Bloomberg News

Nvidia Soars After Forecast Tops Estimates: San Francisco

May 11, 2012

Nvidia Corp. (NVDA:US) jumped the most in seven months after predicting second-quarter sales that exceeded analysts’ estimates, bolstered by demand for its new graphics chips and mobile-phone processors.

Revenue for the period ending in July will reach $990 million to $1.05 billion, the Santa Clara, California-based company said today in a statement. Analysts had estimated $976.3 million, the average of predictions compiled by Bloomberg. The stock rose 6.4 percent to $13.21 at the close in New York.

The latest GeForce semiconductors, which are used to make high-end graphics in desktop and notebook computers, are creating demand that Nvidia said it is struggling to meet. Shortages from supplier Taiwan Semiconductor Manufacturing Company Ltd. (TSM:US) are still holding back sales, including for the new Kepler line. Like Qualcomm Inc. (QCOM:US) and other chipmakers, Nvidia subcontracts its production to foundries in Asia.

“Our demand is much greater than our supply and we’re not going to be able to meet our all of customers’ orders for some time,” Chief Executive Officer Jen-Hsun Huang said in an interview. While the company is trying to improve output as fast as possible, it expects to be short throughout the year, he said.

Nvidia shares today gained the most since Oct. 4 and had the second-biggest increase on the Standard & Poor’s 500 Index. They are down 4.7 percent this year compared with an 8.3 percent gain by the Philadelphia Semiconductor Index. (SOX)

First quarter net income fell 55 percent to $60.4 million, or 10 cents a share, from $135.2 million, or 22 cents, a year earlier, the company said. Excluding some items, earnings of 16 cents exceeded the 15 cent average of estimates. Sales dropped 3.9 percent to $924.9 million, compared with the $916.2 million average projection.

Gross margin

Second-quarter gross margin, or the percentage of sales remaining after deducting the cost of production, will be 51.2 percent, plus or minus one percentage points, according to the statement. Analysts had estimated 50.3 percent.

The company is trying to branch out into microprocessors for phones, lessening its reliance on PCs. Nvidia’s Tegra processor is designed to challenge products from Texas Instruments Inc. (TXN:US) and Qualcomm. Nvidia said in January that orders for those chips had been slow because customers are waiting for an updated Tegra, due later in the first quarter.

New orders and demand ahead of the availability of Microsoft Corp.’s Windows 8 is helping turn around that division. Windows 8, expected to debut later this year, will work on phone chips based on ARM Holding Plc (ARM) technology used by Nvidia.

Tegra 3 is the first phone chip on the market to combine four processors into one piece of silicon and is suited for more powerful phones built for markets outside the U.S., CEO Huang said.

To contact the reporter 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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Companies Mentioned

  • NVDA
    (NVIDIA Corp)
    • $18.56 USD
    • 0.07
    • 0.38%
  • TSM
    (Taiwan Semiconductor Manufacturing Co Ltd)
    • $20.72 USD
    • 0.57
    • 2.75%
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