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Storm clouds are gathering as NVIDIA faces a reinvigorated competitor

As the old saying goes, when it rains it pours.  NVIDIA was performing beautifully thanks to aggressive pricing and performance of its 8000 series of graphics cards.  It looked poised to leave competitor AMD (formerly ATI) in the dust.  However, the latest round in graphics war has marked a dramatic turnaround with AMD's 4850 and 4870 outperforming NVIDIA's offerings at a lower price

While NVIDIA still holds a tenuous grip on the highest end offerings, with its GeForce GTX 280 GPU, this might soon slip, depending on the performance of AMD's dual processor 4870 X2 (R700) card, likely coming in Q3 2008.  Meanwhile, NVIDIA faces challenges from Intel in its low-end and laptop graphics offerings, and from AMD's PUMA chipset/graphics package in the laptop market.

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.

That was not the end of the bad news from NVIDIA either.  It announced that it was facing a massive recall, due to overheating GPUs in notebook computers.  NVIDIA reported higher than average failures in both the laptop GPUs and in laptop chipsets.

NVIDIA said that the chips and their packaging were made with materials that proved to be too "weak".  NVIDIA passes the blame to notebook manufacturers, which it says contributes to the problem.  Typically notebooks have poorer ventilation and components concentrated in a smaller space than desktop computers.

The result of the recalls is that NVIDIA will be taking a onetime charge of $150M USD to $200M USD to cover the damages.  It plans to use the money to repair or replace defective parts.  It also hopes to collect part of the money from insurers it uses.  However, it has acknowledged its problems and switched the materials it uses.

The news has resulted in NVIDIA taking a beating on the stock market, sliding over 25 percent.

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Gaming recession or diversion?
By jamesbond007 on 7/3/2008 11:30:18 AM , Rating: 3
Not sure about you guys or your neck of the woods, but around here, things are quieting down as far as games and gaming goes in the community. I use to help a bunch of locals setup and run LAN parties in the region but in recent years, the attendance became abysmal and we quit hosting them.

This leads me to believe that there may be a lack of desire for the high-end cards and commitment to PC gaming. I place blame on the new consoles. :) Most of my personal friends are now gaming online via their Xbox 360 or Playstation 3. Some just prefer the simplicity and convenience in putting in a disc and playing.

I'm not saying this is a fact for everyone's community, but I really miss the fun of gaming in groups at LANs in the area. Anyone else care to comment on their local status?

nVIDIA seems to also be catching a lot of flak from those who do game in regards to their lack of better or more reliable drivers for Vista, too.

RE: Gaming recession or diversion?
By HrilL on 7/3/2008 12:05:19 PM , Rating: 4
I would have to agree with you. A few years back we used to have some rather large and small local LANs. No one seems to play the same kind of games as in the past. It is probably due to the consoles and RPG games that you play online. But overall PC gaming seems to be in somewhat of a slump. All the new kids are playing colsoles now days it seems like. And the hardcore PC gamers are sticking with the games they have been playing for the last 8 years. Myself I only play starcraft and counter-strike and I don't need a new computer to do it. What I have plays those games just fine.

RE: Gaming recession or diversion?
By Mitch101 on 7/3/2008 12:38:17 PM , Rating: 3
I would agree that WOW/RPG's probably killed the lan party to a degree. When FPS was king the lan party was on. Instant gratification to gibb a friend and hear them scream.

Our LAN parties were more a reason to drink beer and redbull's gorging on chips and pizza.

I'm hoping starcraft brings the lan parties back a bit.

RE: Gaming recession or diversion?
By just4U on 7/6/2008 4:08:36 AM , Rating: 2
I would think that it has more to do with the adoption of high speed connections as opposed to anything else.

