Wedbush Morgan Ups Nvidia to 'Buy'

Analyst David Wu sees more revenue and better pricing ahead, after the graphics chip maker settled a pricing dispute with Microsoft's for its XBox chips

Wedbush Morgan upgraded Nvidia (NVDA ) to buy from hold.

The graphic chip maker posted 30 cents fourth quarter earnings per share, helped by settlement of a pricing dispute with Microsoft, which uses Nvidia's chips in its Xbox video-game console. Analyst David Wu says the effects of the Xbox settlement gives Nvidia recognition of $40.4 million in deferred revenue, and allows for pricing adjustment in the fourth quarter of fiscal 2003, going forward.

But Wu thinks management's lack of revenue guidance for the first quarter means that the range could be relatively large, depending on sales of Xbox and how quickly the company can clear its backlog. He now forecasts $370 million to $420 million first quarter revenue, and 10 cents earnings per share, with a range of seven cents to 13 cents. While the outlook for the first quarter remains murky, he beleives fundamentals will bottom out. Wu set a $14 12-month target.

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