What the hell is up with ATI Technologies (ATYT) stock?

The stuff has been on a steep decline since the beginning of April. It’s gone down about 10% in the last two weeks. What gives?

I bought the stock back in the fall and enjoyed a nice little boost as the price rose from $16.40 to around $20. Since that early peak, I’ve watched the stock price slowly fall in spite of good news item after good news item.

There was one black sheep in the great white flock of ATI news. A slew of former ATI executives are now settling huge insider trader lawsuits. Now we’re not talking Enron or WorldCom huge, but millions of dollars.

So I’ve finally pulled out with the price at $14.80. Still I have my doubts as ATI minus the crooked executives of yesterday is a strong company with great placement to move their product into larger markets. The large majority of their profit comes from the sale of graphics cards for PCs and Laptops. But with Videogame Consoles, TVs, and any number of futuristic graphical devices entering the world of 3d, ATI as a market leader is looking to make a ton of dough. Heck, they’re making a ton of dough right now, undervalued, and outperforming their street numbers.

ATI is a company with good numbers and a great outlook for the future. The one thing they have against them is this insider trading issue. Don’t get me wrong. I’m not saying that insider trader isn’t a big issue or a great reason to distrust a company and dump their stock. However, ATI is now going to be under a lot of scrutiny and I imagine the new breed of execs running things there are going to take corporate ethics really seriously.

I spent a bit of time at a pharmaceutical plant for work. One of the anecdotes told at the plant is about the guy who’s job it is to pour a liquid form of the medicine they are making from 5 liter bottles into 1 liter bottles. The medicine is highly concentrated at this point and each 1 liter bottle has a value of about 50 million dollars. The people pouring out these flasks joke that a drop of the stuff is roughly equal to their annual salary. Anyway, the story is that one time one of these guys dropped an entire bottle of the stuff on the floor. 50 million literally down the drain. When told the story, I joked, “How long did it take to fire that guy?” The response was, “We didn’t fire him. If we fired him we’d just have to hire another guy who might do the same thing. Do you think that guy who dropped the flask once is going to take his job for granted and drop the flask again?”

ATI is like that guy who dropped the flask. We hope that they’ve learned their lesson and can keep their hands clean while taking advantage of all that know how and market position they have. My plan is to wait for the stock to bottom out on this bad news and pick it up when it’s cheaper. Now that I’ve sold my stake, I’m hoping it hasn’t bottomed out just yet.