Nvidia Warns Of Big Revenue Drop In Current Quarter

The filing could be an indication of weakness in that market, given the economic downturn that's likely to favor sales of less-expensive systems.
Nvidia on Tuesday slashed its revenue projection for the current quarter, blaming a drop in sales to PC makers.

The graphics processor maker said revenue would fall 40% to 50% from the fiscal third quarter, as opposed to the 5% drop projected in November. Nvidia's fiscal fourth quarter ends Jan. 25.

Nvidia's sales decline is double projections of chipmakers Intel and Advanced Micro Devices, which also sell graphics processors, but draw most of their revenue from general processors that are the brains of PCs. Intel last week forecast a 20% drop from the third quarter, while AMD has projected a 25% decline.

Nvidia's steeper drop indicates a weaker-than-expected market for graphics processors that drive higher-end PCs. The company said in a statement that the decline was "the result of further weakness in end-user demand and inventory reductions by Nvidia's channel partners in the global PC supply chain."

Nvidia is particularly strong in the market for accessory chips on separate cards that drive graphics in PCs used in gaming and video and photo editing. The company's latest warning could be an indication of weakness in that market, given the economic downturn that's likely to favor sales of less expensive systems.

In an attempt to grab a slice of the low-cost PC market, Nvidia last month said it plans to release in the middle of this year a graphics chipset for mini-laptops that would run alongside Intel's Atom processor. Mini-notebooks, or netbooks, are the fast-growing segment of the PC market.

Besides the economic slowdown, Nvidia also may be feeling the sting of a chip flaw last year that resulted in a big write-off to cover, in part, replacements in customers PCs. The design flaw prompted some computers makers, such as Hewlett-Packard and Apple, to offer customers repairs at no charge.

In the third quarter of last year, Nvidia saw shipments of graphics processors fall 6.4% from the same period a year ago, according to John Peddie Research. AMD and Intel, on the other hand, saw year-to-year growth in shipments of 22.8% and 81.4%, respectively.

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