Nvidia warns of second-quarter revenue shortfall

Graphics chip supplier pares back revenue predictions, blaming increased memory costs and economic weakness in Europe and China.

Nvidia on Wednesday slashed its revenue projection for the company's second quarter, citing a significant sales shortfall and increasing costs.

The Santa Clara, Calif.-based graphics chip supplier said it expects revenue for its second quarter ending August 1 to be lower than the guidance provided with the company's financial results for the first quarter. Nvidia supplies graphics processing units, or GPUs, to all major computer makers, including Hewlett-Packard, Dell, and Apple.

Total revenue is now estimated at $800 million to $820 million, compared with the range of $950 million to $970 million provided on May 13, the company said in a statement.

Nvidia cited a revenue shortfall "primarily in the consumer GPU business," due to increased memory costs and economic weakness in Europe and China and blamed the "increased solution cost of discrete GPUs" which resulted in a "greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics."

Though Nvidia's primary business in consumer PCs and professional computers is supplying discrete, or standalone, GPUs, the company had also been active in the market for integrated graphics--which are built into the chipset that accompanies the main processor--until recently. Intel and Nvidia are now embroiled in a legal dispute which, in effect, prohibits Nvidia from making integrated graphics products for Intel's latest Core i series of processors.

And in more bad news for the company, Tuesday's roll-out of new iMacs and Mac Pros revealed that Apple had opted for competing GPUs from Advanced Micro Devices' ATI graphics unit in both the new iMacs and Mac Pros. Nvidia had previously been a supplier of GPUs in both of those lines.

"Additional commentary pertaining to the second quarter will be available when Nvidia reports its second quarter financial results on Aug. 12, 2010," the company said Wednesday.

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