Nvidia ups outlook; Eyes Tegra 3 ramp, Windows 8 on ARM

It's a mixed bag for Nvidia. It doesn't have enough supply of its next-gen GPU chips, but the Tegra 3 rollout looks strong.
Written by Larry Dignan, Contributor

Graphic chips player Nvidia raised its sales outlook for the second quarter and touted the ramp up of its latest Tegra chips for smartphones, tablets and Windows 8 on the ARM architecture.

But the company misjudged demand for its latest GPUs and is straining to get enough supply from TSMC, its semiconductor manufacturer. How Nvidia muddles through its supply issues will dictate its success in the ultrabook market.

The details emerged as Nvidia reported first quarter results that were hamstrung by supply constraints. Those constraints, specifically 28-nanometer chips, hurt Nvidia's high-end graphics chip business.

The company reported first quarter earnings of $60.4 million, or 10 cents a share, on revenue of $924.9 million. Those results were in line with Wall Street estimates.

For the second quarter, Nvidia projected revenue between $990 million and $1.05 billion. Gross margins will be about 51.2 percent.

On a conference call, Nvidia executives touted its Kepler GPUs, but noted that it will still face supply issues going forward.

"Supply is still constrained and our manufacturer is working their hearts out to catch up to our demand but at the moment he demand still continues to exceed supply and we expect that to happen for throughout the year," said Nvidia CFO Karen Burns.

The supply chain shortage meant that Nvidia's GPU sales were down 6.7 percent in the first quarter compared to the fourth quarter.

While it navigates the GPU chip issues, Nvidia is eyeing its Tegra 3 rollout, which is aimed at smartphones and tablets. Tegra 3 is in HTC's latest phones.

Chris Evenden, director of investor relations, said that Tegra 3 phones are shipping with 22 carriers so far. Tegra 3 lacks LTE, but Evenden said that limitation is only an issue for the U.S.

Evenden said:

Tegra 3 is ramping as we talked about before. Although we don't have LTE at the moment, LTE is predominantly a US-centric phenomenon. Outside of the United States, the big super phone upgrade is quad core. And Tegra 3 is the world's first quad core and it's even a special quad core at that with four plus one and it's got NVIDIA's branded graphics. Tegra 3 is the next major upgrade for super phones in Europe and in China and elsewhere and then towards the end of the year we hope to bring Tegra 3 with LTE phones to the United States.

On Windows 8 on ARM, Evenden said that he expected the Tegra 3 mix to move from 50/50 smartphones and tablets to more the latter. "My expectation is that phones would exceed tablets, but towards the end of the year, latter half of the year, the question is how does Windows and ARM do," said Evenden.

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