ATI Posts Jump in Profit - TheStreet

Updated from 9:23 a.m. EST

Boosted by surging PC sales, graphics-chip maker

ATI

(ATYT)

posted sturdy results in the first quarter of fiscal year 2004, in line with its upwardly revised guidance. It said the quarter now under way would be stronger than usual.

At around 10:30 a.m. EST, the stock was up 49 cents, or 4.2%, to $12.14.

The company posted sales of $469.7 million, up 40% from last year's levels and above the Wall Street consensus estimate for $458 million.

ATI said record revenue was due in part to strong sales of notebook computers. ATI has a nearly 60% market share in notebooks.

Profit totaled $47.4 million, or 19 cents per share, a penny above expectations. Analysts were looking for EPS of 18 cents, in line with ATI'supwardly revised guidance for a range of 16 cents to 20 cents as of Nov. 17.

The latest profit report is well above net income of $7.3 million, or 3 cents per share, for the first quarter last year.

On the conference call, ATI said it's seen good penetration into the value and mainstream markets in desktop discrete processors, noted UBS analyst Martin Cecchetto. "We think that can continue to grow in 2004," he said. UBS hasn't recently done investment banking for ATI.

In another auspicious sign, ATI said it had considered raising its target range for gross margins, currently 32% to 35%. "They've been above that for the last two quarters," Cecchetto said.

In the fiscal first quarter, ATI's gross margin stood at 35.9% of sales, up 8.7 percentage points from the same period last year thanks to improved margins on desktop discrete, notebook integrated and consumer products.

ATI also said results for the second quarter would be "stronger than typical seasonality," based on the strength of its product line, increased channel penetration and an improving PC market.

ATI guided for sales of $430 million to $470 million, above Wall Street expectations of $427 million. It said gross margin should be in the upperhalf of its target range of 32% to 35%.

ATI didn't give EPS guidance, but analysts were expecting 14 cents leading up to the call.

Last week shares of ATI were added to the Nasdaq 100 index.