Nvidia Rises After Profit Tops Estimates on New Business

Nvidia Corp. (NVDA) rose after the maker of graphics processors reported fiscal third-quarter profit that exceeded analysts’ estimates as revenue from new businesses helped make up for declining personal-computer demand.

Nvidia shares rose 7 percent to $15.56 at the close in New York, after the company released its results yesterday. The shares have risen 27 percent this year compared with a 24 percent gain in the Standard & Poor’s 500 Index.

Chief Executive Officer Jen-Hsun Huang is trying to lessen Nvidia’s dependence on PCs by getting the company’s products into new markets, such as handheld gaming devices and servers. Sales of Tegra, a chip for mobile phones and the basis of Shield, a portable gaming machine Nvidia is building and selling itself, helped compensate for weaker sales of chips for laptops.

“We did see a nice bounce back in Tegra,” said Betsy Van Hees, an analyst at Wedbush Securities in San Francisco. She has the equivalent of a buy rating on the stock. “Expectations were pretty low,” for earnings and forecasts, she said.

Profit before certain costs was 26 cents a share in the period that ended Oct. 27, the company said in a statement yesterday. That compared with an average analyst projection of 25 cents. Net income fell to $118.7 million, or 20 cents a share, from $209.1 million, or 33 cents, a year earlier.

Sales declined 12 percent to $1.05 billion, in line with analysts’ estimates.

Fourth-Quarter Outlook

Nvidia’s plans for Tegra go beyond phones and the processor range will continue to appear in new tablets, computers, vehicles and other devices, said Huang.

“We had anticipated a rebound for the year starting this quarter and it’s pretty much on track,” he said in a phone interview. “Tegra is more than about phones.”

Revenue will be $1.05 billion, plus or minus 2 percent, in the fiscal fourth quarter ending in January, the Santa Clara, California-based company said in the statement. That indicates sales of $1.03 billion to $1.07 billion, lower than the average analyst estimate of $1.08 billion, according to data compiled by Bloomberg.

Gross margin, or the percentage of sales remaining after deducting production costs, will be 54.2 percent in the fiscal fourth quarter, Nvidia said.

The company said it is increasing its quarterly dividend payment to 8.5 cents a share from 7.5 cents, and added $1 billion to its stock repurchase program. It has a total of $1.29 billion available for buying its own shares before January 2016.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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