bit-tech.net

Nvidia's financials show Surface RT-shape hole

Nvidia's financials show Surface RT-shape hole

Nvidia's Tegra division has taken a serious battering thanks to consumer disinterest in Windows RT, with revenue down a whopping 70.7 per cent.

Nvidia's latest financial figures show that its Tegra division is hurting from Microsoft's inability to convince buyers that Windows RT is an idea with legs, but that improved GPU sales have lessened the sting.

That Microsoft's Surface RT - the company's first mainstream Windows version to support ARM architecture processors, taking the form of a cut-down and tablet-centric version of Windows 8 without legacy compatibility - hasn't been a stellar success for the company is no secret. Its latest financial figures, following a $900 million write-down on unsold inventory, revealed that sales of all Surface devices have failed to even cover the cost of advertising, and its hardware partners continue to cancel their own Surface RT product lines.

Obviously, such matters concern Microsoft - but it's not the only company to be hurt by what is turning out to be a significant misjudgement of consumer demand. Nvidia is one of just a handful of ARM system-on-chip (SoC) vendors to have its product, Tegra, certified for Windows RT. It's also the company chosen for Microsoft's own Surface RT, with its Tegra 3 T30 quad-core Cortex-A9 SoC powering the company's own-brand tablet.

With Surface RTs sitting in Microsoft's warehouse unsold, however, that's not a good thing - and Nvidia's financials show a hole where predicted Surface RT revenue should be, albeit one the company refused to blame by name. 'We don't expect as much return from the [Windows RT] investment as we had hoped,' admitted Nvidia president and chief executive Jen-Hsun Huang during the company's latest quarterly earnings call. '[But] it's a very important platform that also derived from it a lot of design wins.'

Design wins in products that don't sell are not necessarily a 'win.' Accordingly, Huang admitted that Tegra revenue predictions for the company's financial year - which is now half-over - will need to be lowered by up to $300 million, based on a second-quarter year-on-year decrease in revenue of a whopping 70.7 per cent. That's a disastrous decline, but one Huang is pinning on the phasing out of Tegra 3 in favour of 'Logan,' its successor. As companies pick up Tegra 4 parts in the second half of the year, Huang claimed, revenue will return - but not in a high enough volume to avoid the shortfall.

Things weren't all bad for Nvidia, however: the company's overall revenue grew 2.4 per cent quarter-on-quarter to $977.2 million helped by increasing interest in its GPU products. 'The GPU business continued to grow, driving our fourth consecutive quarter of record margins,' crowed Huang. 'We also began shipping GRID virtualised graphics, which puts the power of Nvidia GPUs into the datacentre.' Huang has previously indicated that GRID, along with the company's Tesla accelerated co-processing cards, is one of Nvidia's highest-margin products, helping to push the company's overall margin for the quarter up by four percentage points year-on-year.

Despite boosted margins and quarter-on-quarter growth, however, the financial results aren't all they could be. A 7.5 per cent year-on-year boost in GPU revenue to $798.6 million for the quarter has been unable to mask the 70.7 per cent drop in Tegra revenue, resulting in a 6.4 per cent year-on-year drop in overall income for the quarter.

Following the publication of the results, Nvidia's share price dropped 1.35 per cent in pre-market trading to $14.50.

10 Comments

Discuss in the forums Reply
rollo 9th August 2013, 11:36 Quote
$300 mil short wow, People really were betting houses on Microsofts Surface RT selling 3-5million units. Gonna hazard a guess this will not be the last write down on computer parts related to the Surface that we see.
SchizoFrog 9th August 2013, 11:52 Quote
Talk about NOT putting all your eggs in one basket though. To lose $300m on such a big move as RT was and yet still come out 2.4% UP.
Gareth Halfacree 9th August 2013, 11:56 Quote
Quote:
Originally Posted by SchizoFrog
Talk about NOT putting all your eggs in one basket though. To lose $300m on such a big move as RT was and yet still come out 2.4% UP.
2.4 per cent up quarter-on-quarter - year-on-year, which is a more telling figure, revenue is down 6.4 per cent. Still better than 70 per cent, though!
Snips 9th August 2013, 15:03 Quote
A drop in the ocean for such a large company. The main problem for them will be the Intel based Surface2, that won't need Tegra and people have been waiting for a full fat Win8 tablet for iPad money.

I wouldn't be to quick to dismiss the SurfaceRT after the price drop as reports of empty shelves at US retailers will pacify until Surface2.
rollo 9th August 2013, 18:12 Quote
Wont be a full a fat Surface 2 pro at ipad money though its just not going to happen. Unless Microsoft is going to lose money doing it. ( surface pro they were making around £100 on the uk launch price)

Surface RT is selling at a loss on each sold effectively good to get rid of unwanted stock but not so great if your trying to make cash on what your selling.

As for an Intel Surface will depend alot on Haswells availability for the pro and wether or not it can hit the thermal and power limits that Microsoft has requested.

Surface RT 2 if its made will be tegra 4 but after loosing the best chunk of $1bil they will not make as many this time and they will likely be priced a little cheaper.

The sad facts are that people have the tablet they want and now wont be buying another one, Even Apple has had reduced sales figures on the tablets they sell. I dout ill be buying another one as the current one just collects dust or is used as a familly web browsing device upgrading to a better one would not change its usage.

Heck an Ipad 2 is fast enough for 99% of people using a tablet for facebook, Email , Web browsing the 3 main uses.
Snips 9th August 2013, 18:26 Quote
Rumours are Surface2 won't be Tegra but Intel instead with x86 compatibility. That's been the biggest problem from day one has been legacy support to some.

I never had such problem myself and found the device miles better than my previous iPad or Tab2.
Nexxo 9th August 2013, 21:26 Quote
Quote:
Originally Posted by rollo
Surface RT is selling at a loss on each sold effectively good to get rid of unwanted stock but not so great if your trying to make cash on what your selling.
Actually even with the price cut it is probably breaking even at worst.
Quote:
Originally Posted by rollo
Surface RT 2 if its made will be tegra 4 but after loosing the best chunk of $1bil they will not make as many this time and they will likely be priced a little cheaper.

One can but hope.
loftie 9th August 2013, 21:29 Quote
Nvidia have said they are "working hard" on the second gen surface. Though that could just be say a gfx card and nothing more.
LightningPete 11th August 2013, 19:37 Quote
Quote:
Originally Posted by Snips
A drop in the ocean for such a large company. The main problem for them will be the Intel based Surface2, that won't need Tegra and people have been waiting for a full fat Win8 tablet for iPad money.

I wouldn't be to quick to dismiss the SurfaceRT after the price drop as reports of empty shelves at US retailers will pacify until Surface2.

A drop in the ocean may be on paper. You explain that to Directors / Managers that the goon(s) in the company who went with the windows RT project and then the people who agreed and financed it. And explain to the shareholders whose price has fallen aswell.... It might seem nothing but 300mil in any western currency is a lot of sales to lose!
Nexxo 11th August 2013, 22:15 Quote
Well, it's not as if a component manufacturer can go: "No, we won't sell you our components because we think that your product is not going to sell well". nVidia actually sold all those Tegra 3's that are in all the Surface RT's. They got paid for them. There just wasn't as much follow-up business from that corner of the market as they had hoped.

But the chip is there, it is proven and it will over time be used in cheap low power devices.
Log in

You are not logged in, please login with your forum account below. If you don't already have an account please register to start contributing.



Discuss in the forums