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nVidia Q2 Sales Show Signs of Life in Chips

It was a better-than-expected showing for nVidia (NASDAQ: NVDA) today, with the graphics chipmaker reporting second-quarter earnings that topped Wall Street estimates.

For the quarter ended July 26, nVidia saw a profit of $37.7 million before charges, or $0.07 per share -- off 9.7 percent compared to a year ago. Revenue clocked in at $776.5 million, a 15 percent decline from the same period in 2008 but up 16.8 percent from first quarter.

Both profit and revenue came in ahead of analyst consensus, which had the company posting a loss of $0.02 per share on sales of $712 billion.

On a GAAP basis, nVidia recorded a net loss of $105.3 million, or $0.19 per share, compared with a net loss of $120.9 million a year ago, or $0.22 per share. The company took a charge of $119.1 million related to defective mobile chips in previous-generation laptops.

"nVidia's business is recovering," President and CEO Jen-Hsun Huang said in a statement. "Product demand is improving, and our strategic investments are leading to new growth. Our two newest businesses began to ship meaningful amounts of product this past quarter and show significant promise."

One especially bright spot: Tesla, the repurposed graphics processors used for general-purpose, high-performance computing in areas like medical imaging and high-end visualization, achieved its highest-ever quarterly revenue.

Additionally, Tegra, the company's system-on-a-chip (SoC) that combines a GPU, controller and ARM processor, picked up a number of design wins, most of which nVidia could not disclose. One that is known is the Zune HD from Microsoft.

nVidia expects revenue in the third quarter, ending Oct. 25, to be up 5 to 7 percent over the second quarter.

IDC semiconductor Analyst Shane Rau said nVidia's numbers are pretty consistent with usual seasonal trends -- and that's a positive sign.

"Yes, product demand is improving from Q2 to Q3 -- that's the typical season profile," Rau said. "It's a good sign that there is real end-demand pulling these GPUs. It doesn't seem to be OEMs begging for inventory. So it's mildly positive."

nVidia's fortune is built on a business of making high-end GPUs for gamers, but with desktop PCs fading in popularity and the need for new markets, nVidia has made the moves into high-performance computing with Tesla and SoCs with Tegra. Rau said it was necessary.

"They have to spread their secret sauce across multiple markets and not be beholden to the PC market," he told InternetNews.com.

Shares of nVidia traded down today ahead of the earnings report, closing down 2.09 percent at $13.12. However, nVidia was up in after-hours trading, at $14.19‎ by press time.