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nVidia Tops Street Despite Losses

nVidia
Graphics chip player nVidia on Thursday topped Wall Street expectations with a lower-than-expected loss -- giving some signs of a turnaround and increasing sales for the battered semiconductor sector.

For its first quarter, ending April 26, nVidia (NASDAQ: NVDA) reported a loss of $201.3 million, or $0.37 per share, compared with a profit of $176.8 million, or $0.30 per share, for the same quarter last year. Much of this was due to one-time employee stock purchase-related charges to buy back stock options that were "underwater," as CEO Jan-Hsun Huang described it.

However, nVidia posted a far narrower loss on a non-GAAP basis -- $46.7 million, or $0.09 per share. That loss excludes recurring stock-based compensation charges, the non-recurring charge related to the tender offer, and the associated tax impact of these items.

In both revenue and losses before one-time charges, nVidia did far better than the street was expecting. Analysts had expected the company to report a loss of $0.11 per share on revenue of $514.7 million, according to Thomson Reuters.

"We made good progress managing expenses and significantly reducing inventory, while continuing to invest in our growth strategies," Jen-Hsun Huang, president and CEO of nVidia, said in a statement.

Revenue grew 38 percent sequentially from fourth quarter, which was a disaster for almost every vendor, but is down 42.4 percent from the same quarter last year.

nVidia has gotten a grip on its inventory problem. Normally the company keeps about 75 days worth of inventory on hand, but when distributors and resellers threw up their hands and said stop sending orders, inventory shot up to 144 days. The company now has 64 days of inventory on hand.

"The quarter was a pretty solid quarter, I'd say," Huang told analysts during a conference call to discuss the results.

He also had better news for industry watchers, echoing a growing trend among chip makers, most notably Intel (NASDAQ: INTC): increased demand. "We had spot shortages of several products and there are rumors of us pushing our supply chain pretty hard to get product out into the marketplace, and those rumors are true."

And it seems to have worked. nVidia increased its GPU market share by six basis points to 69 percent, with much of that coming in desktop sales.

Newly appointed CFO David White, who joined the firm in April to replace retiring CFO Marvin Burkett, said GPU business rose 44 percent quarter over quarter, with desktop sales up 50 percent. Of course, that came on the heels of the dismal fourth quarter. Notebook sales rose 28 percent on increased OEM demand, he added.

The July quarter is typically nVidia's slowest, White said, so the company expects revenues to improve sequentially by only 5 percent, with gross margins of about 32 percent to 34 percent and operating expenses of $280 million.

The company did not give guidance for later in the year.

"The market is still uncertain, and we monitor sellout in every single geography for every single product, and we monitor like crazy," Huang said. "But so far, so good."