nVidia Blows Past Estimates With 90% Growth

Of all the firms to go off the cliff in the fourth quarter of 2008, nVidia took the hardest hit, with sales plunging 60 percent year-over-year and the company posting a loss. One year later, its sales have more than doubled and it could have done better if it had all the supply it needed.

The graphics vendor reported net income for the period ended Jan. 31 of $131.1 million, or 23 cents a share, compared to the loss of $147.7 million, or 27 cents a share, in the same quarter one year earlier.

Revenue for the fourth fiscal quarter more than doubled year-over-year from $481.1 million in fiscal 2008 to $982.5 million this year. Revenue was also up 9 percent sequentially from the third quarter.

Analysts polled by Thomson Reuters had expected nVidia (NASDAQ: NVDA) to report earnings of 20 cents a share on revenues of $957.2 million in revenue. GAAP gross margin was 44.7 percent, higher than prior guidance.

On a conference call with analysts, company executives said nVidia was “supply constrained” throughout the entire quarter and across all product lines. The company has been bedeviled by shortages due to its manufacturing partner TSMC’s inability to produce enough product.

TSMC has had problems with the transition to manufacturing 40nm GPUs, a problem that has impacted both nVidia and its main competitor, AMD (NYSE: AMD). TSMC’s yields have improved with each month, but both AMD and nVidia want more than the Taiwanese company can provide.

CEO Jen-Hsun Huang told analysts that the constraint cost the company “a couple hundred million dollars” in missed sales, with many notebook OEMs going “hand to mouth” throughout the quarter.

nVidia expects to be constrained for the first half of the year. “As we ramp more product into the marketplace, I sure hope the supply would be there to support it,” Huang said.

He said the chipset business was down, but expected it to recoup the losses with two new businesses: the ION business, which marries an Intel (NASDAQ: INTC) Atom processor with an nVidia GPU, and the newly-announced Optimus technology that seamlessly shifts a laptop between an integrated and discrete GPU.

“Optimus is really a game changer for us and solves the single largest issue that has kept GPUs from growing further in the marketplace, and that is power issues,” Huang said. He said he expects Optimus to grow nVidia’s laptop GPU business significantly in coming quarters.

For the first quarter, nVidia expects revenue to be flat with the fourth quarter of 2009, with gross margin of 44 percent to 45 percent. Operating expenses are also expected to be flat with 4Q09.

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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