Analyst Conference Summary


conference date: February 17, 2010 @ 2:00 PM Pacific Time
for quarter ending: January 31, 2010 (4th quarter fiscal 2010)

But I own a competitor, AMD.
Forward-looking statements

Overview: Ramping sales nicely now.

Basic data (GAAP) :

Revenues were $982.5 million, up sequentially 9% from $903.2 million and up 104% from $481.1 year-earlier.

Net income was $131.1 million, up 22% sequentially from $107.6 million, and up from negative $147.7 million year-earlier.

EPS (earnings per share) were $0.23, up 21% sequentially from $0.19 and up from negative $0.27 year-earlier.


Q1 fiscal 2011 revenue expected flat sequentially. GAAP gross margin 44% to 45%. Tax rate 12% to 14% if R&D tax credit renewed.

Conference Highlights:

"We were supply constrained from the beginning to the end of the quarter and expect this condition to persist." Mix was better in the quarter. 44.7% GAAP gross margin.

Desktop GPU revenue was up 19% sequentially.

Notebook GPU revenue was up 27% sequentially.

Quadro professional graphics revenue was up 25% sequentially.

Tegra chips launched in quarter. It is a disruptive technology of the mobile web.

Tesla and CUDA momentum remain strong.

Optimus for notebook computers introduced.

3D Vision product has been demonstrated, and only works with GeForce.

Cash and securities balance ended at $1.728 billion, up $94 million sequentially. Inventories $330.7 million, up 19% sequentially.

Cost of revenue was $543.8 million, leaving gross profit of $438.7 million. Operating expenses of $304.4 million included $216.2 million for R&D and $88.2 million for sales, general, and administrative expense. Operating income was $134.3 million. Interest income $5.1 million. Income tax expense $8.3 million.


Supply constraint for Q1? Q1 is generally a down quarter in PC industry. We are guiding flat, and if we had sufficient supply we would guide further up. We have new products in many new markets.

Optimus ramp? It will show up in notebooks, shipping in April, ramping throughout the year. It solves the battery life problem for GPUs in notebooks.

Constraint impact? About $100 to $200 million. 40nm supply is constrained for the world because the semiconductor market snapped back quicker than expected. Windows 7 is doing well and GPU adoption is increasing.

MCP? MCP (motherboard chips) was down sequentially in Q4, but we expect it to grow sequentially in Q1. Ion will do for premium netbooks what GeForce did for PCs.

Gross margin target in 2010? Expect Quadro, Tegra, and Tesla to become larger part of the mix, and they all have higher gross margins than the current average. Tegra should ramp substantially in the second half of the year.

"My sense is supply will remain constrained for at least the first half of the year."

Attach rates? The GPU attach rate was pretty flat sequentially for desktops, up 5% for notebooks. Consumer attach rates are higher than business attach rates.

Operating expenses in 2010? We guided flat for Q1 because we are restoring some wage reductions we made last year. Expecting roughly flat for first half of year, second half depends on revenues.

How much is just building inventory? Channel inventory is in the 3 to 4 week range. We consider that pretty modest and well below where it has been historically.

In Q2 we should have a new product cycle really cranking, driven by the Fermi architecture.

Tegra ramp expectations? A variety of devices have been designed and they vary in their time to market. The full internet, including Flash, are accelerated by the GPU, and you get multitasking.

Our high gross margins are enabled by our differentiation of our products from the competition.

Fermi hitting full stride in Q2 should offset any normal seasonality. They will span GeForce, Quadro, and Tesla. We are real excited about the upcoming launch.

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Copyright 2010 William P. Meyers