Number one! The biggest loser of them all! This year’s heaping bundle of failure is…
1. The NVIDIA G8x GPU debacle
As 2008’s second fiscal quarter drew to a close, the SEC began to receive and post filings that discuss a company’s performance for the quarter. Of particular interest was this year’s numbing revelation that a swath NVIDIA GPUs were failing to the tune of $200 million.
On July 2, 2008, NVIDIA Corporation stated that it would take a $150 million to $200 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other consequential costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. All newly manufactured products and all products currently shipping in volume have a different and more robust material set.
The crippling admission of error stated that any profit made in the third fiscal quarter of 2008 would be hamstrung by a 150-200 million burden of reimbursement to vendors.
Destined for doom: The 8600M!
Ensuing investigation uncovered that the offending 8400M and 8600M mobile GPUs were manufactured with poor packaging or had improper thermal characteristics ascribed to them. The result was a “higher than normal” failure rate on products that shipped in “significant quantities.” Global laptop vendors turned to NVIDIA to foot the bill for a substantially increased volume of RMAs and repairs. Even more recently, desktops featuring the ill-fated chips have also begun to fail.
In the week following the availability of the SEC filings, NVIDIA (NASDAQ: NVDA) made precipitous declines on the stock market. NVIDIA wound down that disastrous week with a $3 billion drop in market capitalization.
The situation has worsened from there with allegations that virtually every GPU manufactured since the release of the 8000-series is rife with fault.
Going forward, New York law firm Shalov, Stone, Bonner & Rocco filed a September suit in the US District Court for the Northern District of California. The suit requests class-action status for an untold sum and alleges that NVIDIA deliberately withheld vital information from investors regarding the mobile GPU crisis for more than eight months.
Our take: This whole situation just smelled like a cover-up. While manufacturers and vendors still continue to grapple with the problem, NVIDIA seems to have absolved itself of the problem after the $200 million SEC exception. Owners of G8x product, of which there are millions, are left to battle their OEM about their product that was doomed to fail the minute it was born.
Disembarking from the failboat
It has been an amusing and — at times — frustrating year for consumers dealing with these ten failtacular passengers. From Psystar to NVIDIA, our little trip through troubled waters proves that companies of every size can stub their toe at a moment’s notice. Though we wish no ill on any one company and hope that these ten firms regain their footing, we also hope that there are least ten more firms with tickets to punch on our next cruise in the winter of 2009. See you then!
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