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Chipmaker Nvidia sees record quarter

The company reports record revenue and earnings on the strength of new products and design wins with major computer makers.

Nvidia, this year's graphics chip company to watch, reported record revenue and earnings for its second quarter on the strength of new products and design wins with major computer makers.

Santa Clara, Calif.-based Nvidia reported net income of $22.5 million, or 28 cents per share, nearly four times the net income of $6.7 million, or 9 cents per share, that it reported for the same period a year ago. Analysts polled by First Call/Thomson Financial expected the company to report earnings of 26 cents a share.

While the net income figures included gains from investments, a substantial part of the gain came from product sales. Operating income for the three months ended July 31 came to $29 million, slightly more than three times the $9.5 million in operating income for the same period the year before.

Revenue, meanwhile, came to $170.4 million in the most recent quarter, a 118 percent jump from revenue of $78 million the year before.

The meteoric growth in sales and profits underscores the kind of year Nvidia is experiencing. While the company has trailed Canada's ATI Technologies in the market for graphics chips for PCs for the past few years, the company has landed a number of deals with major PC makers this year that could lead to a switch in the rankings, analysts have said.

Nvidia's GeForce graphics chips are usually incorporated in higher-end PCs, while chips from the older TNT family end up in budget PCs.

Nvidia has also managed to lay the groundwork for moving outside the notoriously competitive market for PC graphics chips. Earlier this fall, Microsoft selected Nvidia to design a graphics chip and what is believed to be a multimedia chip for its Xbox game console coming next year. In addition, Nvidia has announced plans to move into the Apple market.

Next year, the company will introduce a PC chipset with integrated graphics. To date, Nvidia has participated in this market through partnerships with other companies.

"Nvidia will be able to enter the (integrated graphics and core logic) market segment without having to incur the costs of major development or retooling," Jon Peddie, president of Mill Valley, Calif.-based consulting group Jon Peddie Associates, said earlier this month.

"The second quarter of fiscal 2001 was a milestone quarter for Nvidia," CEO Jen-Hsun Huang said in a statement. "Our top-to-bottom product offering continues to expand, as we completed the rollout of a full line of GeForce2 GPUs. We are in a terrific position to rapidly expand our market share and extend our technological reach well beyond the core consumer market."