Analyst Conference Summary

NVIDIA Corporation

conference date: February 13, 2007
for quarter ending: January 28, 2007 (4th quarter fiscal 2007)

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Forward Looking Statements


Basic data:

Revenue of $878.9 million was up 7% sequentially and was up 39% from Q4 fiscal 2006.

Net income was $163.5 million, up 53% sequentially and up 68% from Q4 fiscal 2006. The company also reported non-GAAP net income of $205.6 million, or $0.53 per share, which excluded a charge for PortalPlayer R&D acquisition and stock-based compensation charges.

Earnings per Share were $0.26.

GAAP gross margin 43.9%. Non-GAAP gross margin was 44.2%

Cash and equivalents ended at $1.12 billion. $160 million was paid for PortalPlayer. $100 million in stock repurchases.


Fiscal Q1 2008 outlook: normal seasonal decline in revenue of 5%. Position in industry is strong, but there are no growth drivers to offset seasonality. Expect PortalPlayer to contribute less than $10 million revenue in quarter, offet by an associated $10 million increase in expense. Gross margins flat. Hope to keep overall expenses flat sequentially. 14% tax rate.

Conference Highlights:

nVidia is now the only independent GPU company in the world.

For fiscal 2008 they expect growth from branded Intel-based motherboard GPUs, an application processor for handheld devices, high-performance computing accelerators. Vista, DX10, and Blu-ray/HDTV will also drive growth. GeForce 8800 to be leveraged into mainstream market. Expect to gain notebook GPU share. nForce has become the number 1 chipset supplier for AMD-based PCs, and dominates Intel PC chipsets as well.

Share of notebook GPU market reached 58%, up 20% from previous year. Notebook GPU revenue grew 122% year-over-year. nforce MCP revenue grew 16% sequentially and 89% year-over-year. Quadro professional line grew 24% year-over-year.

In performance segment share grew to 85%. PC graphics share grew from 18% year-ago to 29% today.

Handheld gpu line $108 million, up 85% year-over year.

Professional solutions products grew 14% sequentially.

In desktop GPU segment, GeForce 8800 products grew by more than $50 million, but GeForce 7 products showed some weakness. ASPs were slightly down.

Memory grew by $10 million quarter-to-quarter.

Consumer electronics revenue grew 40% sequentially driven by higher royalty payments.

ASPs flat except in desktop GPUs.

PortalPlayer acquisition closed January 5 and contributed only $1 million to revenue.

GPUs, MCPs and handheld divisions all improved gross margins sequentially. Approaching 45% goal.

GAAP operating expenses were $247.2 million. Cost of revenue was $493.1 million. R&D $162.3 million; SG&A $84.9 million. Operating income $138.5 million. Interest income $13 million. Depreciation $30 million. Cap ex $71 million.

Accounts receivable grew $79 million to $518.7 million. Inventories declined by $19 million to $354.7 million. Accounts payable decreased $52 million to $272 million.

4083 employees end of year.

Tax rate was negative 8% due to R&D tax credit.


Rollout of rest of GeForce family? Has beat competition to market by over 6 months, is basis for cores for future mobile, desktop, and integrated graphics. 8800 ramped up well. Will be highest unit volume only late in 2007 or early 2008 because competing with very low cost GeForce 7, which is Vista compatible.

Application processor strategy? Introduced first product this week. Core reason for acquiring PortalPlayer. Will combine their ability to build low power SOCs with our ability in GPUs. Hopes to introduce an amazing product towards end of this year. $4 to $6 billion dollar market.

Intel chip set roadmap? No announcements yet. Market needs a branded motherboard alternative where graphics are important.

Intel discrete GPU threat? Don't see benefit of saying what we will be building several years out. We are really focused on creating products consumers want to buy.

Cell phone traction in fiscal 2008? Remain bullish about mobile. We were focused on Motorola and some of the phones we were designed into were not as successful as we would have liked. Based on design wins, will be over $108 million for the coming year. Will put a GPU in an SOC.

Intel strategy? Combined, single chip motherboard chipset and GPU. Market loved it.

Vista? Believes Vista first to take full advantage of GPU, and allows applications to do that too. Really exploits 3D. With notebooks there is a form factor issue. Can supply market with motherboard GPUs or discrete GPUs.

ASPs (predicted up by Mercury)? Out ASP has been kind of growing steadily over the years. Because graphics richness has grown rapidly.

MCP Intel sets? Will be seasonal in Q1. As year progresses will launch Intel motherboard GPUs.

5% decline guidance? Expect memory decline to be single largest component.

Channel Inventories? Sell through is picking up. Intel motherboards are still ramping. Now that CPUs are back, doing well.

PortalPlayer v. ARM-based processors? Main difference is personal media player market where extreme low power is important. Amazing decoding abilities. Complete computer on chip that does graphics processing at very low power. We did not have an application processor. Competors? TI, Samsung, Marvell. But lots of segments to specialize in.

Response by AMD to your market share gains? Can't answer that. We compete in both AMD and Intel processor markets. Have 29% of overall GPU business and will focus on growing that.

AMD v. Intel chipsets? Mostly AMD, just entering Intel chipset market. As Conroe grows 680 family will follow that.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2007 William P. Meyers