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Nvidia Sales, Earnings Top Estimates on Graphics-Chip Demand

May 10 (Bloomberg) -- Nvidia Corp., a maker of graphics processors, reported fiscal first-quarter sales and earnings that topped analysts’ estimates as demand for high-end gaming machines helped make up for a broader personal-computer slump.

In the first quarter, which ended April 28, net income rose to $77.9 million, or 13 cents a share, from $60.4 million, or 10 cents, a year earlier, Nvidia said yesterday in a statement. Sales increased 3.2 percent to $954.7 million. Analysts on average had estimated earnings of 10 cents on sales of $940.7 million, according to data compiled by Bloomberg.

Buyers of more expensive computers are still willing to spend more for Nvidia’s newest processors to get better graphics in games, said Betsy Van Hees, an analyst at Wedbush Securities. That’s helping Nvidia avoid the worst of a PC slump that saw shipments slide by a record 14 percent in the first three months of 2013, according to researcher IDC.

“The PC-gaming industry is dominated by Nvidia,” said San Francisco-based Van Hees, who recommends buying the shares. “They do a superb job with their technology and gamers are willing to pay for that excellence.”

Nvidia shares rose 3.2 percent to $14.35 at 10:33 a.m. in New York, and earlier touched $14.53 for the biggest intraday gain since November. The stock had advanced 13 percent this year through yesterday, compared with a 14 percent gain for the Standard & Poor’s 500 Index.

Gross margin, or the percentage of sales remaining after deducting the cost of production, will be about the same in the current period as the 54.3 percent reported for the first quarter, the Santa Clara, California-based company said. Analysts had predicted gross margin of 53 percent for both periods.

‘Quite Vibrant’

“The PC as a platform for gaming is quite vibrant,” Chief Executive Officer Jen-Hsun Huang said in a telephone interview. New free games are increasing demand for computers that offer better graphics, he said.

Nvidia has branched out into processors that run handheld devices, seeking to lessen its dependence on PCs -- a market that is poised for a second straight annual decline in 2013.

In mobile phones and tablets, the company expects to pick up orders later in the year with the Tegra 4, the latest version of its mobile line, Huang said. Nvidia slowed the development of Tegra 4 to accelerate the introduction of a model that has an integrated cellular baseband chip, called Tegra 4i, to woo more phonemakers as customers.

In order to better compete with Qualcomm Inc., which has more than half the market for baseband chips, companies such as Nvidia, Broadcom Corp. and Intel Corp. need to speed up their introduction of such combination chips that offer high-speed Internet connections, said Christopher Rolland, an analyst at FBR Capital Markets & Co.

Sales in the second quarter, which ends in July, will be about $975 million, plus or minus 2 percent, Nvidia said. That compared with an average analyst projection of $1.01 billion, according to data compiled by Bloomberg.

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

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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