UPDATE 3-Nvidia eyes lower quarterly revenue, starts dividend

Thu Nov 8, 2012 7:01pm EST

By Noel Randewich

SAN FRANCISCO Nov 8 (Reuters) - Nvidia forecast revenue below expectations due to a slowdown in tablet-processor shipments and a troubled PC market but shares of the graphics chipmaker rose on the announcement of a quarterly dividend.

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, helping offset concerns about the company's lower-than-expected outlook.

"If they hadn't introduced the dividend, after-hours (trading) would have been a bit uglier," said Patrick Wang, an analyst at Evercore Partners.

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.

Slow PC sales and a seasonal dip in shipments of mobile chips for tablets have led Nvidia to expect revenue to dip in the current quarter, Chief Executive Jen-Hsun Huang told analysts on a conference call.

"The Nexus 7 is selling super-well and the Surface and the Win RT devices are really exciting," he said. "However, the vast majority of the builds for the holidays have to happen before the holidays. And so we shipped more proportionately to them in Q3 than in Q4."

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, Huang said Nvidia has taken market share from rival Advanced Micro Devices with its most recent components, helping offset weakness across the PC industry.

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.

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