Nvidia Posts Smaller Profit but Raises Outlook

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Graphics chip designer Nvidia Corp. (NVDA) on Thursday reported a smaller net profit for the fiscal first quarter as revenue declined, but the company said it expected revenue to grow in this quarter.

Santa Clara, California-based Nvidia earned $19.7 million, or 12 cents per share, for the quarter ended April 27, compared with a year-earlier profit of $83.2 million, or 47 cents.

The average estimate of analysts surveyed by Thomson First Call was for earnings of 11 cents per share.

Revenue fell to $405 million from $582.9 million last year. The First Call revenue estimate was $410 million.

On a conference call to discuss the company's fiscal first-quarter results, Nvidia Chief Financial Officer Marv Burkett said the company expects revenue to rise 12 percent to 18 percent in the second quarter.

Chief Executive Officer Jen-Hsun Huang said Nvidia will launch its new chip, code-named 'NV35,' next week, replacing the NV30 (search).

'NV 30 had several well-documented problems and was not a successful product for us,' Huang said.

But he said NV35, which has been in production since early this year at the company's main foundry, Taiwan Semiconductor Manufacturing Co. (search) Ltd., was a superior product.

Michael McConnell, an analyst at Pacific Crest Securities, said the NV35 ought to let Nvidia regain a competitive advantage over chief rival ATI Technologies Inc. (search) and their high-end Radeon 9800 Pro product.

'I would say that it does seem like a very competitive pipeline of higher-margin products,' McConnell said, adding that he estimated NV35 would provide a 5 percent to 10 percent performance improvement over the ATI chip.

Burkett said gross margins in the second quarter may drop 1 percent to 2 percent, as the company works toward manufacturing costs savings it has not yet fully realized.

The company said its revenue from the chips it makes for Microsoft Corp.'s (MSFT) Xbox video game console fell $43 million quarter-over-quarter. But Nvidia said it expects to regain some of the lost revenue in the current quarter.

Huang also said the company would begin production of a new chip in its GeForce FX line with IBM (IBM) this fall under a new foundry deal. Huang said Nvidia has not decided yet on a long-term manufacturing split between TSMC and IBM.