Questions remain about Nvidia's traction in mobile

The graphics and mobile chipmaker provides weak revenue guidance for the current period as it grapples with a slowing PC market. It also reports Tegra mobile chip revenue slid sequentially.

Nvidia CEO Jen-Hsun Huang unveils the company's Project Shield gaming device at CES. James Martin/CNET
Nvidia has pretty strong ambitions for its Tegra mobile chip business, but the operations still aren't enough to move the needle for the company.

Nvidia today reported fiscal fourth-quarter earnings that were better than analysts expected, and its revenue for the period ended January 27 was in line with its earlier projection. However, Nvidia's revenue forecast for the current quarter -- $940 million, plus or minus 2 percent -- was less than the $1.07 billion analysts had been expecting.

"The guide clearly isn't all that great for them...and a part of that is definitely due to PC weakness," Evercore analyst Patrick Wang said. "But the burning question is going to be the trajectory of Tegra...They have lots of things to talk about [for the processor], but in terms of translating into real revenue, we're not seeing it this quarter."

Executives noted during a conference call that the GPU business should decline in line with the broader PC industry, while Tegra will also drop amid the transition to Tegra 4 from Tegra 3.

Nvidia traditionally has been known for making graphics processing units found in computers and game consoles, but the company has taken steps to expand its customer base. It has been counting on its Tegra mobile chip to help offset weakness in its core PC market, but so far, it hasn't been enough. Tegra is showing up in many tablets, including the Microsoft Surface RT, but its presence in smartphones is minimal.

As CNET has noted before , Nvidia plans to launch a new chip this year to better address smartphones, but until that happens, the company is likely to be dogged with worries about its mobile push. The industry has already claimed some victims, like Texas Instruments, which recently said it would refocus its applications processor business away from smartphones and tablets. Nvidia has a lot of work to do to make sure it doesn't end up in the same situation.

In addition, rivals are starting to gain more traction in tablets, posing a threat to Nvidia's position in that market.

"Just one year ago, everybody was telling me there was no future in Android tablets," Chief Executive Jen-Hsun Huang told CNET in an interview. "Now this is a very large market and everybody wants to be part of it...Because it's so large, we will see a lot more competition."

Nvidia today noted that Tegra's fourth-quarter revenue jumped 98 percent from the previous year to $208.4 million, but the amount was down 15 percent sequentially.

The company said the quarter-over-quarter decline was largely due to lower sales volume of Tegra 3 following record results in the third quarter for the holiday season.

Overall, Nvidia reported fiscal fourth-quarter net income of $174 million, or 28 cents a share, up from $116 million, or 19 cents a share, in the same period a year ago. Analysts polled by Thomson Reuters had projected earnings of 24 cents a share.

The company also said revenue rose 16 percent from the year-earlier period to $1.11 billion. Sales were in line with its November estimate for $1.03 billion to $1.18 billion.

Updated at 3:50 p.m. PT with comments from CEO interview and conference call.
 

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