Nvidia: Earnings May Show if Transition Working

 @DavidZie
on November 10 2011 1:03 PM

Shares of Nvidia, the PC chip graphics pioneer, were unchanged Thursday as investors awaited third-quarter earnings that may shed light on the company's product transformation.

Nvidia shares were at $14.37 in early afternoon.They've rocketed 15.5 percent since August and are up eight percent for the year.

Founded in 1993 by alumni of semiconductor powerhouses Advanced Micro Devices and LSI, Nvidia engineers designed the graphics processing unit (GPU) now the keystone of computer graphics, and got them designed into most desktops and laptops.

While 60 percent of revenue still comes from the PC market, where growth is easing, Nvidia is going upstream, with its new chips designed into smartphones, workstations and supercomputers.

Analysts expect NvIdia to report it earned 26 cents a share on revenue of about $1.06 billion, following management's guidance. The company earned 15 cents a share on revenue of $843.9 million a year earlier.

The Santa Clara, Calif., company may also provide answers about several key issues, including the affect on sales of the European financial crisis and the floods in Thailand, which have devastated many parts of the electronics sector and prospects for new, higher-end products.

Look for multiple headwinds, said Wedbush Securities analyst Betsy Van Hees, who expects Nvidia's results to match consensus expectations.

Under CEO Jen-Hsun Huang, 48, Nvidia has moved up the technology chain both with new designs as well as acquisitions. To better compete against Texas Instruments and Qualcomm, the company acquired Britain's Icera for $367 million this year to position itself for the burgeoning smartphone sector.

The purchase provided Nvidia with baseband support needed to run graphics on smartphones. Its Tegra 2 family already is designed into tablets like Motorola Mobility's Xoom and Samsung Electronics's Galaxy Tab.

Last month, Nvidia said it would ship 18,000 GPUs to the U.S. government's Oak Ridge National Laboratories to enable its supercomputer to perform faster graphics modeling. Because the GPUs handle many applications in parallel, they speed up servers based on older forms of central processing units.

Nvidia chips are now being designed into three of the top five of the top supercomputer platforms, said Steve Scott, chief technology officer. The executive formerly worked for Cray, one of the pioneers in the sector.

Besides watching Nvidia's upscale transition, investors will also wait for fourth-quarter revenue guidance. Last year, the company said net income doubled to $171.7 million, or 27 cents a share, on revenue of $886.4 million.

The company's market capitalization is $8.68 billion; enterprise value is $6.2 billion.

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