RE: Gaming recession or diversion?
By gaakf on 7/3/2008 12:40:10 PM , Rating: 2
ahh but you will need a new computer for starcraft 2. I have faith that Blizzard will restore some of the passion PC Gamers have lost for the platform over the next couple years. A new game in the Warcraft, Starcraft and Diablo series as well as a brand new is one hell of a thing to look foward to.

By SavagePotato on 7/3/2008 12:46:42 PM , Rating: 4
A brand new battlenet can only mean brand new bnet tards of the next generation.

Kind of a mixed bag as far as calling it a good thing.

RE: Gaming recession or diversion?
By SavagePotato on 7/3/2008 12:34:38 PM , Rating: 5
I wouldn't blame the weakening of the lan on consoles.

It goes both ways realy, pc users have access to high speed internet too, and by and large, who wants to trudge to a lan to game when you can play online with perfectly fine latencies any time you want.

Lan's were great back in the day of dial up, now though, not so necessary.

RE: Gaming recession or diversion?
By JoshuaBuss on 7/3/2008 7:05:40 PM , Rating: 2
not to mention free VPNs like hamachi make virtual lans almost as good as local lans.

for me, lan parties were simply because it was impossible to enjoy a game of counter strike when most of your friends had pings over 400..

now over hamachi you can have ~40ms pings with people on the other side of the country

RE: Gaming recession or diversion?
By jamesbond007 on 7/5/2008 12:15:54 AM , Rating: 3
But you can't honestly say that it is equally enjoyable to frag someone over the Net and just see the kill come up on the screen. Kill someone (virtually, of course) at a LAN and hear them scream like a girl is great. Plus, there's always the sweet goodies, prizes, file sharing (yeah, we all do it!) and the interaction with real people. It's a pleasurable experience and no online gaming session has ever come close to the memories I have of LANing.


By overzealot on 7/9/2008 5:00:13 AM , Rating: 2
Teamspeak and Ventrilo fulfill those screaming needs.
I still LAN a bit, but I find the quality of opponents far better online.

By MrBlastman on 7/3/2008 1:10:38 PM , Rating: 2
No amount of consoles can get me to switch from PC gaming... ever.

I keep my Wii around because console goodness if fun when I have friends over, but there is no replacement for mouse/keyboard or thousands of dollars in expensive HOTAS/head tracking equipment I need for simming in military simulations.

By StillPimpin on 7/3/2008 3:29:29 PM , Rating: 3
I think one more thing that might be overlooked is broadband. Back in the day of dialup and expensive, slower broadband, it was much easier to grab your rig, take it to the local LAN party and get your frag on.

Now with +6Mb/s connections and in game communications it kind of makes "being there" a non issue. Especially if I can do it all from the comfort of my own home and not have to lug around a big computer and monitor.

I do believe that the current consoles have been steeling some of the LAN parties thunder, but convenience is killing it more.

By kilkennycat on 7/3/2008 6:59:53 PM , Rating: 2
The thing that has really pulled the Nvidia stock price down so drastically in the last couple of days is the $200 million write-off for this quarter and its consequent effect on the quarter's net earnings (probably a loss...). In today's uncertain conditions 3 months of patience is too much of a strain for the big fund investors who own(ed?) 85% of nVidia's stock. Probably a great time for individuals to buy and hold for at least 6 months. nVidia has ~ $800million in the bank and ZERO debt. Remember that the nVidia management team that bound together to survived the Fx5800 debacle that nearly dragged the company under is still intact and the company is financially in great shape.

As for the GT280/260 -- considering the competition/cost-pressure from ATi, I suspect that a 55nm version will be put on a high-priority fast track to production. Lower die-cost, better yield, much faster or lower power (or any combo in between). Since the G92-family GTX has now made the transition to 55nm and the GT280/260 has the same fundamental building blocks but with enhanced data-paths and compute units, such a "shrink" should be pretty straightforward. I doubt if this shrink was in nVidia's short-term 'grand-plan' for near-term production, but history has shown nVidia again and again to be capable of making very rapid corrective business decisions.

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