NVIDIA financial results and expectations for the future

Expectations for the future, financials:

• The company expects revenues to rise across all markets the firm serves.
• XBOX revenues to decline by $80 million, but the decline will be offset by the growth of sales in other segments, the management believes.
• Revenues will be approximately flat from Q3 to Q4, according to NVIDIA.
• CFO supposes gross margins will go up.
• CFO also anticipates that the gross margins will improve with each new product introduction and its actual revenue shipments. As “new products” ramp up, the company expects better product costs and higher gross margins.
• CEO added that the company has implemented a “re-tuned model” to address product cost issues. He also said about increasing margins with every new product.
• NVIDIA believes GeForce FX 5700 and nForce3 chipset will generally help to increase margins already in the Q4 (looks like the transition between GeForce FX 5600 to the GeForce FX 5700 will be unbelievably rapid, editor).
• Marvin Burkett also noted the company was able to achieve better FX product costs from TSMC.
• The company expects its gross margin to be up 1% in the fourth quarter of fiscal 2004 (a significant improvement keeping in mind that sales of lucrative XBOX core-logic sets will be down).
• Operation expenses are expected to increase 3% to 5% quarter-to-quarter (they mean the growth over the figure – around $115 million – that excluded one-time expenses from the Q3, editor). Some increases are due to impact of MediaQ acquisition, some are because of increase number of tapeouts of future products GPUs and MCPs.
• Management anticipates ASPs to improve in Q4 over Q3.

Expectations for the future, products:

• Aims to deliver “an exiting roadmap of digital processors” for handhelds market. 60 ex-MediaQ engineers to join NVIDIA.
• Mr. Jen-Hsun Huang mentioned “design-wins” for the GoForce 2150 for lace> Europelace> , lace> Asialace> and the lace> USAlace> .
• The co projects new lineup of ultra low-power media processors for handhelds.
• The management also talked about exciting DTV products during the conference call, but provided not details or timeframes for the devices.
• The CEO talked on a future MCP with native Gigabit Ethernet and Serial ATA-150. Claimed the company will bring “MCP’s features and performance to a new level during the quarter”.
• No updates on nForce for Intel CPUs.
• The officials from NVIDIA confirmed a “whole-new” NV4x family to be launched next year (probably, calendar year, editor) and bring “programmable shading and cinematic computing to a new level”.
• In Q1 some of NV4x will be in production. By Q2 many of NV4x will be in production to bring the margins up. By Q3 “almost entire” family of NV4x will be ramping up in production. No indications whether “calendar” or “fiscal” quarters, though.
• When asked about NV40 tapeout, the management did not comment saying “We do not comment on tapeouts; we just comment on production ramps and design wins. There will be time to talk about NV40, today is our time to talk about 5950 and 5700…”
• NVIDIA will offer top-to-bottom lineup of GPUs and MCPs with support for PCI Express.
• NVIDIA is now sampling customers with its “first PCI Express technology”.
• NVIDIA is excited about the PCI Express and will surely be on track with it, but denied to talk about the speed of transition, etc.
• NVIDIA anticipates “something like” 10 different versions of GPU products next year, the majority of which will be PCI Express, as I understood from Jen-Hsun Huang, NVIDIA’s CEO.

Interesting statements:

• Both NVIDIA’s product redesigns and IBM’s manufacturing technologies allow shrinking 0.13 micron cycle time at IBM (65 days versus TSMC’s 80 days, according to a report from Pacific Crest issued earlier this month, editor).
• Some products at TSMC are made using 300mm wafers, as I understood from the CEO’s claims. ATI said during the most recent conference call that its RADEON 9600 XT had been in production at TSMC’s low-k 300mm lines.
• IBM manufactures NVIDIA’s GPUs using 300mm wafers and 0.13 micron process, not low-k, though.