Nvidia to cut workforce by 6.5 percent

Written by Tim Smalley

September 18, 2008 // 9:27 p.m.

Tags: #360 #65 #business #cuts #employees #nvidia #percent #regions #units #workforce

We have learned that Nvidia will shed 6.5 percent of its 5,500-strong global workforce—equating to approximately 360 employees—before the end of its third fiscal quarter.

The job cuts come following dramatic changes to the company's business outlook during the second quarter and will be company-wide cuts. There will be job losses in all business units, in all regions – because of this, there will be some internal reshuffling following the redundancies.

Although Nvidia's business outlook has changed, the company says it is still making significant progress in its key growth areas, namely with its CUDA parallel computing technology and also its Tegra system on a chip, and will continue to invest heavily in high growth opportunities.

Jen-Hsun Huang, Nvidia's CEO and president, said that although he regrets having to make the first cuts in the company's history, he believes they are necessary "considering the current business realities." He then continued by saying that "We are taking fast action to enhance our competitive position and restore our financial performance. All of us at Nvidia are determined to emerge from these challenges an even stronger company."

It's fair to say that the last few months have been tough Nvidia. Not only did the company record its worst quarterly financial performance for almost six years, but it also revealed that GPU shipments were down by 20 percent and average selling prices also dropped by 25 percent in the last quarter.

If that wasn't enough, the company levied a $196 million charge to cover warranty repairs in the same quarter following higher-than-expected failure rates on some of its notebook GPUs in July. An angry shareholder has since filed a class action suit against Nvidia because the company allegedly knew about the mass failures as early as last August, but chose to keep the information from investors.

Earlier this morning, we managed to speak to Luciano Alibrandi, European director of PR - he explained to us that the cuts are regrettable but required in order to make the company more efficient for the growth it expects. "It's about realigning ourselves to be more effective in the future," he said.

When asked about its relationship to the high mobile GPU failure rates the company has suffered, Alibrandi responded by saying that "this has nothing to do with the mobile GPU problems; instead, it's all about re-focusing the company for the challenges it faces in the future. Fundamentally, the biggest challenge is to make the GPU more relevant with innovations like CUDA and Tegra, where we're providing something revolutionary to the market."

Alibrandi finished by adding that those employees affected by the job cuts will be offered severance packages, counselling and job placement services. Let's just hope everything works out for all those being made redundant.

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