SAN FRANCISCO (Reuters) - Graphics chipmaker Nvidia Corp NVDA.O warned on Wednesday that revenues and gross margin would miss analysts' estimates due in part to weak demand, sending its shares down 25 percent.
It also cited delayed production of a new product and price cuts on some other chips due to a price war.
While Nvidia’s warning, coming on the cusp of the quarterly earnings season, could be seen as a harbinger of further earnings warnings, big technology companies so far have not warned of the weak U.S. economy leading to results that are worse than expected.
“Market weakness is going to be an issue, but I don’t see any other companies preannouncing their quarters that are on the PC side of things,” said Raymond James & Associates analyst Hans Mosesmann.
“AMD is not preannouncing, Intel didn’t preannounce and Micron said the PC market has looked good,” Mosesmann said, referring to processor makers Advanced Micro Devices Inc and Intel Corp, and memory chip maker Micron Technology Inc. “A lot of what Nvidia is seeing is specific to them.”
The company expects second-quarter revenue in a range of $875 million to $950 million and said its gross margin would be lower than its internal expectations.
Analysts currently expect Nvidia to have a second-quarter profit of 28 cents per share on revenue of $1.01 billion, according to Reuters Estimates.
“The estimated decrease in revenue and gross margin is due to several reasons: end-market weakness around the world, the delayed ramp of a next generation MCP, and price adjustments of our GPU products to respond to competitive products,” the company said in a statement.
When the company reported first-quarter results it said it had no reason to believe the current quarter would be “anything other than seasonal,” Chief Financial Officer Marvin Burkett said on a conference call.
In late electronic trading, shares slid to $13.55 after closing at $18.03, down 4 percent on Nasdaq.
Separately, the company said it would take a charge of $150 million to $200 million in its second quarter to cover anticipated warranty, repair and return costs associated with a defect on some of its chips.
The charge would be to cover expected warranty, repair, return, replacement and other costs, arising from a weak packaging material used in some of its previous generation graphics chip products sold in notebook PCs.
When Nvidia reported first-quarter results, its revenue rose 37 percent, but the shares fell initially after results missed analyst expectations.
The stock rebounded then after Burkett’s comments about the second quarter, which is historically been difficult for the Santa Clara, California-based company to forecast.
Reporting by Duncan Martell; editing by Jeffrey Benkoe and Andre Grenon
Our Standards: The Thomson Reuters Trust Principles.