Nvidia's stock had a rocky start on Thursday, as shares fell more than 5 percent following the company's announcement that fourth quarter profit had declined by 17 percent.
The company faced declines across all its major business units, which led analysts and investors to react with obvious concern. Tegra 2 sales declined much faster than Nvidia had anticipated and caused the manufacturer's consumer business to nose-dive by 42.5 percent sequentially. The hard disk drive shortage and reduced PC shipments resulted in a 3.6 percent decrease for the GPU business in the same time frame, while the professional business was down 3.6 percent. Earnings were also impacted by a payment to Rambus to settle a patent suit.
Nvidia tried to maintain a positive perspective and noted that "Tegra products shipped in 14 phones, 34 tablets and in 18 of the top 20 carriers." Vice president Rob Csongor noted that Tegra 3 is well-positioned and should deliver "renewed growth". Total Tegra sales in 2011 were about $360 million, Nvidia said. For 2012, the company expects "at least" $540 million, the majority of which will be generated via Tegra 3, CEO Jen-Hsun Huang said.
However, there are additional hurdles Nvidia has to take. Huang noted that the hard disk drive supply issues remain and the shortage of 28-nanometer wafers as well as lower than expected production yields continue, which negatively impacts the company's core GPU business. It does not seem to be an issue that can be resolved anytime soon as Huang explained that "the amount of 28-nanometer capacity in the world is not enough." He expects 28 nm shortages to persist throughout this year.