by Anton Shilov
07/28/2010 | 05:39 PM
Nvidia Corp. on Wednesday announced that it expected revenue for the second quarter ending August 1, 2010, to be drastically lower than the guidance provided with the company's financial results for its first quarter. The company blamed poor sales of consumer graphics processing units (GPUs) as well as economic weakness in certain parts of the world.
The company that controls a huge chunk of the graphics adapters market said that its revenue for its second quarter of fiscal 2011 was estimated at $800 million to $820 million, compared with the range of $950 million to $970 million provided on May 13, 2010.
Nvidia officially explained that the revenue shortfall occurred primarily in the consumer GPU business, resulting from increased memory costs and economic weakness in Europe and China. The increased solution cost of discrete GPUs led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics. Nevertheless, everything may not be that easy and straightforward.
Nvidia's revenue for the Q1 of FY2011 was $1.00 billion and the revenue split was as follows:
Based on the revenue split and the fact that Nvidia launched a new professional graphics solution just this week, it can be expected that the company lost sales in both consumer and professional GPU segments with GeForce and Quadro offerings. Besides, Microsoft Corp.'s canning of Kin phones probably affected sales of Tegra system-on-chip (SoC) devices that power the smartphones.
But the most logical reason for Nvidia's failure to achieve revenue goals was the fact that ATI, graphics business unit of Advanced Micro Devices, has won a massive market share from its arch-rival by supplying mainstream DirectX 11-supporting products that Nvidia still does not have. AMD's second fiscal quarter starts in April and ends on June, 26; whereas Nvidia's second fiscal quarter starts in May and ends on August, 1, which means that both quarters overlap and Nvidia even has an advantage when it comes to reporting since sales of graphics processors are pretty high in July. Last quarter sales of AMD's graphics products (not including any chipsets) were around $470 million. Such revenue is still lower compared to supposed Nvidia's sales of graphics chips, but the trend is absolutely not good for Nvidia.
Personal computer manufacturers started to stockpile components and build personal computers for the back-to-school (BTS) season sometimes in June and if in late July Nvidia declares massively lower sales it means that the company has lost a dramatic number of contracts for the BTS season. Only this week Apple unveiled a new iMac lineup that switched from Nvidia's integrated GeForce 9400M offering to ATI Radeon HD graphics chips.
For Nvidia it is now crucial to offer very good performance with its forthcoming code-named GF104 and GF108 chips for mainstream and entry-level markets to win back designs for Holiday season. Not all PC makers will agree to switch graphics processors and drivers for the second time in several months, but with proper performance and pricing Nvidia has all chances to win many contracts. Still, ATI is not going to stand still and it may not only refresh the lineup of high-end graphics products with the new Radeon HD 6000 chips sometimes in Q4, but also somehow boost the appeal of the current ATI Radeon HD 5000-series lineup.