NVIDIA Stubs Its Toes.. All Of Them (NVDA, AMD)

By Douglas A. McIntyre Published Jul 2, 4:01PM EDT

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NVIDIA Corporation (NASDAQ: NVDA) has just come out and issued an earnings warning over several issues. The graphics processor giant said that second quarter revenue and gross margin are expected to be lower than guidance provided during its first quarter conference call back on May 8, 2008. It now sees total revenue from $875 million to $950 million. This is a HUGE disappointment. First Call had estimates at $1.1 Billion in revenues. The decrease in revenue and gross margin is being noted because of the following reasons:

end-market weakness around the world,
the delayed ramp of a next generation MCP,
and price adjustments of GPU products to respond to competitive products.

NVIDIA said it also plans to take a one-time charge from $150 million to $200 million against cost of revenue for the second quarter to cover warranty, repair, return, replacement and other associated costs and expenses. These arose from a weak die/packaging material set in certain versions of its previous generation GPU and MCP products used in notebook systems. It noted that certain notebook configurations with GPUs and MCPs manufactured with a certain die/packaging material set are failing in the field at higher than normal rates. NVIDIA said that abnormal failure rates with systems other than certain notebook systems have not been seen, and it has started discussions with its supply chain regarding this material set issue and the Company will also seek to access insurance coverage for this matter.

This might actually be a break for Advanced Micro Devices Inc. (NYSE: AMD). It is unknown if the same end weakness that is mentioned is also true at AMD or if maybe this is Caused by AMD and its graphics chipsets from the old ATI that it acquired. We cannot drop any fears that some of the issues do not overlap. But that failure rate hasn’t been the same according to available data seen out of AMD. AMD shares are down with NVIDIA, with shares down 3.7% at $5.44 at the close and shares are down another 1.3% at $5.37 in after-hours trading.

NVIDIA had already been weak for some time, so much may have been known. Its stock closed down 3.8% at $18.03 in regular trading. Unfortunately NVIDIA stock is halted until 5:05 PM EST. It’s hard to imagine that this won’t see a new 52-week low as its 52-week trading range was $17.31 to $39.67.

Jon C. Ogg
July 2, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.