ATI's quarterly sales and income dipped sequentially during its most recently completed quarter, Q2 FY2005, but the graphics chip maker was able to post big year-on-year gains.

For the three months to 28 February, ATI made sales totalling $608m, up 31 per cent on the year-ago quarter's $463.3m, but down on the previous quarter's $613.9m total.

Net income for the quarter came to $57.2m (22 cents a share), 20.2 per cent up on Q2 FY2004's $47.6m, but down nine per cent on Q1 FY2005's $63.7m. Without one-off expenses, including $10.3m in stock-based compensation costs, the latest quarter's income would have been $66.2m (25 cents a share).

Gross margins remained unchanged from the previous quarter: 34.2 per cent.

As ATI CEO Dave Orton himself admitted, the first few months of a new calendar year are traditionally weak for the graphics chip business, so the company's sales figures could have been much worse.

"Strong sales of discrete PC products helped to offset the anticipated seasonal weakness in our digital consumer business, which we expect will rebound nicely in the second half," said Orton, in a statement.

Focusing on Q3 FY2005 specifically, the company said it expects its consumer business to grow slightly, but its PC business will decline. The upshot will be revenues of $560-600m, representing a 2-8 per cent sequential decline, but a 14-22 per cent increase over Q3 FY2004.

Operating expenses, excluding stock-based compensation costs, are expected to increase by about five per cent sequentially, ATI warned.

"Looking into the fourth quarter, we expect our consumer business to nearly double revenues from third-quarter levels," the company added, "and expect the PC business to be better than seasonal due to growth in integrated and new products." ®

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