Nvidia rides Tegra wave
Nvidia Corp forecast quarterly revenue and margins above Wall Street estimates as it quickens its expansion beyond personal computers into a thriving market for tablets and smartphones.
With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors, branded Tegra, for mobile devices. But it faces tough competition from the likes of Qualcomm Inc, Texas Instruments Inc and Samsung Electronics Co Ltd.
Nvidia won spots for its Tegra chips in two of the highest-profile tablets to be launched in 2012.
In June, Microsoft Corp unveiled its Surface tablet using Nvidia’s Tegra chip, while Google Inc launched its Nexus 7 tablet, which also uses Tegra 3 and has had strong sales.
The devices mark the first forays by Microsoft and Google into a tablet market dominated by Apple Inc’s iPad.
Shares in the company once known mainly for its high-end graphics cards have gained more than a quarter in value since June, just before Microsoft and Google announced those product launches.
“Going forward, the key focus is going to be Tegra, Tegra, Tegra,” said Evercore analyst Patrick Wang. “I think it would be hard to argue that there’s significant organic growth left in the discrete graphics market.”
Consumer products revenue, the bulk of which comes from the Tegra business, leapt 35.5 percent in the second quarter from the first, more than double the growth of Nvidia’s traditional graphics unit division.
Consumer products accounted for more than 17 percent of total revenue in the quarter, up from 14 percent in the first quarter.
As PCs lose popularity with consumers, those computers are increasingly being manufactured without discrete graphics chips like the ones Nvidia designs.
The recent Nexus and Surface announcements follow some earlier disappointments for the company, including Samsung’s reliance on its own chips instead of Nvidia’s.
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