What about ATI?

So, in terms of their CPU business, AMD's prospects for Q107 obviously seem rather weak, to say the least! Their issued statement doesn't even mention the former-ATI operations though, so that makes it much more difficult to estimate how that part of their business is going. In terms of GPUs, there wasn't any significant change in the market compared to Q4. G80 is still there, G84/G86 still aren't. RV560/RV570 still seem to be doing quite nicely. Vista has arrived, but it apparently hasn't changed much of anything. OEM bundling for AMD might also begin to make more of an impact, but that's very hard to say at this point.

So nothing really new there. In terms of chipsets, it's fairly hard to judge how things have been going for AMD, especially so since CPU+Chipset bundling is a very important part of their strategy. NVIDIA's MCP61 product family apparently did very well in the IGP market in Q3/Q4, which is AMD's traditional strength - but it would certainly surprise us if NVIDIA managed to achieve even more momentum in the market with that chip in Q1. It's not impossible, but doesn't seem very likely. AMD's RS690 also didn't have any massive impact this quarter, we'd imagine, so that's another business unit that should be relatively stable, at least in theory.

Consumer Electronics is yet another former-ATI business unit, and it's also quite particular because it isn't that big in terms of revenues but it has very nice gross margins. NVIDIA's guidance for handhelds in Q1 wasn't amazingly positive, so it's not impossible that ATI would also be down slightly more than is traditional for a Q1. Other factors, such as perhaps Microsoft trying not to get excess inventory of 90nm XBox360 chips before they transition to 65nm might also play a role here. So it wouldn't be particularly surprising if CE was rather weak, really. But in terms of revenue, that wouldn't change much.

So overall, the prospects there for Q107 (and Q2?) look fairly decent, and certainly much better than those in the Computing Solutions unit. It is possible that a slightly bigger decline than expected will occur for GPUs and Chipsets in Q107, but we believe it is very unlikely to be significant, at least in terms of revenue. As for gross margins, it'd make sense for them to go down slightly as ASPs erode naturally among other things, but nothing dramatic there we'd imagine.