Nvidia results top expectations, shares rise

SAN FRANCISCO, USA: Graphics chipmaker Nvidia Corp posted better-than-expected results on improved product demand and set a current-quarter sales outlook above Wall Street expectations, and its shares rose 8.6 per cent on Thursday.

Nvidia's core business is in consumer personal computers, a market that has proved healthier in the downturn than the one for PCs used by businesses.

The chip sector as a whole was stung by a steep falloff in PC purchases as the economy began to falter last year.

But Intel, the world's largest chipmaker, said last month it saw better-than-expected consumer demand for PCs and analysts expect launches this fall of new operating systems from Windows 7 and Apple to help boost sales.

"We're seeing strength pretty much across the board," Chief Executive Jen-Hsun Huang said on a conference call with analysts in response to a question about demand.

Nvidia expects sales for the current quarter to rise 5 to 7 percent sequentially to roughly $815 million to $830 million, well above the average Wall Street estimate of $765 million.

Nvidia also forecast gross margins rising by 36 to 38 per cent for the October quarter.

"It's kind of what the stock needed to get to a higher level," said Wedbush Morgan analyst Patrick Wang.

"They're comfortable with giving better gross margin guidance, expenses are under control. They're seeing broad-based strength with relatively lean inventories."

Chief Financial Officer David White said told Reuters the enterprise business appeared to have bottomed out: "Some of the signals we're beginning to see now are evidence of signs of recovery in the second half of the year."

Nvidia dominates the higher-end "discrete" graphics chip market along with rival ATI, which is owned by Advanced Micro Devices Inc.

Intel makes only lower-end "integrated" graphics chips, but plans to enter the stand-alone market with a forthcoming chip code-named Larrabee.

Big charge

Revenue fell 13 percent to $776.5 million, but easily beat the $712.3 million Wall Street estimate.

Nvidia reported a net loss of $105.3 million, or 19 cents a share, in the fiscal second quarter ended July 26, versus a year-ago net loss of $120.9 million, or 22 cents a share.

Nvidia had a profit of 7 cents a share, excluding items such as a charge of about $119 million related to a weak die/packaging material set that was used in some previous-generation chips. Analysts on average had forecast a loss of 2 cents a share, according to Reuters Estimates.

Broadpoint Amtech analyst Doug Freedman said the charge was one of the few negative points from the report.

"The charges continue to come in pretty high .... This is an issue we thought was behind us," he said.

Nvidia said the cost of remediation and repair has been higher than it originally expected. It took a $196 million charge a year ago to cover expected costs.