2nd UPDATE: Nvidia 2Q Results, 3Q Revenue View Tops Expectations
07 Août 2009 - 12:40AM
Dow Jones News
Nvidia Corp.'s (NVDA) fiscal second-quarter loss - its fourth in
the past five quarters - narrowed as the graphics-chip maker said
it is seeing a recovery across its product line-up.
Shares jumped 8.6% to $14.25 in after-hours trading as the
results topped expectations and the company forecast revenue this
quarter would top analysts' estimate. The stock has more than
doubled from a four-year low last November.
Nvidia - which makes chips that allow computers to play movies
and generate images in videogames - saw demand for its chips slump
as sales of computers and other tech products dropped amid the
recession. Particularly hard hit were its high-performance - and
high-margin - graphics cards, which hurt profits.
But in this latest period, sales picked up in nearly all of its
markets.
"We experienced broad growth in almost every segment of our
business," said Nvidia Chief Financial Officer David White. He
added that two of Nvidia's newest products, its Tesla graphics chip
and its Tegra low-power chip for mobile devices, have begun
contributing to revenue in the quarter.
The company predicted third-quarter revenue 5% to 7% above the
latest quarter's $776.5 million. Analysts estimated $767 million,
down 1.2% sequentially.
Nvidia expects gross margins for the third quarter of 36% to
38%. Analysts expect gross margins of 35.2%, on average.
"Product demand is improving, and our strategic investments are
leading to new growth," said Chief Executive Jen-Hsun Huang in a
prepared statement.
In recent weeks, many chip makers have said the market has
bottomed, and Nvidia is among the companies likely to benefit from
the higher technology spending expected when Microsoft Corp. (MSFT)
launches the Windows 7 operating system this fall.
In the quarter ended July 26, Nvidia reported a loss of $105.3
million, or 19 cents a share, compared with a year-earlier loss of
$120.9 million, or 22 cents a share.
The loss included a $119.1 million charge covering further costs
to fix a flaw related to some of its graphics chips discovered last
year. The company had previously set aside $196 million for
customer repair costs.
Nvidia said no additional chips are flawed, but costs will be
higher to repair them.
Excluding inventory and other charges, earnings fell to 7 cents
a share from 13 cents.
Revenue dropped 13% to $776.5 million, far higher than Nvidia's
May forecast of a 5% gain from the first quarter's $664.2
million.
Analysts expected, on average, a loss of 2 cents a share on
revenue of $714 million, according to a poll by Thomson
Reuters.
Gross margin rose to 20.2% from 16.8%, but was far below the
company's forecast of 32% to 34%. But inventories are down 48% so
far this fiscal year.
The second-quarter results were impressive, said Wedbush Morgan
analyst Patrick Wang. He added, however, that Nvidia could face
challenges through the rest of the year as it battles rival
Advanced Micro Devices Inc. (AMD). AMD could have an edge by
bringing out the first chip to work with the latest version of
DirectX, widely-used software that handles multimedia, Wang
said.
"The question is looking forward from here, how they are going
to improve?" he said.
Nvidia's Huang, in a conference call with analysts, reiterated
earlier statements that the company will innovate its way out of
the recession. He said the company is also beginning to see signs
of returning demand for more high-performance chips used in
research and other science-based sectors.
"I'm certain we didn't lose any market share, so it must be that
demand was held up, spending was held up," he said. "We're feeling
much, much more positive energy in regards to upgrades."
-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155;
jerry.dicolo@dowjones.com
(Kathy Shwiff contributed to this report.)