Nvidia puts plans for new Silicon Valley campus on hold

SAN FRANCISCO Wed Feb 12, 2014 8:33pm EST

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SAN FRANCISCO (Reuters) - Graphics chipmaker Nvidia Corp has halted plans to build a flashy new campus that could have rivaled the architectural ambitions of major Silicon Valley neighbors like Facebook Inc and Apple Inc.

Nvidia said a year ago it would use property it owns across the street from its current headquarters in Santa Clara, California, to construct one, and eventually two, eco-friendly buildings in the shape of triangles. The triangle is a basic building block in video game graphics.

But Chief Executive Jen-Hsun Huang said on Wednesday that Nvidia put the project on hold after leasing office space late last year in a existing building by its headquarters.

"We will absolutely need a new campus eventually. In the short term, with this new facility, we're in pretty good shape," Huang said in an interview.

Earlier on Wednesday, Nvidia posted higher fiscal fourth-quarter revenue that beat Wall Street's expectations, fueled by the chipmaker's PC gaming components, even as it grapples with an expansion beyond computers and into mobile devices.

When Nvidia unveiled plans for its new campus a year ago, Huang wrote a blogpost showing off images of buildings with vast open floors optimized for "cross-functional work," with skylights in the shape of criss-crossed triangles taking up almost all of the buildings' roofs.

Nvidia has been just one of many Silicon Valley tech companies to plan major headquarter improvements in recent years.

Apple has been planning a massive new, ring-shaped structure near its Cupertino headquarters, while Facebook intends to expand its campus in Menlo Park, with the roofs of buildings doubling as park space in a project the size of 7-1/2 football fields.

Nvidia's decision not to launch into its construction project shows prudent restraint on the part of Huang, said RBC analyst Doug Freedman.

The company has about 3,300 employees at its headquarters, some of whom have already moved into the newly leased building.

"I like the fact they're not building a new campus. It's almost historically been a great investment short indicator when a company goes out and builds itself a new campus," Freedman said. "It distracts management's attention from the issues that allowed them to build the campus."

Nvidia is at a critical juncture. With the personal computer industry losing steam, Nvidia has expanded its graphics expertise into mobile devices. But it is meeting stiff competition from larger Qualcomm Inc and has responded by increasing its focus on automotive markets and other areas.

Nvidia's results in the fourth quarter, which ended on January 26, reflected better-than-expected sales of high-end graphics chips popular with game enthusiasts. That niche has suffered less than mainstream laptops from consumers' growing preferences for tablets. The company's revenue forecast for the first quarter was also above analysts' expectations.

"The graphics market has been fairly resilient, even in the face of poor PC sales," said Evercore analyst Patrick Wang. "Folks still buy graphics cards to play games."

Nvidia has struggled to convince manufacturers to use its Tegra chips in tablets and smartphones. In the fourth quarter, revenue from Nvidia's Tegra mobile chip business fell 37 percent while revenue from its PC graphics processor business rose 14 percent.

The company is increasingly marketing the Tegra line of chips as ideal for powering entertainment and navigation systems in cars. In January, Nvidia said it was broadening its relationship with Audi, which plans to use the upcoming Tegra K1 chip in more of its cars.

Nvidia said that during the quarter, it had lower sales of Tegra chips for smartphones and tablets while increasing its sales of Tegra chips for cars.

Overall, Nvidia's fourth-quarter revenue rose to $1.14 billion, up 3 percent from the year-ago period. It said revenue in the first quarter would be $1.05 billion, plus or minus 2 percent.

Analysts on average had expected fourth-quarter revenue of $1.053 billion and first-quarter revenue of $1 billion, according to Thomson Reuters I/B/E/S.

Net income was $147 million, or 25 cents a share, in the fourth quarter ended on January 26, compared with $174 million or 28 cents a share in the year-ago quarter. Non-GAAP earnings per share in the fourth quarter were 32 cents.

Nvidia shares rose 3 percent in extended trading on Wednesday after closing up 3.6 percent at $16.83 on Nasdaq.

(Additional reporting by Malathi Nayak; Editing by Matthew Lewis and Richard Chang)

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