Nvidia rides Tegra wave, beats on revenue outlook
* Mid-range of rev forecast beats expectations
* Non-GAAP EPS 27 cents
* Stock up 5 pct after hours
(Adds comment from CEO, details on supply and margins; updates
stock price)
By Noel Randewich
Aug 9 (Reuters) – Nvidia Corp (NVDA.O) forecast quarterly
revenue and margins above Wall Street estimates as it quickens
its expansion beyond personal computers into a thriving market
for tablets and smartphones.
With PC sales suffering from economic uncertainty and a
growing consumer preference for tablets, Nvidia has staked its
future on leveraging its graphics expertise to make
high-performance processors, branded Tegra, for mobile devices.
But it faces tough competition from the likes of Qualcomm Inc
(QCOM.O), Texas Instruments Inc (TXN.O) and Samsung Electronics
Co Ltd (005930.KS).
Nvidia won spots for its Tegra chips in two of the
highest-profile tablets to be launched in 2012.
In June, Microsoft Corp (MSFT.O) unveiled its Surface tablet
using Nvidia’s Tegra chip, while Google Inc (GOOG.O) launched
its Nexus 7 tablet, which also uses Tegra 3 and has had strong
sales.
The devices mark the first forays by Microsoft and Google
into a tablet market dominated by Apple Inc’s (AAPL.O) iPad.
Shares in the company once known mainly for its high-end
graphics cards have gained more than a quarter in value since
June, just before Microsoft and Google announced those product
launches.
“Going forward, the key focus is going to be Tegra, Tegra,
Tegra,” said Evercore analyst Patrick Wang. “I think it would be
hard to argue that there’s significant organic growth left in
the discrete graphics market.”
Consumer products revenue, the bulk of which comes from the
Tegra business, leapt 35.5 percent in the second quarter from
the first, more than double the growth of Nvidia’s traditional
graphics unit division.
Consumer products accounted for more than 17 percent of
total revenue in the quarter, up from 14 percent in the first
quarter.
As PCs lose popularity with consumers, those computers are
increasingly being manufactured without discrete graphics chips
like the ones Nvidia designs.
The recent Nexus and Surface announcements follow some
earlier disappointments for the company, including Samsung’s
reliance on its own chips instead of Nvidia’s.
TIGHT SUPPLY
In recent quarters, Nvidia and Qualcomm have suffered from
shortages of cutting-edge chips after contract manufacturer
Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW)
underestimated demand for its new 28 nanometer technology.
That has hurt sales of Nvidia’s top-of-the-line PC graphics
chips as well as Qualcomm’s high-end smartphone chips.
“We have no idea how much business we left on the table. And
we expect to be supply constrained throughout the quarter,”
Nvidia Chief Executive Jen-Hsun Huang told analysts on a
conference call.
Nvidia reported second-quarter gross margins of 51.8 percent
and said its third-quarter gross margin would be the same.
Analysts, on average, had expected a gross margin of 51.3
percent for the second quarter and 51.7 percent in the current
quarter.
Nvidia posted second-quarter revenue of $1.044 billion, up
from $1.016 billion in the year-ago quarter. It estimated
current-quarter revenue of $1.15 billion to $1.25 billion.
Analysts on average were expecting revenue of $1.007 billion
in the second quarter and $1.093 billion in the third quarter,
according to Thomson Reuters I/B/E/S.
Nvidia said second-quarter GAAP net income was $119 million,
or 19 cents a share, compared to $152 million, or 25 cents a
share, in the same quarter last year.
The Santa Clara, California-based company had non-GAAP
earnings of 27 cents per share in the second quarter.
Nvidia’s shares rose more than 5 percent to $15.47 in
extended trading after closing up 3.37 percent at $14.71 on
Nasdaq.
(Reporting By Noel Randewich; Editing by Richard Chang)
((noel.randewich@thomsonreuters.com)(Twitter handle:
@randewich)(415)(677 2542)(Reuters Messaging:
noel.randewich.thomsonreuters.com@reuters.net))
Keywords: NVIDIA EARNINGS/
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The News Source: http://in.reuters.com/article/2012/08/09/idINL2E8J9EGK20120809
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