- BMO Capital Markets' Brian Piccioni is negative on ATI Tech (NASDAQ:ATYT)notes that according to a report by the usually reliable Inquirer (http://www.theinquirer.net/default.aspx?article=33072 ) a recent Intel product roadmap indicated the company will no longer be using ATI Integrated Graphics Processor (IGP) chipsets in its desktop motherboards. As the firm has noted repeatedly, they estimate 20% of ATI's PC related revenues are associated with IGP business it largely inherited from Intel when the latter decided to temporarily exit the low end chipset business as it reallocated and upgraded its manufacturing resources. Although these IGPs are decidedly low margin products, they estimate the loss of this business could trim EPS by roughly 50%.
What the firm does not know, however, is what portion of ATI's chipset business is associated with Intel Desktop motherboards, although they suspect it is a significant relationship. In any event, Intel's possible decision could suggest the company is aggressively pursuing the business, which they continue to expect will be largely repatriated. The good news is that, because low end IGP products have such low margins, the possible loss of this business would result in ATI's Gross Margins increasing, which is the spin te firm would predict the bulls would use to position this potential development.
Maintains Underperform and $10 tgt.
What the firm does not know, however, is what portion of ATI's chipset business is associated with Intel Desktop motherboards, although they suspect it is a significant relationship. In any event, Intel's possible decision could suggest the company is aggressively pursuing the business, which they continue to expect will be largely repatriated. The good news is that, because low end IGP products have such low margins, the possible loss of this business would result in ATI's Gross Margins increasing, which is the spin te firm would predict the bulls would use to position this potential development.
Maintains Underperform and $10 tgt.
Notablecalls: Not sure what to say about this one.
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