SAN FRANCISCO Nov 8 (Reuters) - Graphics chipmaker Nvidia initiated a quarterly dividend that helped send its shares higher and forecast quarterly revenue below expectations as it pushes further into a growing tablet market to offset weak PC demand.
With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors for mobile devices.
The company has made inroads in tablets but competition from larger rival Qualcomm has Wall Street concerned the company may struggle to keep its mobile business growing fast.
Nvidia said it was initiating a quarterly dividend of 7.5 cents a share.
"They're joining the party. Most of their peers pay dividends and now they are too," said Alex Gauna, an analyst at JMP. "The investment community is very conscious of companies returning capital to investors and they're listening to their investors."
Nvidia's Tegra 3 mobile processor is used in Google's Nexus 7, one of only a handful of tablets to make inroads against Apple's iPads. The Tegra 3 chip is also used in Microsoft's recently launched Surface tablet.
But Apple's recent launch of the iPad mini, which uses Apple's own processors, could cut into sales of the Google and Microsoft devices, analysts believe.
Nvidia's consumer products revenue, the bulk of which comes from the Tegra business, grew 28 percent, year over year, to $243.9 million and accounted for a fifth of Nvidia's business in the third quarter.
Its traditional PC graphics chip business grew 15 percent versus the year-ago quarter. In that business, Nvidia is believed to be taking some market share from rival Advanced Micro Devices with its most recent components.
The Santa Clara, California, chipmaker reported third-quarter revenue of $1.204 billion, up from $1.066 billion in the year-ago quarter.
It said revenue in the current quarter would be between $1.025 billion and $1.175 billion.
Analysts were expecting revenue of $1.193 billion for the quarter ended in October and $1.206 billion for the quarter ending in January, according to Thomson Reuters I/B/E/S.
Third-quarter net income was $209 million, or 33 cents a share, up from $178 million, or 29 cents a share in the same quarter last year.
Non-GAAP earnings per share were 39 cents.
Shares of Nvidia rose 1.34 percent in extended trade after closing up 0.6 percent at $12.68 on Nasdaq.