NVIDIA released their latest quarterly results after the close of business on Thursday, and things aren’t so sunny in Santa Clara. When reading this, remember that NVIDIA uses year-ahead accounting, so “FY2011” is actually this year.
The news seems to be almost all bad. They reported a net loss of $141M on revenue of $811.2M—down nearly 20% from the previous quarter. Even worse was a painful and precipitous drop in their gross margins—from 45.6% to 16.6%. This translated to a loss of $0.25 per share.
Two major impacts in NVIDIA’s own words were “a large inventory write-down and a charge related to a weak die/packaging material set.” This is confirmation that the “bumpgate” fiasco is still ongoing from a financial standpoint, and resulted in a $193.9M one time charge for “remediation costs” as well as the estimated costs of settling a class action lawsuit. According to NVIDIA, if they take this charge out, revenue climbs to $20.1M or $0.03 per share, which is still a perilous drop from the previous quarter.
They’re trying to put a brave face on the inventory write-down, insisting that a combination of higher memory prices weakening consumer demand and economic weakness “led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics.” However, inventory write-downs generally occur because of parts sitting unsold on shelves.
In the call, NVIDIA admitted that the consumer area—GeForce cards sold to OEMs for integration in systems and cards sold by add-in-board (AIB) partners like EVGA—is doing very poorly. The Tegra System-on-a-Chip platform is also doing poorly, with very few design wins still. Their chipset business was primarily with Apple, who you will recall, will no longer be offering NVIDIA GPUs either. They expect chipset shipments to drop about 25% as a result. NVIDIA hinted that low-end “budget” and mid-range Fermi-based cards would be available “soon,” but didn’t provide any definition as to when “soon” would be.
Their brightest points are the Quadro family of workstation cards and Tesla GPU compute cards. They’ve reported a number of design wins here, and the newest Quadro 6000 has proven itself to be a very capable card here at Icrontic. But the outlook in Santa Clara remains mostly cloudy, with revenues only expected to improve 3-5% next quarter but gross margins to improve to 46.5-47.5%. With AMD hard at work on their HD6000 series GPU, anticipated to launch this fall, NVIDIA may have a very bumpy road ahead of them.
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