Nvidia Forecasts First-Quarter Sales That May Exceed Estimates

Nvidia Corp. (NVDA), a maker of graphics processors, forecast fiscal first-quarter sales that may exceed some analysts’ predictions as demand for cards used in high-end gaming computers helps make up for a decline in laptops.

Revenue in the period ending in April will be $1.05 billion, plus or minus 2 percent, the Santa Clara, California-based company said yesterday in a statement. That compares with an average analyst estimate of $1 billion, according to data compiled by Bloomberg.

While broader demand for personal computers is declining, gamers and other users of expensive add-in cards are buying desktop machines that use Nvidia’s GeForce chips. The company also is getting more of its Tegra processors into cars to run driver-assistance and entertainment systems, helping boost revenue from outside the PC market, said Christopher Rolland, an analyst at FBR Capital Markets.

“They’ve said they’re going to double their auto revenues every year,” said Rolland, who has the equivalent of a hold rating on the stock.

Nvidia shares climbed as high as $17.85 in extended trading after the report. The stock gained 3.6 percent to $16.83 at yesterday’s close in New York, and has risen 35 percent in the past year.

Fourth Quarter

Net income in the fourth quarter, which ended Jan. 26, fell to $147 million, or 25 cents a share, from $174 million, or 28 cents, in the same period a year earlier. Revenue rose 3.4 percent to $1.14 billion. Excluding certain items, profit was 32 cents, Nvidia said. Analysts on average had projected profit of 24 cents on sales of $1.05 billion.

Gross margin, or the percentage of sales remaining after deducting production costs, was 54.1 percent in the fourth quarter. That measure of profitability is forecast to be 54.2 percent in the current period, Nvidia said.

Global PC shipments fell 6.9 percent in the calendar fourth quarter -- the seventh straight drop -- to 82.6 million units, market researcher Gartner Inc. said last month. That rounded out an annual decline of 10 percent, the steepest ever for the industry.

Nvidia’s strength in graphics processors for high-end gaming machines has helped blunt the effect of the PC slump. Fourth-quarter sales in its graphics-chip business rose 14 percent from a year earlier to $947 million, the company said in commentary that accompanied its earnings release.

“We’re not really in the mainstream PC market,” Chief Executive Officer Jen-Hsun Huang said yesterday in an interview. “We’re really in the specialty PC market.”

In China in particular, consumers overwhelmingly use their PCs for gaming and haven’t taken to Microsoft Corp.’s Xbox or Sony Corp.’s PlayStation, Huang said -- meaning that all of the growth in gaming there comes on machines that use his graphics chips.

China is able to use PC as its game console,” he said.

In mobile, new versions of Nvidia’s Tegra chip are part of a push to bring PC-level graphics to mobile devices, Huang said. Those new products will help to fuel demand, he said.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Gerrit De Vynck in Toronto at gdevynck@bloomberg.net

To contact the editor responsible for this story: Reed Stevenson at rstevenson15@bloomberg.net

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