Nvidia Dramatically Lowers Revenue Guidance for the Quarter

From X-bit Labs: Nvidia Corp. on Wednesday announced that it expected revenue for the second quarter ending August 1, 2010, to be drastically lower than the guidance provided with the company's financial results for its first quarter. The company blamed poor sales of consumer graphics processing units (GPUs) as well as economic weakness in certain parts of the world.

The company that controls a huge chunk of the graphics adapters market said that its revenue for its second quarter of fiscal 2011 was estimated at $800 million to $820 million, compared with the range of $950 million to $970 million provided on May 13, 2010.

Nvidia officially explained that the revenue shortfall occurred primarily in the consumer GPU business, resulting from increased memory costs and economic weakness in Europe and China. The increased solution cost of discrete GPUs led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics. Nevertheless, everything may not be that easy and straightforward.

Nvidia's revenue for the Q1 of FY2011 was $1.00 billion and the revenue split was as follows:

* GPU business unit (which now includes sales of both discrete and integrated consumer graphics adapters) earned $780.9 million;
* Professional solutions business (PSB) unit (which sells Quadro- and Tesla-branded products) earned $189.7 million;
* Consumer products business (CPB) unit's revenue (which commands sales of Tegra-branded products and also absorbs game consoles royalties) was $31.2 million.

Based on the revenue split and the fact that Nvidia launched a new professional graphics solution just this week, it can be expected that the company lost sales in both consumer and professional GPU segments with GeForce and Quadro offerings. Besides, Microsoft Corp.'s canning of Kin phones probably affected sales of Tegra system-on-chip (SoC) devices that power the smartphones.

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