NVIDIA Reports Lower Q2 Profits

A combination of market missteps and a rise in third-party integrated
graphics flattened NVIDIA’s Q2 revenue. The company now is in a
virtual dead heat with rival ATI. NVIDIA expected the period from May to July to
be traditionally soft but failed to predict that desktop graphics-chip sales
would decline by 17 percent, as integrated-graphics chipsets from Intel, Via and
others pushed prices down. Intel also frustrated Nvidia in another segment by
delaying the ramp of its Intel 915 "Grantsdale" and 925 chipsets.

Meanwhile, a number of competitors forced pricing down in the mid-range and
low-end PC markets and Nvidia was forced to cut prices to win share. Nvidia
actually built inventory expecting the mid-range NV40 and low-end NV30 products
to sell through but it didn’t happen and the company was forced to cut
production while selling prices and unit volume for the two segments decreased.
The market share of both ATI and Nvidia shrank as Intel’s integrated graphics
kept it at the top of total graphics shipments, with a 37.7 percent market
share. The one high point for Nvidia was the company’s revenues from the
Microsoft Xbox gaming console, which grew $ 60 million, and sales of the
company’s latest 6-series graphics chips, which brought in $ 30 million.


A combination of market missteps and a rise in third-party integrated
graphics flattened NVIDIA’s Q2 revenue. The company now is in a
virtual dead heat with rival ATI. NVIDIA expected the period from May to July to
be traditionally soft but failed to predict that desktop graphics-chip sales
would decline by 17 percent, as integrated-graphics chipsets from Intel, Via and
others pushed prices down. Intel also frustrated Nvidia in another segment by
delaying the ramp of its Intel 915 "Grantsdale" and 925 chipsets.

Meanwhile, a number of competitors forced pricing down in the mid-range and
low-end PC markets and Nvidia was forced to cut prices to win share. Nvidia
actually built inventory expecting the mid-range NV40 and low-end NV30 products
to sell through but it didn’t happen and the company was forced to cut
production while selling prices and unit volume for the two segments decreased.
The market share of both ATI and Nvidia shrank as Intel’s integrated graphics
kept it at the top of total graphics shipments, with a 37.7 percent market
share. The one high point for Nvidia was the company’s revenues from the
Microsoft Xbox gaming console, which grew $ 60 million, and sales of the
company’s latest 6-series graphics chips, which brought in $ 30 million.

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