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Nvidia cuts workforce 6.5 percent

Responding to "business realities," the world's largest graphics chip supplier on Thursday said it expects to eliminate approximately 360 positions worldwide.

Update at 10:45 p.m. with additional information throughout.

Responding to "business realities," Nvidia is cutting its workforce by over six percent.

Nvidia, the world's largest graphics chip supplier, on Thursday announced a workforce reduction of 6.5 percent "to allow for continued investment in strategic growth areas," the company said in a statement. "As a result, Nvidia expects to eliminate approximately 360 positions worldwide, or about 6.5 percent of the company's global workforce."

The company expects to record restructuring-related charges of approximately $7 million to $10 million in the third quarter of fiscal 2009 in connection with the reduction. These pre-tax charges are comprised of severance and related expenses and are expected to be charged primarily against NVIDIA's operating expenses, the company said.

Derek Perez, an Nvidia spokesman, said this is related to a discussion in its second quarter 2008 earnings conference call "about how the business outlook has changed dramatically from what we thought it was going to be at the beginning of the year."

"Our action today is difficult, but necessary considering current business realities. Despite our reduction, we will continue to invest in selective high-growth opportunities like our revolutionary CUDA parallel computing technology and our Tegra mobile single-chip computer," said Jen-Hsun Huang, president and CEO of Nvidia in a statement.

Nvidia has been in the throes of a minor stock meltdown. On July 2, Nvidia announced a one-time charge of $150 million to $200 million to cover warranty, repair, return, replacement costs connected to weak die/packaging material in laptop graphics chip products. Then on Thursday, July 3, shares plunged $5.54, or just over 30 percent, and closed at $12.49. And share prices have continued to fall--though how much of the post-30-percent drop can be attributed to the weak stock market is not clear.

Both Dell Computer and Hewlett-Packard have issued advisories, workarounds, and, in some cases, extended warranties to deal with potential computer breakdowns related to the Nvidia graphics glitch.

Nvidia has also faced stiffer competition from its main rival, the ATI graphics unit of Advanced Micro Devices. ATI's newest midrange and high-end graphics boards--launched in June--were well-received and typically priced at a discount, though roughly equal in performance to Nvidia boards. This forced Nvidia to cut prices on its performance graphics chips.

The workforce reduction is expected to be completed by the end of the third quarter of fiscal 2009 ending October 26, 2008. Nvidia said it will provide employees affected by this reduction with severance packages, counseling, and job placement services.