There have been a lot of road-kills in the graphics business [Chips & Technologies, S3, Cirrus Logic, Tseng Labs come to mind], which is always cyclical, and "owned" by a player or two. For now, nVidia is one of the big two, and will continue to be - till the next major breakthrough in graphics processing creates a new winner [or a new old winner].
I had an opportunity to listen to nVidia's mea culpa conference call - after the earnings announcement that fell short, but wasn't as bad as expected. While this is fine and dandy, it just seems too "perfect" to me, and I refuse to believe that the long-term effects of this admitted snafu will last only one quarter. Why am I being pessimistic ?
a. NVDA came in closer to the low-end of their own guidance of $875M to $950M in revenues [I'd have thought that they had an excellent idea by mid-July as to what they would probably announce].
b. I believe in the cockroach theory. If you see a roach, there are a hundred below the floor-boards that you do not see.
c. In the semiconductor industry, even the best systems cannot stop the "propagation" of a mistake into other areas.
d. nVidia's cycle-time - from when they start designing a chip, to getting it fully qualified at Microsoft [to work with the OS and the graphics API] - to the time the company recognizes revenue from the product is anywhere from twelve to eighteen months [though occasionally, I have heard the company venture smaller numbers (which is possible for re-designs and incremental improvements)].
e. The announcement of a stock buy-back means nothing. Implementation thereof is key [see Linear Tech in my previous article].
Let me be very clear that I believe in Jen-Hsun Huang and his resilience. In fact, NVDA has been through bankruptcy protection once and emerged triumphant [which very few semiconductor companies have done in the past].
Bapcha
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Ok. Here is a little different look from me - I don't agree 100% when you say that the worst is not over.
AMD just released their new 48xx line of super video boards, taking the crown of fastest video boards from nVidia and this time nVidia was caught in a bad moment. 1) They just released their 2xx new boards and they are not on par to AMD's, 2) They are having a good headache with the notebook video chips (perhaps a recall will be placed) 3) They don't have a new/better chipset to challenge Intel's P45 family and now Intel is going to play SLI, 4) Global market is slowing down because Intel onboard video chip is enough to run Windows XP/Vista/Mac OS on an reasonable performance (x3100).
But nVidia is looking for the future, and this is why I believe that from now forward, things are going to be better for nVidia:
1) From the last conference call (few days ago), the president from nVidia - mr. Huang - spoke a LOT of times about CUDA, a technology that will allow programs to use the mathematical power of the GPUs to improve the speed and responsiveness of games / programs / etc. All big players in the industry are going this way: Adobe's new version of Flash player is using GPU processing for a better performance of their Flash player, Adobe's new Photoshop version (CS4) will use GPU to reach 10x or more performance on image filters, Apple's new operational system (Mac OS X - Snow Leopard) will be using a LOT of GPU power. So nVidia is on the right track with this. On the next 6-9 months, we will see a new revolution on how GPUs are used.
2) I've heard from the grapevine that Apple's new line of notebooks will use nVidia GPUs and chipsets. They are focusing on the next MacOS with this hardware.
3) nVidia will reduce the price on their 9xxx line to be on par with AMD's. This will help to get rid of the 65nm parts stock.
Unfortunatelly, we will only see a new line of top video cards from nVidia by march next year. Also they will probably come with a overclocked version of their top dog just to tie with AMD's performance.
Let's hope nVidia takes a rabbit from their hats before Christmas season with a new mid/low-end line of video boards that looks appealing for the regular 6-pack Joe.
I believe that by the end of october, nVidia stocks will be back to the $20's.
David
PS. Sorry for some typos. English is not my primary language.
SPWR keeps moving higher based on new contracts.
Do you still believe that it is over-priced when compared to group?
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