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Nvidia beats revenue outlook

Posted: 14 Aug 2012 ?? ?Print Version ?Bookmark and Share

Keywords:tablet? smartphone? Microsoft Surface? Nexus 7?

Nvidia Corp. has announced its quarterly revenue and margins that according to the company are above Wall Street estimates. This came amid its expansion beyond personal computers into a growing market for tablets and smartphones, noted the company.

With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors, branded Tegra, for mobile devices. But it faces tough competition from the likes of Qualcomm, Texas Instruments and Samsung Electronics.

Nvidia won spots for its Tegra chips in two of the highest-profile tablets to be launched in 2012.

In June, Microsoft unveiled its Surface tablet using Nvidia's Tegra chip, while Google launched its Nexus 7 tablet, which also uses Tegra 3 and has had strong sales.

The devices mark the first forays by Microsoft and Google into a tablet market dominated by Apple's iPad.

Shares in the company once known mainly for its high-end graphics cards have gained more than a quarter in value since June, just before Microsoft and Google announced those product launches.

"Going forward, the key focus is going to be Tegra, Tegra, Tegra," said Evercore analyst Patrick Wang. "I think it would be hard to argue that there's significant organic growth left in the discrete graphics market."

Consumer products revenue, the bulk of which comes from the Tegra business, leapt 35.5 percent in Q2 from the first, more than double the growth of Nvidia's traditional graphics unit division.

Consumer products accounted for more than 17 percent of total revenue in the quarter, up from 14 percent in Q1.

As PCs lose popularity with consumers, those computers are increasingly being manufactured without discrete graphics chips such as the ones Nvidia designs.

The recent Nexus and Surface announcements follow some earlier disappointments for the company, including Samsung's reliance on its own chips instead of Nvidia's.

In recent quarters, Nvidia and Qualcomm have suffered from shortages of cutting-edge chips after contract manufacturer Taiwan TSMC underestimated demand for its 28nm technology.

That has hurt sales of Nvidia's top-of-the-line PC graphics chips as well as Qualcomm's high-end smartphone chips.

"We have no idea how much business we left on the table. And we expect to be supply constrained throughout the quarter," Nvidia CEO Jen-Hsun Huang said.

Nvidia reported Q2 gross margins of 51.8 percent and said its Q3 gross margin would be the same.

Analysts, on average, had expected a gross margin of 51.3 percent for Q2 and 51.7 percent in the current quarter.

Nvidia posted Q2 revenue of $1.044 billion, up from $1.016 billion in the year-ago quarter. It estimated current-quarter revenue of $1.15 billion to $1.25 billion.

Analysts on average were expecting revenue of $1.007 billion in Q2 and $1.093 billion in Q3, according to Thomson Reuters I/B/E/S.

Nvidia said Q2 GAAP net income was $119 million, or 19 cents a share, compared to $152 million, or 25 cents a share, in the same quarter last year.

The Santa Clara, California-based company had non-GAAP earnings of 27 cents per share in Q2.

Nvidia's shares rose more than five percent to $15.47 in extended trading after closing up 3.37 percent at $14.71 on Nasdaq.

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