Nvidia results beat Street as Tegra chips take off

By @ibtimes on

Nvidia Corp forecast quarterly revenue above expectations, lifted by sales of its mobile chips as it fights off growing competition in the personal computer graphics chip market.

The maker of graphics chips for PCs grabbed center stage early this year with design wins in tablets and phones using Google Inc's Android platform and made by Samsung Electronics <005930.KS>, Motorola Mobility and LG Electronics <066570.KS>.

But competition from Apple Inc's iPad 2 has been fierce, raising concerns that consumers may be buying fewer than expected tablets with Tegra processors.

The company's first-quarter results beat expectations, reducing those worries.

Tegra came in slightly better than we expected, and also the notebook graphics came in better, said Stifel Nicolaus analyst Kevin Cassidy. It seems like the industry concerns about Tegra inventories building might not be warranted.

Revenue from Nvidia's closely watched consumer products group, including Tegra, jumped 78 percent sequentially to $122.6 million in the first quarter, more than some analysts had predicted.

Nvidia's core business of selling graphics chips for PCs is becoming harder as rivals Advanced Micro Devices and Intel Corp launch central processors with integrated graphics, and as sales of PCs come under pressure from tablets.

To expand its mobile offering, Nvidia said this week it is buying British cellphone chipmaker Icera for $367 million.

Chief Executive Jen-Hsun Huang told analysts on a conference call on Thursday that Icera's modem technology complements Nvidia's mobile chips. But he said Nvidia does not plan to build the modem technology directly onto its Tegra chips.

With industry giant Texas Instruments Inc shutting down its low-margin baseband chip business to concentrate on more profitable application processors, some analysts warn that Nvidia will find itself in a tough, commodity market.

Nvidia said second-quarter revenue would rise 4 to 6 percent from the first quarter, implying revenue of $1 billion to $1.02 billion. Analysts on average had forecast $992.5 million in revenue for the current quarter, according to Thomson Reuters I/B/E/S.

The company, a new player in the booming mobile market, reported GAAP net earnings of $135.2 million, or 22 cents a share, for the quarter ending May 1, compared with a net profit of $137.6 million, or 23 cents a share, in the year-ago period.

Non-GAAP earnings per share were 27 cents and first-quarter revenue fell 3.97 percent to $962 million.

Analysts on average expected net profit of 19 cents a share and revenue of $947.8 million in the first quarter.

Nvidia also forecast a record gross margin of 50.5 to 51.5 percent in the current quarter, above the average forecast for about 49 percent. The company's first-quarter gross margin was 50.4 percent.

Shares of Nvidia spiked 3.4 percent briefly in extended trade and then reversed, down 1 percent. The stock closed up 3.17 percent at $20.50 on Nasdaq.

(Reporting by Noel Randewich; Editing by Richard Chang)

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