Another psychological stock milestone for ATI [Archive]

Joe DeFuria

02-Oct-2003, 20:55

Sabastian

02-Oct-2003, 22:43

Hum making comparisons like that has absolutely no basis :)

The total shares x share value could be usefull to estimate how the market sees both companies and in that case ATI >>>> Nvidia

Of course, a higher share price is just a "psychological" milestone as I indicated in the title. No real bearing on anything financially important.

Actually ATi better show some real increase in revenues tomorrow else, comparatively speaking of course, they are overvalued. From a long term perspective they do have some real good looking prospects that help prop the stock price even if they do not have such a great increase on their bottom line. Chipsets, MS Xbox2, Nintendo deal, handheld, laptop, set-top box and still holding firmly on the mid range and top end in the desktop realm. The only real gap is a low end DX9 solution but I am thinking the Radeon 9600SE will be priced for it. I don't see anything from nvidia but the FX5950 and unreleased drivers that reduce IQ so far.

Joe DeFuria

03-Oct-2003, 11:16

Actually ATi better show some real increase in revenues tomorrow...

Your wish is granted. ;)

http://biz.yahoo.com/bw/031003/35126_1.html

Dave Baumann

03-Oct-2003, 11:22

35.6% margins! Shit, they are doing something right!

andypski

03-Oct-2003, 11:44

35.6% margins! Shit, they are doing something right!

I lkike to think that we are doing a few things right now and then... ;)

Dave Baumann

03-Oct-2003, 11:53

Like type like right? ;)
:D

mczak

03-Oct-2003, 12:00

nice earings, despite the cirrus logic patent which cost them 9 million.

The suit claimed infringement of US Patent No. 5,841,418 issued on November 24, 1998 entitled "Dual displays having independent resolutions and refresh rates". On October 1, 2003, ATI Technologies announced that it had entered into a cross-license agreement with Cirrus Logic and has settled all outstanding litigation between the companies.

After a quick look at the patent (you can look it up at uspto.gov) this sounds to me like a quite obvious idea which probably everybody else would infringe too.

hjs

03-Oct-2003, 12:11

if by Friday at 4pm est, ATI closes over 17 a share, I will buy a brand spanking new ATI 9600XT card or nV FX 5700 Ultra (Your Choice) when I can get one and give it to someone on these forums. (http://www.nvnews.net/vbulletin/showthread.php?s=&threadid=18822)

:roll:

andypski

03-Oct-2003, 12:28

Like type like right? ;)
:D
I think we should be allowed to get a few things wrong as well... :D

RussSchultz

03-Oct-2003, 13:42

Yes, Damn Cirrus. (They sued Sigmatel nearly out of business a few years back).

Joe DeFuria

03-Oct-2003, 14:09

35.6% margins! Shit, they are doing something right!

Despite all the talk about "technical" reasons given for not having higher clocked memory on their products, I still contend that this is the reason.

Increasing market share while increasing margins = no big need to push higher, and in fact, can be a detriment to their business.

Congrats ATI, on "doing things right!"

RussSchultz

03-Oct-2003, 14:59

35% GROSS margins isn't stellar, btw.

50-60% is what most fabless semiconductor companies shoot for.

Joe DeFuria

03-Oct-2003, 15:04

35% GROSS margins isn't stellar, btw.

nVidia wishes they as "non stellar" as that...

50-60% is what most fabless semiconductor companies shoot for.

Do most fabless semiconductor companies have 6 month product turnovers, and require the R&D expenditures that companies like ATI and nVidia have to remain competitive?

I thought it was well established that the discreet graphics chip market (at least at this time) was rather unlike "most fabless semiconductor companies..."

RussSchultz

03-Oct-2003, 15:41

35% GROSS margins isn't stellar, btw.

nVidia wishes they as "non stellar" as that...

I'm sure they do, but what does that have to do with anything? Why is this always ATI vs. NVIDIA to you?

50-60% is what most fabless semiconductor companies shoot for.

Do most fabless semiconductor companies have 6 month product turnovers, and require the R&D expenditures that companies like ATI and nVidia have to remain competitive?

I thought it was well established that the discreet graphics chip market (at least at this time) was rather unlike "most fabless semiconductor companies..."
That's nice. That's all the more reason to have a high gross margin! Gross margin is revenue minus cost of goods sold(manufacturing, not R&D)

I'd guess it really doesn't matter what part of the industry you're in, the investors are interested in ROI. 5% ROI isn't much to crow about, from an investment standpoint. INTC, for example, seems to make 15% ROI. SLAB makes 12%.

Guess what? they've all got a higher gross margin because its required to make money when you've high operating expenses from R&D, it only gets worse when you have a 6 month development cycle.

