digital television manufacturers such as Sony and Matsushita to incorporate its chips into their products.