NVIDIA Corporation


conference date: May 11, 2006
for quarter ending: April 30, 2006 (1st quarter 2007)

Overview: Very good revenue and EPS growth tempered some what by guidance to flat guidance for the current quarter.

Basic data:

Revenues of $681.8 million were up 7.6% sequentially and 17% from year-earlier. GAAP net income was $90.7 million or .23 per share. This included $23 million of stock-based compensation expense.

All numbers reflect the 2 for 1 share split of April 6, 2006.

Each business segment showed growth.

Gross margins were also a record, 42.5%.

$959 million ending cash reflecting acquisitions. Inventory up 92 million mainly due to new GeForce products.


Q2 is difficult to forecast. Normally desktop declines along with PC industry. But sees growth in MPC and notebook business, plus new products. Net result will be flat revenue. Gross margins will require hard work to maintain. Operating expense will grow only slightly. If R&D tax credit is renewed tax rate will decline.

Conference Highlights:

When Sony Playstation 3 is launched (November 3) it will incorporate NVIDIA chips, committed to 4 million units by December 31. Many previously-announced new products were mentioned. Initiatives with both Intel and AMD. Acquisitions included Uli and Hybrid Graphics. GeForce7 adoption contributed to high gross margins.

AMD64 segment went from 35 to 42% of market share.

Desktop segment grew only slightly, but that is despite a typically seasonally weak quarter for PC sales.

MCP grew 65% and GPU 10% year-over-year.

Expenses were higher than anticipated for several reasons, including adding employees and stock option tax related expenses. Headcount ended at 3,175. Tax rate was up due to lack of R&D tax credit.

Has 98% share of multi-GPU market. Gaining notebook market share. Ready for Vista, which will require new graphics cards. Also looking to smart phone graphics for growth. Share grew from 7% to 12%.


MCP business? Market share was below expectations. Believes was because a competitor in Asia sold obsolete inventory at very low cost.

Revenue guidance: does it imply handset decline? No.

Sony NRE? Roughly $23 million. Expect flat this quarter.

Growth areas for rest of year? GeForce 7 continues to ramp, lots of OEM design wins on desktop and notebook. Blue Ray disk should start driving growth. Graphic processing requirements are much higher for DVD.

Will inventories increase again? Not their expectation.

Shortages for GeF 7 seen. Why increased inventories? Because of high demand and need for rapid ramp-up, plus SLI requires 2 GPUs per PC.

New product inventory grew $150 million, overall growth was $90 million, so older product inventory decreased by $60 million.

Physics feature will make SLI much more valuable because one GPU can be used for physics processing. Physics will make virtual worlds seem much more alive, which in turn will create more graphics workload.

Workstations? Down 1% quarter to quarter.

Margins may increase because GeForce 7 margins will be better than prior products. They have been working on operational performance, which also helps margins.

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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 from multiple independent sources.

Copyright 2006 William P. Meyers