Table: A Highflier Comes Down to Earth
The stock of graphics-chip maker Nvidia is down 68% this year after rising 308% in 2001. Here's its turnaround plan:
PROBLEM: FIGHT OFF COMPETITION
Nvidia holds 42% of the graphics-chip market, but on July 17, a reinvigorated rival, ATI Technologies, launched a new high-end chip. Analysts predict Nvidia's market share will fall to 37% by yearend.
SOLUTION: Nvidia released new chips for the low-end PC market in July, and by yearend it will release its high-end NV30, to compete with ATI's new product.
PROBLEM: MAINTAIN GROWTH
Analysts say Nvidia's sales will rise 54%, to $2.1 billion, this year, down from 87% growth last year. With sluggish PC growth, bearish Wall Street firms are forecasting growth will slow to 7% in 2003.
SOLUTION: Nvidia is moving into markets such as integrated graphics chips for cheap PCs. Nvidia has grabbed 4% of that market, up from zilch last summer.
PROBLEM: MEET DEADLINE FOR NEW CHIP
Nvidia sent the NV30 design to Taiwan Semiconductor Manufacturing, its chipmaker, several weeks late. A new factory process that Taiwan is using could delay volume shipments until after Christmas.
SOLUTION: Nvidia has sent engineers to Taiwan to work out glitches at the plant. And it has simplified the chip's design to smooth production.
PROBLEM: RESTORE INVESTOR CONFIDENCE
Last year, the SEC charged 11 Nvidia employees with insider trading. In January, the SEC opened an inquiry into whether Nvidia double-booked expenses and improperly logged reserves. The inquiry remains open.
SOLUTION: Nvidia fired some of the accused employees. And an internal audit resulted in the company slightly boosting its earnings for the past three years.