Nvidia Corp. late on Thursday said it would reduce its workforce by 360, or 6.5%, for the first time in recent history of the company since 1995, when the company got rid of massive amount of employees after the unsuccessful launch of NV1 . It is not clear whether Nvidia intends to cut down the headcount across the board, or the company gets rid of particular group of people due to changing realities on the market.
“Our action today is difficult, but necessary considering current business realities. Despite our reduction, we will continue to invest in selective high-growth opportunities like our revolutionary CUDA parallel computing technology and our Tegra mobile single-chip computer. We are taking fast action to enhance our competitive position and restore our financial performance. All of us at Nvidia are determined to emerge from these challenges an even stronger company,” said Jen-Hsun Huang, president and chief executive of Nvidia.
Nvidia is facing challenges these days: ATI, graphics product group of Advanced Micro Devices, has returned to the market of enthusiast-oriented graphics adapters; chipset business of the company is endangered since AMD now has its own chipsets, whereas Intel is not letting Nvidia make chipsets for future microprocessors; Intel Corp., the world’s largest supplier of graphics cores, plans to enter the lucrative market of discrete graphics processors, Nvidia’s stronghold; some of Nvidia's products are faulty, which may cause financial losses; finally, the market situation does not encourage customers to spend on rather expensive add-in graphics cards.
In the current situation it would be logical for Nvidia to reduce the headcount in chipset and affiliated divisions, however, keeping in mind that Nvidia has been acquiring a lot of companies in the recent years, it had perfect chances to get a lot of redundant personnel.
“The company has been on a roll and when you’re growing, as they have for the past 13 years, you never get employment level, or floor space right, either too little or too much. Also Nvidia, under Jen Hsun's direction, has been really aggressive about acquiring technical talent and doing a little stock-piling of people in preparation of more growth. Lastly they have made a few acquisitions in the last 12 months and with any acquisition you’ll have some redundancies,” said Jon Peddie, the head of Jon Peddie Research market tracking company.
The actual reasons of Nvidia’s decision to reduce headcount are to be seen, but the initial toll is evident: the company expects to record restructuring-related charges of approximately $7 million to $10 million in the third quarter of fiscal 2009 in connection with the reduction. These pre-tax charges are comprised of severance and related expenses and are expected to be charged primarily against Nvidia’s operating expenses.
The firm will provide employees affected by this reduction with severance packages, counseling, and job placement services.