Analyst Conference Summary

conference date: November 11, 2010 @ 2:00 PM Pacific Time
for quarter ending: October 31, 2010 (third quarter fiscal 2011)

But I own a competitor, AMD.
Forward-looking statements

Overview: Continued improvement, but revenues down from year-earlier quarter.

Basic data (GAAP) :

Revenues were $843.9 million, up 4% sequentially from $811.2 million, but down 7% from $903.2 million year-earlier.

Net income was $84.9 million, up sequentially from negative $141.0 million, but down 21% from $107.6 million year-earlier.

EPS (earnings per share) were $0.15, up sequentially from negative $0.25, but down 21% from $0.19 year-earlier.

Guidance:

For fiscal Q4 2011 ending January 30, 2010, revenue is expected to be up 3 to 5% sequentially from Q3. Gross margin flat. Operating expenses about $300 million. GAAP tax rate 18 to 20%.

Conference Highlights:

Believes they have "turned the corner." Execution speeed in up and Fermi architecture is now available for "every segment of our desktop, notebook and workstation product lines." Tegra will be in a variety of smartphones and tablets "soon."

12 new GPU products were launched in the quarter. After the quarter ended the GeForce GTX 580 started shipments; claims world's fastest. GeForce and Quadro are regaining market share. GTS 450 is targetted at budget gaming. Design win share has increased in notebooks. Tesla supercomputer adoption is growing.

46.5% gross margin at low end of range due to product mix not as good as anticipated.

Consumer business up slightly. Tegra revenue should ramp in Q4 as customers prepare for launches in Q1 2010.

Cash and equivalents ended at $1.99 billion, inventories at $378 million were reduced.

Cost of revenue was $451.9 million, leaving gross profit of $392.1 million. Operating expenses of $288.3 million included $204.5 million for R&D and $83.8 million for sales, general, and administration. Leaving operating income of $103.8 million. Other expense was $0.2 million. Income taxes were $18.7 million.

Q&A:

For Q4, could you talk about revenue growth drivers? We are conservative in how we look in the market place. Our Fermi GPUs are going to ramp with the Intel Sandy Bridge launch. We believe we will gain market share and adoption for our GPUs with this new processor. We also start building into our phone and tablet design wins. Google is doing amazing work, building a magical product in the next generation of Android phones and tablets, capable of competing against the iPad and iPhone. Tesla is also going to gain momentum.

When will Tegra revenue exceed chip set revenue? Q1 2011.

Reason mix affected margin? This quarter there were some shifts of high end versus low end and professional versus consumer. Would not read to much into that. We will capture back a lot of high end business we lost because we were late with Fermi. Tegra has very good margins, so as that ramps margins will improve.

Concerns about pricing competition? Consumer GPUs, we pulled further ahead after catching up with Fermi. And GTX 580 is the second generation of Fermi architecture. In that segment, winning wins. Lower prices don't win when someone is going to spend $199 on a gaming card. We just have to market our advantage and the gamers will respond.

Tesla lumpiness? It is lumpy, we don't have a large enterprise sales force. But towards end of last quarter Dell, HP and IBM started selling Tesla.

Over the last few years we have been trying to extend our leadership in GPUs. Tesla and Tegra were additional initiatives to be the future of computing. Along the way a recession came along and we did not execute well on Fermi. But now we are executing well.

Tegra has taken longer than we expected by a few months because the tablet makers had to engineer in excellence to compete with the iPad. A lot had to do with system software. Tegra should have a pretty good ramp in Q1.

Chip set market? It will come down, but not as much as previously thought, because our chip sets are in the new Mac Air. Chip set revenues grew sequentially.

Customers are lined up all over the world with Tegra, so it is going to ramp hard. These will be some of the best devices ever built. You will be more than surprised and delighted.

GPU units and pricing in Q3? Units were up sequentially. Desktop up about 6 points, which brought our ASPs (average prices) down, and margins down a bit too.

No comment on NVIDIA's share of tablets for next year, "but a lot of tablets won't be shipped." A tablet with a keyboard and mouse can compete with notebooks. "Every single company I know is working on tablets... It is a revolutionary form factor. It is probably going to become the largest computing segment." "Touch is not a fad. This form factor is likely to be very disruptive."

Our smartphone business is larger than our tablet business.

R&D expense has doubled since the second half of 2006, with revenues flat? Calling the next generation an update does not do justice to the amount of engineering that has been done. For a tablet you can't just put a phone operating system on a larger device and compete with Apple. The R&D spend allowed us to create Tegra and Tesla, putting us at the epicenter of the next computer revolution.

We are not going to build any more chip sets. It will tail off in 2011. Our AMD chip set remains quite well positioned. MCP 89 for Intel was also really good and Apple will use that for some time. We don't break out chipset revenues.

ASPs for Tegra? Range of $15 to $30 per unit. Tegra revenue should easily overwhelm chipset revenue.

Share buybacks? We are always evaluating our liquidity needs, but at present we have no plans for repurchases.

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