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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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RE: Ow
By JasonMick on 7/3/2008 2:53:53 PM , Rating: 4
Someone had a busy day at the nvidia koolaid stand I think...

RE: Ow
By TheJian on 7/7/2008 2:57:09 PM , Rating: 1
My reply was to you (sorry flipmode). No koolaid involved. Nvidia already dropped their GTX280 to $459 at newegg (couple cards after rebate, and quite a few under $500). The GTX260 is now $329 at newegg. So what I said has already happened. They'll drop pricing to make AMD's cards worth less. They just did. You can expect more cuts the second 4870x2 comes out. By then 260/280 will have a die shrink just about out the door to easily allow this and add performance. I'm not saying I LIKE nvidia, I'm saying this is what's going to happen. Currently I'd buy a 4850/4870/GTX260 (toss up 4870/GTX260). But I'd also say ATI won't look quite so good after another cut from Nvidia. $460 isn't bad for king of the hill. That's $140 less than quoted in all these reviews of it. Quite a price cut in ONE month eh? The GTX280 doesn't look so bad now. Remember that we used to have $499/$599 cards to get top of hill performance. Right now that's only $460. That's a great buy all of the sudden. My point is, AMD has a great pair of cards, but their performance/buck was only great when GTX260 was $450 and GTX280 was $600. At $329 and $460 things change. The reviews should be updated showing this since it happened so fast.

"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs

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