Novice Investing - Turnaround for ATI?

Date: Monday 01st 2008f December 2008 05:28:15 PM

Turnaround for ATI? - 09/04/2005

By: Hari Wibowo

A week ago, I recommended looking at stocks that are trading close to 52 week-low to look for potential turnaround investments. ATI Technology Inc. (ATYT) is one of such list. On Monday, the turnaround did not look to be in place anytime soon. It slashes revenue estimate by a whopping 100 Million for 4 Q 2005 while inventory will be written off by $ 70 Million.

Is this good? In the surface, it is horrendous. ATI missed revenue prediction by 20% from their earlier prediction back in June 2005. Can two months make a huge 20% in revenue difference? I don't know. But if that is the case, then ATI's revenue estimation just stinks. Furthermore, it now has to write off 15 % of its inventory, based on May 31st 2005 figure. Inventory was quoted at $ 456 M back then.

15% worth of unsold inventory and 20% revenue miss in two months? You tell me. Management was not straight forward back in June. How else can they explain that? In my opinion, they are trying to leak all the bad news before the fiscal year ends. This way, they can start fiscal year 2006 fresh and have a chance of improved performance.

There are reasons for optimism. One is that ATI has been selected to supply the graphic processor for Xbox 360 console this fall 2005. ATI Technology still boasts a positive net cash of $ 2.55 per share. There are rewards for investors who can wait. However, I would prefer to wait until they report 4Q 2005 earning before making a fair value estimation for ATI. Earning call for 4Q 2005 is slated to be announced during mid to end of September 2005.

My guess is they will somehow provide disappointing guidance. But if they don't, the share price might rise to reflect the optimism and we had missed buying ATYT at this level. I'll take that chance for now. Management has not proved that it can provide accurate guidance so far.

END

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding ATI Technologies (ATYT) or other securities.

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