NVIDIA posted a troubled financial outlook for its fiscal Q2 2009, ending in July. Now with the final numbers coming in, it is apparent that the company is bleeding money and facing the unfamiliar role of playing underdog to competitor AMD/ATI.
Compounding NVIDIA's woes was the revelation that nearly all its laptop GPUs were defective. Faced with a $196M USD charge to cover the replacement costs for GPUs and slowed sales, NVIDIA has announced for the first time in many quarters that it is in the red.
Jen-Hsun Huang, president and CEO of NVIDIA stated, "Our Q2 financial performance was disappointing. The desktop PC market around the world weakened during the quarter. And our miscalculation of competitive price position further pressured our desktop GPU business. We have a great product line-up and, having taken the necessary pricing actions, we are strongly positioned again. Our focus now is to drive cost improvements and to further enhance our competitiveness through the many exciting initiatives we have planned for the rest of the year."
In total, revenue for the quarter dropped to $892.7M USD, down from $935.3M USD a year prior. Following the U.S. generally accepted accounting principles (GAAP); NVIDIA announced that it was in the red with a loss of $120.9M USD for the quarter.
Mr. Huang did not address the laptop problems in the earnings report. Rather, he plugged the strong growth of the notebook GPU sales.
While he acknowledged that NVIDIA may be in a bit of trouble, Mr. Huang expressed confidence that key NVIDIA technologies will help the company through. Among these are PhysX support and CUDA -- a C language programming interface. He added, "Though we approach the near term with caution, we remain very optimistic about the expanding universe of visual computing and the exciting growth opportunities made possible by CUDA, our general purpose parallel computing architecture."
NVIDIA does have a bit of additional cause for concern, however. Long-time AMD rival Intel is jumping into the discrete graphics business. NVIDIA is quite concerned about Intel’s Larrabee architecture and how the press interprets its significance – NVIDIA has even reached out to the press to shoot down “myths” surrounding Larrabee.
quote: Our Q2 financial performance was disappointing
quote: U.S. generally accepted accounting principles (GAAP);
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quote: And our miscalculation of competitive price position further pressured our desktop GPU business.
quote: The economic repercussions of NVIDIA's slippage are already visible. NVIDIA announced yesterday that it was going to turn in revenue of $875 million to $950 million for Q2 2008, which ends July 27. This is significantly lower than the current analyst expectations of $1.1 billion.
quote: For the second quarter of fiscal 2009, revenue decreased to $892.7 million compared to $935.3 million for the second quarter of fiscal 2008, a decrease of five percent. For the six months ended July 27, 2008, revenue increased to $2.05 billion compared to $1.78 billion for the six months ended July 29, 2007, an increase of 15 percent. During the second quarter of fiscal 2009, NVIDIA recorded a $196 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and associated costs arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems.