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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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Another thing to consider
By tviceman on 7/3/2008 11:34:35 AM , Rating: 2
When 1/2 of the hardcore gamers owned an 8800GT or better prior to the new releases from nvidia and ATI, there really isn't that much of an incentive to upgrade to a completely different and new card (especially when many of these owners can SLI their cards but have yet to do so). Is a 10-25% performance improvement worth $180-300? Probably not.

Part of the problem is market saturation. The 8800GT and 9600GT were such great cards for the money that nvidia's current cards (and AMD's IMO) don't justify the price to upgrade.

RE: Another thing to consider
By ImSpartacus on 7/3/2008 11:53:18 AM , Rating: 2
Yeah, there's almost no need to get a GTX200 chip, they are too much when the G92's are so capable and so cheap. Granted, the 4800's are superior to G92, but before those came out, a lot of people owned a G92 and there just isn't a reason to switch.

I'm just waiting for 8800GT to hit rock bottom so I can grab one for SLI.

RE: Another thing to consider
By ajfink on 7/3/2008 12:01:39 PM , Rating: 2
I don't think it's that bleak. Some gamers like buying new graphics cards to stay up-to-date. Others may still be playing with an 8800GTS 320 or something along those lines, and when they see a 4850 come along for less than $200 that really outperforms what they're using, they can often be enticed to buy. People will often simply skip a generation because what they're using works good enough and then pounce on the newer generation that really takes this up a notch. This whole online tech community (I don't mean just Dailytech) that is constantly talking about the latest and greatest tech wares really does have a lot of driving force in getting consumers, especially those that are into gaming and computer technology, to keep buying.

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