Joe DeFuria

03-Oct-2003, 15:50

I'm sure they do, but what does that have to do with anything? Why is this always ATI vs. NVIDIA to you?

It's not. 35% gross margins is good historically speaking, for this market segment. nVidia ("The Market Leader or at least next best competitor) was used as the example.

That's nice. I'd guess it really doesn't matter what part of the industry you're in, the investors are interested in ROI.

Yes, and they are also interested in growth. ATI is moving in the right direction. That is something to "crow about".

5% ROI isn't much to crow about, from an investment standpoint. INTC, for example, seems to make 15% ROI. SLAB makes 12%.

That's nice. Why is everything ATI vs. INTC and SLAB to you?

Guess what? they've all got a higher gross margin because its required to make money when you've high operating expenses from R&D, it only gets worse when you have a 6 month development cycle.

Um, that's my point.

The 6 month development cycle is required to be competitive in this particular market (at this time, at least.) This puts immense pressures on margins. Again, see nVidia. The fact that ATI is moving the right direction in all respects: margins, revenues, market share....in this competitive environment is definitely something to "crow" about.

RussSchultz

03-Oct-2003, 15:53

You replied prior to me editing my post.

The relevant edit was: gross margin is revenue minus cost of goods. Engineering does not enter this equation.

The 6 month cycle would demand a higher gross margin percentage, assuming 6 month cycle would mean increased engineeering.

Joe DeFuria

03-Oct-2003, 15:59

You replied prior to me editing my post.

The relevant edit was: gross margin is revenue minus cost of goods. Engineering does not enter this equation.

Actually, it does.

Because more time to engineer can lead to a lower cost of goods.

The 6 month cycle would demand a higher gross margin percentage, assuming 6 month cycle would mean increased engineeering.

The 6 month cycle also means maintaining a higher cost of goods. (which in turn demands a lower margin.) You don't get a lot of time to lower the cost of goods and maintain the same selling price, because you are constantly replacing your product line up.

RussSchultz

03-Oct-2003, 16:13

Well then, you must be right.

I'll be sure to tell my CEO that 35% gross margin is fantastic.

Joe DeFuria

03-Oct-2003, 16:24

Well then, you must be right.

Who said anything about being right? I said that 6 month cycles in this competitive environment certainly CAN have a negative impact on gross margins.

I'll be sure to tell my CEO that 35% gross margin is fantastic.

While you're at it, ask him if beating the most optimisitic expectations on the street is a good thing or not.

OpenGL guy

03-Oct-2003, 16:55

35% GROSS margins isn't stellar, btw.

50-60% is what most fabless semiconductor companies shoot for.
It has nothing to do with being a "fabless semiconductor company" but everything to do with the business model. ATI's business model (listen to the conference calls for a better description) puts a good gross margin at about 35-36%. I believe nvidia aims for similar gross margins.

Mintmaster

03-Oct-2003, 17:04

OpenGL guy

03-Oct-2003, 17:08

I'm not a business type, but can anyone explain to me why ATI's stock price dropped so much today (CDN$1 so far) in light of the positive results? Did analysts have higher internal expectations that they didn't believe?
I'm no analyst, but I believe what happened was that people had expected ATI to beat estimates so the stock price went up in advance of that. Now that ATI has posted earnings which were in line with investor's expectations, people are cashing out. If ATI had shown stronger earnings (i.e. better than what investor's were thinking) then the stock price would have gone up some more.

Anyway, this is what I think.

Joe DeFuria

03-Oct-2003, 17:11

I believe the drop is due to ATI's cuatious margin outlook for the future. I haven't listened to the conference call yet, but I believe ATI is forecasting stagnant or slightly lower margins for next quarter. They are forecasting their normal 32-35%, which is below where they are at for Q4.

After some sell-off today, I expect the price to return to the 16's over the next week or two. I'm holding...

Sabastian

03-Oct-2003, 21:40

I agree with Joe on this. I have been watching both nvidia and ATi stock for years now. Ever since ATi stock was hammered years ago now ATi became typically conservative in their guidance. Nvidia however played differently and even at one point suggested that they would have nearly the entire market to themselves by this time. I think it is wise to keep things in perspective and consider ATi has a very high valuation. (price to earnings.) But it still looks like a very good long term investment for a lot of good reasons. This helps keep speculative investment and subsequently stock stays at a higher valuation as a result of the prospects a company in ATi's position has. I think the stock will trade in its current range for the most part with good news giving it some upward movement at times. The same however particularly in the short term could not be said about nvidia at present they are facing I believe significant market share loss.

Miksu

03-Oct-2003, 22:09

Anyway, this is what I think.

