Markham (ON) - ATI today reported revenues of $591 million and net profit of $7.6 Million for its first fiscal 2006 quarter. The company showed substantial financial improvement over the preceding quarter as the new X1000 chip series ramps in production, but repositioned older X800 chips and a strong increase in IGC shipments kept down margins and profits.

Compared to the fourth quarter, ATI is on a street of recovery, but the company is far from the profitability and performance it had achieved a year ago. Year-over-year revenues for the three-month period are down 4% from $614 million ; profit even 88% from $64 million.

The continued delay of the X1000 series of product weighed heavy on ATI, as the new product line only contributed 10% of the firm’s revenues. As a result of the delays and due to competitive pressure, ATI said it was forced to reposition its older X800 products from the performance into the mainstream segment which deteriorated revenues and profit margins.

Overall, ATI experienced a 10% decline in its PC business year-over-year. A substantial decrease in sales for its standalone graphic cards was partially offset by a significant increase in shipments for its Xpress200 chipset. However, the shift in product mix had a significant impact on the firm’s profit margins, which dropped from 34.0% in the first fiscal quarter of 2005 to 28.7% in the first fiscal quarter 2006.

According to sources, ATI was able to ship "millions" of Xpress200 chipsets to Intel, which currently experiences a production shortage of entry-level chipsets for its mainboards. However, Intel already announced that it expects this situation only to be temporary, as the company wants to return to its own chipsets as soon as its 90 nm chipset production capacity becomes available in the second and third quarter of 2006.

A more positive story is ATI’s consumer electronics (CE) business. During the quarter, the company shipped its 10 millionth DTV chip and improved its CE results by 31 percent from sales of $96 million to $125 million year-over-year. ATI also shipped 21 million graphics processor for the handheld market, which is about half the volume of all handheld processors the company shipped in fiscal 2005. Also, ATI has begun recording revenues from licensing the graphics processor design used in Microsoft’s Xbox 360.