Challenges ahead
Nathan Brookwood of Insight 64 concurred with Peddie, noting that "NVIDIA's results were impressive by almost any measure."
"It's always a good omen when a theatre posts an ‘SRO' sign at the box office, or a supplier sells everything they can manufacture during a quarter," he said. "Nvidia, like most semiconductor companies, has high operating leverage. When sales max out, margins and profits become exceptional, as was the case in this quarter."
But NVIDIA is remaining somewhat cautious about its predictions for next quarter, which includes the usually lucrative holiday season, saying it expects revenue to rise by just two per cent, to $921.3 million. Although this is still above analyst estimates of $868.1 million, Peddie told HEXUS that the fact NVIDIA was aiming low could indicate that it's feeling some pressure from rival AMD in the graphics space.
NVIDIA has indeed lost some market share to its rival over the past quarter, and is also embroiled in a legal a licensing dispute with Intel that's caused it to freeze chipset production which, we note, brought in 27 per cent of the revenue.
Brookwood told HEXUS the challenges for NVIDIA would be "to get Fermi out the door as quickly as it can, and to demonstrate the company can accommodate the eventual ramping-down of its chipset business for Intel and AMD processors."
He added that AMD was also doing rather well in the graphics market at the moment and that it was "encouraging to watch a market segment where competitive forces result in better values for all consumers."
Nevertheless, it was a proud day for NVIDIA as the firm's shares shot up 7.3 per cent, to $13.17, in after-hours trading. This means NVIDIA's stock has more than doubled from a four-year low in November 2008, although it still remains about 25 per cent down from its 52-week high in September 2009.
