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Summary will be delayed due to conflicting conference
conference date: November 9, 2006
for quarter ending: September 30, 2006 (3rd quarter 2007)
Overview:
Basic data:
Revenue of $820.6 million, up 23.7% sequentially and up 41% over year-earlier.
Net income of $106.5 million or $0.27 per diluted share. Non-GAAP net income was $149.2 million or $.039 per share. The difference between GAAP and non-GAAP is primarily due to stock-based compensation expense and a one-time licensing expense.
They are now providing net income for the prior quarter (fiscal Q2 2007) of $86.8 million or $0.22 per share. Non-GAAP Q2 2007 net income was $112.0 or $0.29 per share.
Cash $1.174 billion, up over $300 million sequentially.
Guidance:
Revenues for Q4 will grow 5%. Gross margin improvement of at least 1% to 44%. Operating expenses will rise 3 to 5%. No portalplayer expenses or revenue in this guidance, but could be there depending on closing date.
Conference Highlights:
Gained share in each of their core businesses. Standalone graphics share 55%. Desktop graphics share 33%. Notebook standalone GPU to 52%, growing 46% sequentially.
Restatement is making good process. Hope to end the work before end of month, but there are still unresolved issues.
17% of total volume for PC core logic. Single chip MCPs have been embraced by major OEMs. Chosen for Dell Optiplex products. nForce MCP grew 35% sequentially and captured 61% of AMD64 market.
Quadro Professional business strong with 25% increase year-over-year. Quadroplex external solution launched.
Now a supplier for GPUs for cell phones.
Desktop GPUs grew
GeForce 8800 had initial shipments, but no significant impact on revenue. But expects rapid production ramp to fuel Q4 growth. Also introduced nForce 680i for Intel motherboards.
Gross margins (non-GAAP) of 42.9% reduced from expectations because of mix. GAAP gross margin of 40.6%
Accounts Receivable down $20 million. $373 million in inventory was down $5 million.
PortalPlayer acquisition is in a high-growth area.
AMD & ATI merger leaves NVidia in line to dominate Intel market. Vista, HDDVD, and DirectX 10 will all fuel growth.
Q&A:
PortalPlayer guidance? Cannot provide guidance, deal is not done yet. Mobile devices will become more intelligent, then portable computers. Need further innovation in application processors and CPUs.
PC end demand? Complex dynamics, Q4 is typically seasonally strong, transition to Vista. Focusing on ramping new GPU products.
Quadroplex market size? Leverages SLI/workstation presence. Market is potentially huge, billions of dollars have been spent on high-end image generators over the past decade.
Chip set business gross margins? Architectural efficiency is needed. Operations need higher yields and just-in-time production. nForce core logic is premium brand. nForce 680i and a targeted for enthusiasts will have good ASPs (prices).
Going after Intel mainstream MCP segment? Yes, with integrated graphics. Large market opportunity because of ATI sale to AMD. Bar for graphics capability has gone really high.
Graphics memory supply? Was a memory tightness, but okay now. Gross margins were impacted by increase in memory business because of low margins in that segment.
Die size? Competition has not shown products yet, "die size would be infinitely large," so NVidia has major competitive advantage. 8800 is targeted at gamer segment, so prices are great.
G80 margins? Just first of family.
Santa Rosa platform? Notebooks are DX 10/Vista. Only supplier of DX 10 GPUs today. Expectations for transition success are high.
Consumer segment? NREs are rolling off, offset by increase in royalties. Revenues recognized on completion.
Inventory down, can you service upside demand? Wants to reduce inventories while being able to address unexpected demand. Inventory mix is weighted to new products.
Vista and DX 10 are biggest thing since Windows 95 introduction. Second tier core logic suppliers are going to have difficulty competing. Branded Intel core logic business will grow very well.
Will G80 head start allow for share gains in mid-power segment? Focused on gaining share and creating larger market. Average prices could be driven up because consumers may want full benefits of Vista/DX 10.
Wafer capacity constraints? They planned for wafer needs, so no problem.
One time patent license fee? Confidential arrangement for a significant number of patents. Primarily for past use of patents.
PortalPlayer effect on margins? Slightly dilutive the first year, hope will be accretive after that.
OpenIcon Analyst Conference Summaries Main Page
Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2006 William P. Meyers