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Nvidia Takes A Big Hit In The Second Quarter

By - Source: Tom's Hardware | B 6 comments

Santa Clara (CA) - The replacement of faulty graphics chips as well as a much stronger than expected AMD/ATI pushed Nvidia deep into the red during the second quarter. The company reported a revenue decline of 23% sequentially and a triple-digit loss.

The company posted sales of $893 million, down 23% from $1.15 billion the first quarter and down 5% from $936 million year over year. In a rare event, Nvidia reported a hefty loss of $120.9 million, compared to a net income of $211.8 million in the first quarter.

Nvidia said that its GPU replacement program had a price tag of $196 million. CEO Jen-Hsun Huang said that while the failures affected a relatively small percentage of its total GPU output, repairing an entire notebook "can be expensive". Huang also admitted that Nvidia underestimated the "price/performance" of AMD’s/ATI’s most recent graphics chip, resulting in a wrong position of its products and forcing the company to adjust its pricing during the quarter.

The desktop GPU segment apparently came under heavy pressure and declined 23% from Q1 overall, according to Mercury Research. Nvidia appears to have been especially exposed to this trend as the company said that unit shipments declined by 20% sequentially, while average selling prices dropped by 25%. Overall, Nvidia desktop GPU sales were down 40% from Q1 and down 25% from the second quarter of last year.

Huang believes that this trend is amplified by a market that is moving away from desktops and to notebooks as well as stronger demand of entry-level desktop PCs - a market that is currently underserved by Nvidia. The executive said that Nvidia will begin targeting the entry-level desktop segment with low-cost GPUs this quarter.

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  • 1 Hide
    Anonymous , August 13, 2008 11:12 AM
    NVIDIA rob people lots of bucks,It's time to payback!
  • 0 Hide
    jeb1517 , August 13, 2008 1:38 PM
    Can't tell by looking at their stock. Opened at over 8% gain this morning. Very impressive. If only AMD's stock could go up after reporting a loss, it would be up 982375%!
  • 0 Hide
    jeb1517 , August 13, 2008 2:15 PM
    Increase was due to Nvidia putting $1 billion into their stock buy back program. Good timing.
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  • 0 Hide
    blackened144 , August 13, 2008 2:33 PM
    This is just a little bump in the road for Nvidia.. If this happened to ATI, it would practically put them under.
  • 0 Hide
    Anonymous , August 14, 2008 10:15 AM
    ok i just bought a 2700$ hp pavilion dv 9880ee. Am i screwed?
  • 0 Hide
    jivdis1x , August 27, 2008 2:46 AM
    wow $2700 OEM and not from a boutique builder!