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Nvidia (NVDA) Chips Not Selling

Graphics chipmaker Nvidia Corp. (NVDA) said on Wednesday that its revenue plunged 60 percent in the fourth quarter to $481.1 million from $1.2 billion a year ago and the non-GAAP loss for the quarter was 18 cents per share compared to profit of 49 cents per share in last years fourth quarter.

Wall Street analysts were expecting the company to lose 11 cents per share on a non-GAAP basis on revenue of $491 million.

In response, investors sent the shares down some 14 percent in Wednesday trading after the news of the earnings miss hit the wires and the company said the market environment was “difficult and uncertain.”

On the bright side Chief Financial Officer Marvin Burkett said that revenue in the current quarter would be flat to slightly up from the fourth quarter.

“Unless demand continues to fall significantly from here, our prospects are better than they were last quarter,” he said on the company’s conference call.

Burkett also said that gross profit margins should regain some ground and will climb back into the mid-30 percent level this quarter. In Q4 Nvidia’s gross profit margin fell to 29.4 percent due to inventory write-offs and a shift to lower-margin products.

It was an all-around difficult year for Nvidia. It was forced to cut the price of its new graphics processor last year due to competition from Advanced Micro Devices‘ (AMD) ATI unit which also operates in the high-end graphics-card market. Mr. Burkett said that demand “fell off a cliff” in the fourth quarter and noted that “there were no safe havens.”

He cited a 34 percent falloff in its desktop PC chip business and a 63 percent slide in its notebook PC business.

Tightening Their Belts

Nvidia’s CEO Jen-Hsun Huang said that the company’s first priority is to set an operating expense level that balances cash conservation while allowing the company to invest in initiatives that are of great importance to the market and in which the company believes it has industry leadership.

He said the company has initiatives in all areas to reduce operating expenses and is planning to cut $35 million in operating expenses by the end of the second quarter.

While fiscal 2009 was a disaster financially for Nvidia (they called it “extremely difficult”, shareholders called it a disaster) Mr. Huang said it was one of the company’s best years for innovation.

He said the company made important advances in many areas, including graphics processing where major studios such as Electronic Arts, THQ and Take 2 have standardized on PhysX, the industry’s first GPU accelerated physics processing.

Other advances were made in 3-D vision — the first ever high resolution, stereo 3-D solution for the home, and in GPU computing where the company’s CUDA parallel processing architecture can accelerate computation intensive applications by 100 times over a CPU alone.

Nvidia is a leader in its industry and has $1.2 billion in cash and marketable securities at the end of the fourth quarter and no debt. The recent selling is painful, but may open a door for investors to buy on the cheap.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, visit www.InvestorPlace.com.

Article printed from InvestorPlace Media, https://investorplace.com/2009/02/nvidia-nvda-chips-not-selling/.

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