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nVidia Sales Plunge on Bad Fourth Quarter

That "can of whoop-ass" that nVidia CEO Jen-Hsun Huang promised to open up on Intel last year has just been returned to his office, postage due. The company was pounded today with downgrades after a severe downward revision of fourth quarter numbers.

nVidia today revised its revenue guidance for its fourth quarter of fiscal 2009 ending January 25, 2009 down by almost half. It said revenue would be 40 to 50 percent lower sequentially from the third quarter due to weakness in end-user demand and inventory reductions by nVidia's channel partners in the global PC supply chain.

The company would not comment further, nor has any plans to say anything else between now and February 10, when it will release fourth quarter and year-end figures. Despite it all, nVidia (NASDAQ: NVDA) was actually up for the day, by $0.04 to $7.65.

Other chip companies have made pre-announcements, but Intel (NASDAQ: INTC), AMD (NYSE: AMD), and LSI have recently offered revised guidance in the range of 15 to 25 percent lower sequentially. Certainly their warnings were not this severe.

These downward estimates are leading to some rather dire predictions. FBR Capital Research cut its calendar 2009 revenue estimate from $3.05 billion to $1.93 billion and its 2009 earnings per share estimate from $0.40 to ($0.45).

BMO Capital Markets said in a research note "revenue may actually bounce back somewhat in the first quarter of 2010, assuming inventories have normalized. Nonetheless, these are challenging times for the PC and consumer electronics industry."

Meanwhile, Friedman, Billings, Ramsey & Co. said in its own research note that while the revision was not surprising, "the magnitude of the sequential revenue decline is far worse than expected ... Given this steep drop in revenues, we forecast nVidia to be unprofitable in the fourth quarter and the full year 2009."

What makes nVidia's warning especially bad is that the company's fiscal quarters are one month behind the calendar quarter, notes Jon Peddie, president of Jon Peddie Research, who follows the graphics market. nVidia's quarter ends at the end of January, not December.

All of the chip makers make their biggest push for sales in Q4 in the second half of the last month of the quarter, i.e. the last weeks of December. If nVidia's numbers are falling off a cliff in a quarter spanning both Christmas and then January, it means Q1 will be equally as bad.

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