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ATI shares drop on earnings warning

The graphics chipmaker's stock drops 14 percent after the company warns it will post a loss in its fiscal second quarter amid a slowdown in business.

Shares of ATI Technologies fell 14 percent Thursday after the graphics chipmaker warned it will post a loss in its fiscal second quarter amid a slowdown in business.

Markham, Ontario-based ATI said it expects to report an adjusted net loss of 11 cents to 13 cents per share when it releases earnings March 28. The company blamed the shortfall on lower-than-expected revenue and costs related to its purchase of memory chips before the recent slide in prices. Its fiscal second quarter ended Wednesday.

ATI had already lowered its outlook for its second quarter, saying in January that it expected its adjusted results to come in at breakeven. Also at the time, ATI had said it expected revenue approaching $300 million. The company now sees revenue at about $230 million, a representative said.

In early afternoon trading, shares of ATI were down 75 cents, or 14 percent, at $4.50.

ATI has seen its fortunes dip amid strong competition from Nvidia, which last week announced its next-generation GeForce3 chip for Apple's Power Mac line.

Until recently, ATI had a virtual lock on the Macintosh market, but the company seen its share slip in that market, as well as in the PC market.

ATI said it expects modest revenue growth in its third quarter compared with its second quarter. This, combined with higher profit margins and cost cuts, should "move adjusted net income back toward breakeven," the company said in a statement.

"We expect to see an improvement in our business outlook by the end of the calendar year as new products are introduced and assuming the PC market strengthens," Chief Financial Officer Terry Nickerson said in the statement.