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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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oh man, that's not good
By gochichi on 7/3/2008 4:48:22 PM , Rating: 2
I like ATI a lot, I think that when they are up, they are way up (the lil' Radeon 9800 Pro I'm talking).

However, NVIDIA is a little guy, and I don't want to see them hurting too bad either, we absolutely need two companies making awesome graphics cards. A third company would be even better... and Intel may just join the fray in the next year or two.

Anyhow, sorry to hear that NVIDIA is having problems in addition to the 4850. NVIDIA needs to keep power consumption low and partner up with Creative Labs in order to make a sound&video card combo (like ATI but even better). This is one volatile industry (25% stock loss!?)

RE: oh man, that's not good
By lukasbradley on 7/3/2008 5:58:52 PM , Rating: 2
AMD - Market Cap of $3.21B
NVDA - Market Cap of $6.93B

Neither one is really a "little" guy.

RE: oh man, that's not good
By Warren21 on 7/4/2008 1:11:18 PM , Rating: 1
You're missing the point. This stock drop is unrelated to ATI's newest 48xx cards (at least outwardly), and is due to shoddy GeForce 8xxxM product design/materials/execution.

Also, like the other guy just said, NV is twice the size of AMD (the whole company, not just GFX division), and neither are really 'small'.

---------- OT ------------

One other thing -- do you think NV gives a damn about the consumer? No, they give a damn about your money. Who's to say the 9800 GTX would've dropped from 349 to 199 if it were not for AMD? NV could have dropped that price any time before that, but they didn't.

Likewise, AMD could've released the 4850 at 299 and the 4870 at 399 and still been competetive with the original 449/649 GTX 260/280 prices but they didn't. So ask yourself, who is really better for the consumer? It is AMD driving prices down.

Bottom line: nVIDIA has become arrogant over the past couple years in the lead and has been quite happy overcharging the consumer for that lead. We should be thanking AMD for this return to competition.

"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive

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