Nvidia profit plummets as revenue slips

The chipmaker comes in a penny below analysts' predictions for earnings, but beats estimates for revenue.

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Updated at 5:20 p.m. throughout. Also, correction made for earnings per share.

In the third quarter of its fiscal year, Nvidia's profit dropped sharply from last year's levels, but revenue came in above forecasts.

For the three months that ended October 26, profit sank 74 percent to $61.7 million, or 11 cents a share, from $235.7 million a year earlier. Excluding costs from stock compensation and other expenses, earnings were 20 cents a share. This exceeded the average estimate of 11 cents projected by First Call.

Revenue for the world's largest graphics chip supplier declined 20 percent to $897.7 million from $1.12 billion last year.

During the third quarter, Nvidia recorded an $8.3 million charge against operating expenses related to restructuring costs in connection with its workforce reduction. The company announced a 6.5 percent reduction in its workforce in September .

Nvidia also lost market share to Advanced Micro Devices' ATI graphics unit. "We lost some market share recently. We're focused on regaining market share," said Jen-Hsun Huang, president and CEO of Nvidia.

"We were caught flat footed at 65 (nanometer) and our chip and board solution was just too expensive. We've made that transition (to 55 nanometer) in Q2. And in Q3 we're through that transition and we're off and running," Huang said. Nvidia shifted to a more advanced 55-nanometer manufacturing process from a 65-nanometer process for its "performance segment" graphics chips in the third quarter.

The desktop segment is a concern for Nvidia, however. "The big swing factor in all of this is what happens to desktop revenue. We're focused on regaining some market share in that area," said Marvin D . Burkett, Nvidia's chief financial officer. "Caution tells me it could be a weak market in the fourth quarter," he added.

The company is aiming to gain share in the high-growth laptop segment. Nvidia launched the GeForce 9400M mobile chipset in the third quarter, its "first notebook chipset for Intel processors," Huang said.

"This is a very important growth opportunity for us. For the first time we have exposure to the vast majority of this fast-growing segment of the PC industry," Huang said.

About the author

Brooke Crothers writes about mobile computer systems, including laptops, tablets, smartphones: how they define the computing experience and the hardware that makes them tick. He has served as an editor at large at CNET News and a contributing reporter to The New York Times' Bits and Technology sections. His interest in things small began when living in Tokyo in a very small apartment for a very long time.


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