Nvidia: GPU shipments down 20 percent in Q2

Written by Tim Smalley

August 13, 2008 | 14:06

Tags: #call #ceo #credit #crunch #earnings #economic #financial #gpu #huang #jen-hsun #loss #shipments #slowdown

Companies: #nvidia

During Nvidia’s second quarter financial earnings call last night, CEO and President Jen-Hsun Huang revealed that the company’s GPU shipments have dropped by 20 percent in the last quarter.

He also said that average selling prices (ASPs) of GPUs sold by the company has dropped by 25 percent as well, which isn’t doing much for Nvidia’s financial performance. Indeed, the company’s revenue decreased by five percent to $892.7 million, compared to $935.3 million a year earlier.

It was the first quarter in nearly six years where Nvidia posted a loss and the mood on the call was understandably sombre. The loss amounted to $120.9 million and compares to $172.7 million of profit recorded a year earlier – that’s quite a turnaround, but it wasn’t unexpected.

This comes following the announcement of higher-than-expected failure rates on some of its notebook GPUs last month, where Nvidia said it would take a $200 million charge to cover warranty repairs – the company also coughed up $196 million to cover this. When asked, Huang said that the situation is now under control and he believes there won’t be any more charges relating to this problem.

Huang blamed the drop in revenue on a number of factors, ranging from economic slowdown, a large inventory of 65nm chips to an over-priced product lineup that was put down to underestimating the competition from AMD.

The desktop PC market around the world weakened during the quarter,” said Huang. “And our miscalculation of competitive price position further pressured our desktop GPU business. We have a great product line-up and, having taken the necessary pricing actions, we are strongly positioned again. Our focus now is to drive cost improvements and to further enhance our competitiveness through the many exciting initiatives we have planned for the rest of the year.

He later added that the delays to the company’s first integrated graphics chipsets for Intel processors was hurting the company, but assured analysts that the products would be released during the third quarter. Despite this, Huang was bullish about the company’s performance in other areas of its business. “The notebook GPU, MCP, and Professional Solutions groups grew a combined 27 percent year-over year,” he said.

However, when asked about when he expects the market to recover and for desktop GPU shipments to grow again, he said “it’s hard to say when it will recover.” Huang mentioned that the company is ready to ship 55nm chips in volume, but because of a large inventory of 65nm products, 55nm products will not carpet bomb the market until later in the year – as soon as 65nm inventory has been worked through.

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