Bloomberg News

Nvidia Shares Rise as Graphics-Chip Demand Lifts Revenue

November 14, 2011

(Updates with today’s trading in fifth paragraph.)

Nov. 11 (Bloomberg) -- Nvidia Corp. shares rose on the Nasdaq Stock Market after the maker of graphics processors reported third-quarter sales and profit that topped analysts’ estimates, lifted by demand for chips used by computer gamers and designers.

Sales in the period that ended Oct. 30 rose 26 percent to $1.07 billion, the Santa Clara, California-based company said in a statement yesterday. That compared with the average analyst estimate for $1.06 billion in revenue, according to Bloomberg data. Excluding certain costs, profit was 35 cents a share, topping projections of 31 cents.

Nvidia has been winning market share in sales of graphics processors for desktop PCs from Advanced Micro Devices Inc., according to Patrick Wang, an analyst at Evercore Partners Inc. The company is also getting its chips into high-end computer workstations used for applications such as industrial design.

“Workstation was a good business for them last quarter,” said Wang, who is based in New York. He has an underweight rating on Nvidia stock because he’s concerned that the company will struggle to deliver on plans to expand into mobile phones.

The stock rose 3.9 percent to $15.03 as of 1:08 p.m. New York time. The shares had declined 6 percent this year before today.

‘Mind Blowing’

Net income in the third quarter rose to $178.3 million, or 29 cents a share, from $84.9 million, or 15 cents, a year earlier.

Revenue in the current period will be little changed from the prior three months, Nvidia said. Analysts on average had projected sales of $1.07 billion, according to Bloomberg data.

Fourth-quarter gross margin, or the percentage of sales left after subtracting production costs, also will be little changed from the third quarter’s 52.2 percent, Nvidia said.

Nvidia will keep attracting consumers to its graphics chips with the release of “mind-blowing” games that take advantage of the improving capabilities of processors, Chief Executive Officer Jen-Hsun Huang said in an interview. Gamers are increasingly turning to computers as video-game consoles start to show their age and they fall behind the capabilities of PCs, he said.

‘Preferred Gaming Platform’

“We’re in the second half of a 10-year game-console cycle, and the PC has evolved so far beyond the console that it’s become the preferred gaming platform,” Huang said. “That typically continues for multiple years.”

Still, the company’s founder is trying to lessen its dependence on personal computers with a new range of chips called Tegra. The processor is meant to challenge products from Texas Instruments Inc. and Qualcomm Inc. in the market for chips that run programs in phones.

New phones running the company’s latest version of Tegra will come to market in the fourth quarter, followed by more in the first quarter, Huang said. The company has chips in new phones from LG Electronics Inc. and Motorola Mobility Holdings Inc.

While desktop PCs increasingly featured Nvidia hardware, the company lost about 4 percentage points of market share in laptop computers as rival AMD won orders, Huang said. Apple Inc. doesn’t currently offer Nvidia graphics, he said.

--Editors: Jillian Ward, Nick Turner

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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