NVIDIA Corporation today reported financial results for the third quarter of fiscal 2003 ended October 27, 2002. It seems to be the first time NVIDIA reports losses since the year 1997, if I am not mistaken.

For the third quarter of fiscal 2003, revenues increased to $430.3 million, compared to $365.0 million for the third quarter of fiscal 2002, an increase of 18%. Net loss for the third quarter of fiscal 2003 was $48.6 million, or $0.32 per diluted share, compared to net income of $41.3 million, or $0.24 per diluted share, for the third quarter of fiscal 2002.

The net loss for the third quarter of fiscal 2003 included a special charge of $61.8 million that resulted from the exchange of certain out-of-the-money employee stock options that had an exercise price equal to or greater than $27.00 per share for fully vested shares of the Company's common stock. For each stock option tendered, an employee received common stock with a value equal to the number of shares underlying the stock option, multiplied by $3.20. This resulted in the issuance of 3.8 million shares of common stock and the cancellation of approximately 18.8 million options.

For the second quarter of fiscal 2003, revenues increased 64% compared to the same period a year ago to $427.3 million. Actual net income for the second quarter of fiscal 2003 was $5.3 million, or $0.03 per diluted share, compared to actual net income of $32.9 million, or $0.19 per diluted share, for the second quarter of fiscal 2002. Actual net income for the second quarter of fiscal 2003 included the additional write-down of certain Xbox and nForce products.

Revenues for the nine months ended October 27, 2002 were $1.44 billion, an increase of 66% compared to revenues of $865.8 million for the nine months ended October 28, 2001. Net income for the nine months ended October 27, 2002 was $39.9 million, or $0.24 per diluted share, compared to net income of $100.9 million, or $0.60 per diluted share, for the nine months ended October 28, 2001.

Generally speaking, there are a lot of reasons why NVIDIA losses money, including the ones they blame. The most important are the current state of the graphics cards market and the pressure from ATI Technologies, as strong as never before. At the moment I am not able to make any predictions about NVIDIA, since everything develops very rapidly and even unpredictably. Maybe tomorrow NVIDIA will launch its NV30 that will blow the rivals away to Canada, maybe NVIDIA itself will have to stay back in Santa Clara, developing and redesign the highly-anticipated VPU.