Nvidia looks to mobile chips for growth

The graphics vendor is counting on mobile devices to drive it through the recession

Graphics hardware vendor Nvidia saw its revenue drop during the first quarter of 2010 but is pinning its hopes on mobile devices for growth during the recession.

Revenue was US$664.2 million for the first quarter ended April 26, a 42 percent drop from $1.2 billion during the first quarter of fiscal 2009. However, revenue exceeded the consensus forecast of $562 million from analysts polled by Thomson Reuters.

The company also recorded a loss of $201 million, or $0.37 per share, compared with a profit of $176.8 million a year earlier. The loss included charges of $140.2 million related to the purchase of employee stock options.

Nvidia is trying to push into new markets as it looks for ways to get through the recession, said Jen-Hsun Huang, Nvidia's CEO, during a conference call to discuss the financial results. Nvidia, traditionally known as a graphics card vendor, is set to supply CPUs and graphics chips for smartphones and netbooks in the upcoming fiscal quarters.

Nvidia will deliver CPUs for smartphones with its Tegra low-power processors, which bundle Arm-based processor cores with GeForce graphics cores on a single chip. Tegra should put Nvidia in direct competition with Intel, which offers low-power Atom processors for smartphones. The company has about 500 people dedicated to developing Tegra chips, Huang said.

Nvidia also hopes to dip into the burgeoning netbook market with its Ion platform, a package of chips that brings high-definition graphics to low-cost PCs. During the first quarter, the Ion platform was implemented by Acer in the AspireRevo nettop, a small desktop the size of a hardcover book. Nvidia hopes to put Ion in netbooks as well, though no products built around the platform have been announced yet. The Ion platform pairs Nvidia's GeForce 9400M GPU with Intel's Atom CPU.

Ion could be Nvidia's fastest-growing business as the low-end PC market quickly grows, Huang said.

About 10 million netbooks shipped in 2008, and that number is expected to rise to 22 million in 2009, according to IDC. The netbook category is the only bright spot in an otherwise slumping PC industry, which has seen shipments of mainstream laptops and desktops fall, IDC has said.

The mobile space may be alluring in the short term, but Huang doesn't want Nvidia to lose its focus as a graphics-centric company.

"The [graphics processing unit] is ever more central to our computing experience. There is a rapidly growing number of applications that rely on the GPU, and the industry is gearing up to launch the next-generation operating systems that adopt GPU computing," Huang said in a statement.

Nvidia is designing GPUs to boost PC performance in upcoming operating systems, including Apple's Mac OS X 10.6 Snow Leopard and Microsoft's Windows 7. The operating systems will include features to unload specific multimedia tasks, such as video editing, to graphics chips, while keeping CPUs free to execute generic computing tasks such as word processing.

Nvidia took some cost-cutting measures during the first quarter, including a revision of its compensation plan to cancel performance-related compensation of top executives for fiscal 2010.

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