Nvidia Predicts Sales That Will Miss Estimates Amid PC Slump

Nvidia Corp., the largest maker of chips for computer-graphics cards, gave a forecast for second-quarter sales that fell short of analysts’ estimates, hurt by the persistent slump in PC demand.

Revenue in the period that ends in July will be $1.01 billion, plus or minus 2 percent, the company said in a statement Thursday. That compares with an average analyst estimate of $1.18 billion, according to data compiled by Bloomberg.

Like other companies that rely on PCs for most of their revenue, Nvidia is suffering as unit sales of the devices head for a fourth year of declines, hurt by the popularity of smartphones and tablets. The dollar’s strength against European currencies has also cut into orders for PCs, because components are priced in the U.S. currency and computer makers have held off on stocking up now while they wait for demand from Microsoft Corp.’s Windows 10.

“The headwind comes from exchange rates and the PC OEM declines,” Nvidia Chief Executive Officer Jen-Hsun Huang said in a telephone interview. “Although we have the same challenges as others, in the four vertical markets that we’re focused on -- you can see that we’re growing.”

Nvidia shares slipped 1.4 percent in extended trading following the announcement. Earlier, they gained 1.8 percent to $22.49 at the close in New York. The stock is up 12 percent this year. The company said it’s boosting quarterly dividends to 10 cents a share, from 9 cents.

Icera Unit

Fiscal first-quarter profit, excluding some costs, was 33 cents a share. Sales in the period ended April 26 rose 4.4 percent to $1.15 billion, Nvidia said. Analysts on average had projected profit of 34 cents on sales of $1.16 billion. Net income was little changed at $134 million, from $137 million a year earlier.

Under Huang, Nvidia has been trying to lessen its dependence on PCs, moving into semiconductors for mobile devices, cars, servers and its own portable gaming devices. While some of his initiatives have paid off, others have fallen short.

Earlier this week, the company said it will give up trying to make modem chips for mobile devices, abandoning a key element of its attempt to break into the smartphone market. Nvidia is open to selling its Icera unit, purchased in 2011, and will stop development of its modems, or chips that connect phones to cellular networks. The “wind-down” of the unit will be completed by the second quarter of fiscal 2016.

Mobile Processors

The company’s Tegra mobile processor division, whose products -- originally aimed at phones and tablets but adapted for use in cars as the heart of entertainment systems -- grew from a year earlier. Sales in the unit rose 4.3 percent to $145 million.

Worldwide PC shipments fell 5.2 percent in the first quarter as corporate spending decelerated, market researcher Gartner Inc. said last month.

Nvidia is also attempting to turn some of its inventions in graphics chips into licensing revenue and has sued Samsung Electronics Co. and Qualcomm Inc., alleging that they have infringed on its patents.

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