By Noel Randewich
SAN FRANCISCO Nov 7 Nvidia Corp gave a
revenue forecast for the current quarter that was shy of Wall
Street's expectations as the graphics chipmaker faces tough
competition in tablets and a slow personal computer market.
With the personal computer industry losing steam, Nvidia has
expanded its graphics chips into tablets and is working on
smartphone chips, but it is meeting stiff competition from
Qualcomm Inc and other rivals, and some analysts said
the chipmaker should exit those markets.
In the third quarter, sales from Nvidia's Tegra mobile chips
fell 54 percent and sales from its PC graphics chips, which
accounts for the majority of the company's total revenue,
declined 2 percent.
Nvidia expects its mobile chip business, called Tegra, to
remain flat this year as it focuses on integrating Long Term
Evolution (LTE) features on upcoming components, making them
compatible with high-end carrier networks and more attractive to
Nvidia's lighter-than-expected revenue forecast follows
other chipmakers that have failed to impress analysts.
Several semiconductor companies, including Texas Instruments
Inc, Intel Corp and Qualcomm, have given
current-quarter revenue forecasts in recent weeks that
disappointed Wall Street, raising concerns that manufacturers of
industrial and consumer devices might have overestimated the
Nvidia's most recent Tegra 4 processors are being used in
Microsoft's Surface 2 tablet and a smartphone made by Xiaomi in
China but Wall Street is concerned it is making too little
progress for the money it spends to develop the chips.
"Look at the tablet space - Apple and Samsung are captive
and there's no chance Nvidia is going to have a long-standing
business there," said Evercore analyst Patrick Wang.
Many of the tablets in the fast-growing Chinese market are
made with inexpensive components supplied by Mediatek
and other local chipmakers.
Some analysts, including Wang and Needham's Rajvindra Gill,
said Nvidia should shed its mobile chip business and stick to
more profitable areas such as gaming PCs, automotive and
"What they should do is try to spin out Tegra or sell the
business related to phones and tablets," said Gill. "Become a
much higher margin company and continue to return capital to
Nvidia's PC graphics chips are widely used in high-end
laptop and desktop computers favored by gamers. Sales of those
computers have been healthier than sales of less expensive
laptops, which consumers are switching away from in favor of
"We still believe strong growth in terms of the overall
gaming side of that will continue as we go into Q4. But overall,
the PC market, and our low-end PC (graphics chips) are probably
expected to continue what we have been seeing in Q3," Colette
Kress, who took over as Nvidia's CFO in September, told analysts
on a conference call.
This week, Nvidia announced that Amazon Web Services was
making the chipmaker's high-end graphic computing power part of
its cloud services offering.
Nvidia has been promoting the use of its graphics technology
in new places such as data centers. Offered remotely, Nvidia's
graphics chips could be used to provide computing power for
people playing high-performance games on tablets and other
"Grid is potentially, long-term, the largest opportunity for
our company," Chief Executive Jen-Hsun Huang told Reuters in a
telephone interview. "I expect it to grow very nicely next
Also in its report on Thursday, the company announced a 13
percent increase in its quarterly dividend, and said its board
authorized an additional $1 billion for its stock repurchase
Revenue was $1.054 billion and net income $119 million, or
20 cents a share, in the third quarter ended in October,
compared with $1.204 billion and $209 million, or 33 cents a
share, in the year-ago quarter. Adjusted EPS in the third
quarter was 26 cents.
It said revenue in the fourth quarter would be $1.05
billion, plus or minus 2 percent.
Analysts on average expected revenue in the third quarter,
which ended in October, of $1.052 billion and fourth-quarter
revenue of $1.083 billion, according to Thomson Reuters I/B/E/S.
Nvidia shares were flat in extended trading after closing
down 2.38 percent at $14.55 on Nasdaq.