Called "The Nokia syndrome".

Fred da Roza

04-Oct-2003, 04:13

I believe the drop is due to ATI's cuatious margin outlook for the future.

You are correct. Can't post the link because it from my account but it says:

Adjusted earnings, which exclude goodwill amortization and other items, were $29 million, or 12 cents per share, compared with a loss of $100,000, or nil cents per share, the year before.

Revenue surged 71 percent to $380.7 million, topping ATI's own forecast, on strong demand from notebook computer and mobile phone makers.

Twenty-four analysts surveyed by Reuters Research, a unit of Reuters Group Plc, had expected, on average, adjusted earnings per share of 10 cents. Nineteen analysts had forecast, on average, revenue of $362.9 million.

But ATI shares fell, a move analysts attributed to concerns about the company's guidance. The stock reached its highest level since March 2002 on Thursday, and had tripled in value since the start of the year.

ATI shares closed down 99 cents, or more than 6 percent, at $15.29 on Nasdaq with more than 10.6 million shares traded. In Toronto, the stock fell C$1.43 to C$20.56 on volume of 3.7 million.

"There's a lot of concern around where gross margins will land in the next couple of quarters. The company alluded to seeing some pricing pressure in the marketplace and new products having margins that are lower than the corporate average," said Deepak Chopra, an analyst with National Bank Financial in Toronto.

"That's where you're seeing the stock take its hit today...the revenue guidance was good."

So ATI did extremely well this quarter exceeding expectations but it fell $1.43 CDN.

Sabastian

04-Oct-2003, 04:51

Yeah the 9100 IGP will take some of their notebook margins down even cutting into their own market share with it rather then the higher margin mobile parts. What they need to do with the 9100 IGP is to do volume shipments. Also they are using the low-k process for the 9600XT.(should be slightly more expensive.) But I think that they are also going to start moving into the lower end DX9 market with a withered 9600 part and so lower margins on low end DX9 parts of course. Overall though as far as PC graphics are concerned I believe the 9100 IGP will have low margins. I don't know much about their margins on Imageon or their set-top box parts ether. The question is if they can get their low end/low margin parts to ship in volume or not.

Joe DeFuria

04-Oct-2003, 12:30

So ATI did extremely well this quarter exceeding expectations but it fell $1.43 CDN.

It's kinda funny...the only expectation they did not exceed...is the expection on their expectations for the future. ;)

RussSchultz

04-Oct-2003, 13:20

Joe DeFuria

04-Oct-2003, 13:36

Well, when you give an advance warning that your margins will be falling on new products...

I guess they're not expecting their step to .11u to be an easy one. (Or .13u aren't as good as they had said)

I haven't heard their conference call yet...but there is increased competition in the lower end, you know. XGI does have a few design wins, and that can be putting pressure on prices.

IGP 9100 will probably start shipping in high volume, as will be the imageon. (I think there's a major cell phone ramp up this quarter.) These are both likely to be fairly low margin / high volume parts. I don't think the decreased margins say anything about 0.11 or 0.13 transitions...

Dave Baumann

04-Oct-2003, 13:56

Their margin range they were shooting for was 32%-35% and this Q they exceeded that. 110nm isn't going to be any kind of issue for next Q, or for the next 3 I should imagine. The reason they cite slightly falling margins is because they are focussing on increasing market share - part of that they expect to happen via 9100 IGP, and in this market they are dealing with the very price competetive Intel. So, basically it amounts to trimming off a little margin (but still withing their expected range) through the IGP products and increasing market share.

tazdevl

04-Oct-2003, 22:11

I think one thing you all are forgetting is that company turnarounds can take years to accomplish as the organization effects change. ATI is still in the midst of a turnaround. We've seen 2 consecutive quarters with a net profit since the 8500 debacle in 2001... which representated what folks @ INTC would call a strategic inflection point. Fortunately the gang chose wisely.

You can quote margins until the cows come home... the important issue is that the numbers have been improrving for the past few quarters... in an increasing manner.

I didn't look but I would assume that overall sector performance would also be responsible for the decrease in stock price.

digitalwanderer

04-Oct-2003, 23:13

which representated what folks @ INTC would call a strategic inflection point.
Is a "strategic inflection point" kind of like a "jump the shark" moment but you recover before you tailspin?

RussSchultz

04-Oct-2003, 23:32

I didn't look but I would assume that overall sector performance would also be responsible for the decrease in stock price.

The NASDAQ was up considerably on Friday. The category "computer peripherals" (which yahoo groups ATYT) was up 3.6% on friday. "semiconductors" was up 4.1%. Its direct competitor (NVDA) was up 2.63%.

Down was not the overall sector trend on Friday.