Shares of

ATI Technologies

(ATYT)

plunged more than 12% Thursday after the graphics chipmaker offered a disappointing outlook for its current, or fourth, quarter and missed revenue estimates for the just-completed period.

The stock's decline came even though the company's third-quarter earnings topped the Street's expectations.

The second half of the company's just-completed quarter was weaker than expected, said ATI CEO Dave Orton in an interview with

TheStreet.com

. The company expects its results to rebound later this year as

Intel's

(INTC) - Get Report

introduction of new chips and

Microsoft's

(MSFT) - Get Report

introduction of its Vista update to its Windows operating system spur PC sales, Orton said.

But the company isn't certain when sales will pick back up, he said.

"We're excited about the back half of the year, but we don't know exactly the timing of the ramp," he said. "We thought it was prudent to be cautious."

But investors weren't pleased. In recent trading, ATI shares were off $1.65, or 10.7%, to $13.85. Earlier in the session, shares fell as much as $1.89, or 12.1%, to $13.61.

In its third quarter, which ended May 31, ATI earned $31.9 million, or 12 cents a share, in the quarter, compared with a loss of $400,000 a year ago. Sales rose 23% from a year ago to $652.3 million.

Excluding stock-options expenses and certain other charges, ATI would have earned 16 cents a share.

On this basis, analysts polled by Thomson First Call were expecting the company to earn 16 cents a share on sales of $661.3 million. In March, the company

predicted that it would post sales of between $640 million and $680 million. It did not give a bottom-line forecast.

But it was the company's guidance for the current quarter that likely addled investors. The company is expecting sales of $620 million to $660 million for the quarter.

Although it again did not give specific earnings guidance, ATI's outlook for expenses implies an earnings range of between 12 cents and 22 cents a share, depending on its tax rate.

The Street was expecting a much better outlook. The consensus forecast called for earnings of about 20 cents a share -- well above the midpoint of ATI's implied guidance -- on sales of about $694 million.

By segment, PC revenue rose 8.5% from a year ago to $499.7 million, while consumer revenue rose 120% to $152.6 million. ATI said its gross margin was 30.1% in the latest quarter, up from 29.1% a year ago.

The company's PC-sales were weighed down by soft sales of its flagship discrete graphics chips. Notably, sales of desktop discrete chips fell 10% in the quarter from the year-ago period. But discrete notebook chips also fell by an undisclosed amount.

Orton blamed the declines on a shift in sales in the PC industry in the quarter to lower-end machines, which typically include cheaper integrated graphics processors.