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Nvidia Corp.'s sales of graphics processors and chipsets dropped 29.5% sequentially in the second quarter of fiscal 2011, the company said on Thursday. But weak sales of consumer chips was not the only reason why the firm posted a loss. Apparently, Nvidia was hit again by the charges for faulty chips that used inappropriate packaging material.

Nvidia's revenue of for the second quarter of FY2011 ended August 1, 2010, were $811.2 million, down 19.0% from the prior quarter and up 4.5% from $776.5 million from the same period a year earlier. On a GAAP basis, the company recorded a net loss of $141.0 million, or $0.25 per share, compared with net income of $137.6 million, or $0.23 per diluted share, in the previous quarter and a net loss of $105.3 million, or $0.19 per share, in the same period a year earlier. GAAP gross margin was 16.6% compared with 45.6% in the previous quarter and 20.2%  in the same period a year earlier. Excluding the charge for the weak die/packaging material set and the associated tax impact, non-GAAP net income for the quarter was $20.1 million, or $0.03 per diluted share.

 

Nvidia Revenue Split for Q2 FY 2011 (in $ million)

 

Q2 FY2011

Q1 FY2011

Change

GPU Business (GeForce, IGP)

$550.4*

$780.9

-29.5%

Professional Solutions Business (Tesla, Quadro)

$215.1

$189.7

+13.4%

Consumer Business (Tegra, royalties)

$45.7

$31.2

+46.5%

Total

$811.2

$1001.8

-19%

*According to Jen-Hsun Huang, sales of chipsets were in the range of "less than $200 million", which essentially puts sales of discrete GPUs to over $300 million, but probably less than $400 million.

Based on the company's revenue split, Nvidia experienced substantial drop in sales of graphics processors and chipsets (Nvidia reports about them under the same moniker), managed to moderately increase sales of professional solutions like Tesla (which was up significantly) and Quadro (which was up slightly) and finally succeeded in boosting sales of its Tegra-series system-on-chip to consumer electronics makers.

During the second quarter Nvidia recorded an additional net charge of $193.9 million related to a weak die/packaging material set that was used in certain versions of our previous generation chipset and graphics processing unit (GPU) products shipped before July 2008. Together with the previously announced charges related to this same issue, the new one brings the total net charge to $475.9 million.

Nvidia also blames the unexpected consumer PC market weakness for excess inventory of certain, primarily older generation, products.  As a consequence, the company's second quarter results include charges for a "large" inventory write-down.

"Inventories at the end of the quarter were $434.2 million, up 11.9% over the prior quarter.  Notwithstanding the inventory write-downs, inventory was up as a result of lower actual revenue than was planned early in the first quarter when we made wafer start commitments. Our manufacturing cycle time is approximately four months. We made appropriate adjustments to our build plans over the course of the second quarter, but we do not expect these corrections to meaningful impact our inventory levels until the fourth quarter," explained David White, chief financial officer of Nvidia.

Tags: Nvidia, Geforce, Fermi, Business, Failures

Discussion

Comments currently: 3
Discussion started: 08/13/10 03:53:32 AM
Latest comment: 08/17/10 11:57:16 PM

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1. 
Nvidia lost quite a few of it's users and supporters when they kept denying that the lead connection issue existed.Although some of their chipsets used to run circles around Intels (and I don't think it is fair that Intel is locking them out of the latest CPU chipset business) the issue of the "bumps" still comes back to haunt them. Had they fully published the issue and made it right by ALL users they would have been in dire straits as far as liquidity, but now they face a more skeptic user base.Sure there are going to be the Nvidia "die hards" and that is good but for most the revelation that they were having QC issues was not even first announced by Nvidia, they only admitted it after HP, Dell, and Apple revealed the issue and reached an agreement to extend the warranty on that particular area of the OEMs products. Then kep shipping bad product mixed in with good to not totally lose their pants in the deal.On top of that Nvidia had issues with certain "other GPU brands" consistently not always working with their chipsets.I used to buy mobo's with Nvidia chipsets but not since they had the QC issue and would not make it right (and I don't want to have to "bake" my products" to make them work again knowing that it will just happen again.AMD/ATI is eating their lunch now because of the "bump" issue but also because they took too long to get a DX11 GPU out.On a positive note they are doing very well with their Tegra line and I hope they continue to drive that product up and out to the OEMS.
0 0 [Posted by: fdunn  | Date: 08/13/10 03:53:32 AM]
Reply

2. 
And man .. to think Charlie was bashed for over a year for writing and criticizing nVIDIA on this. The world is filled with idiots and any sane man feels like drowning
0 0 [Posted by: East17  | Date: 08/15/10 08:00:59 AM]
Reply

3. 
What NV fail to mention are the many consumer level motherboards with faulty NV chipsets bought by ppl who have to wear all the costs associated with RMA and in the end having to replace the damn things with an Intel board

4 different bad NV boards in a row and who lost $............me and the original local supplier

NEVER again will I buy NV............and how many ppl feel the same after being shafted by NV
0 0 [Posted by: alpha0ne  | Date: 08/17/10 11:57:16 PM]
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