Is Nvidia's Tegra mobile domination plan in trouble?

Nvidia's Tegra 3 is the first quad-core mobile chip, but it's unclear whether the company can snag design wins from Qualcomm and Texas Instruments.
Written by Larry Dignan, Contributor

Nvidia introduced its Tegra 3 quad-core mobile processor, but analysts are counting the design wins and casting doubts about the company's prospects in the smartphone and tablet markets.

The graphics and mobile chip maker said its Tegra 3 processor will land in December and the ASUS Eee Pad Transformer Prime will be the first quad-core tablet. Nvidia's Tegra 3 processor, formerly known as Project Kal-El, promises better battery life and more performance. In other words, the Tegra 3 is supposed to enable a lot of multi-tasking.

For Nvidia, the Tegra stakes are high. Nvidia is out front with a quad-core chip and is betting it can gain share on the likes of Qualcomm and Texas Instruments. The problem is that analysts aren't really buying the Tegra 3 argument.

JMP Securities analyst Alex Gauna downgraded Nvidia, which reports its third quarter earnings on Thursday. Gauna said:

We are not optimistic for Tegra 3 prospects based on how the design win landscape is shaping up. In addition to our concerns over the absence of phone wins, Tegra 3 is emerging in higher performance but weaker brand SKUs that strike us as moving in the wrong direction given the emergence of lower priced Kindle Fire and Nook Tablet class entries that use OMAP. We note key customer Samsung is favoring its own solution or Snapdragon in the 1500MHz Superphone category and appears to be passing on Tegra 3, with platforms that could, in theory, use it.

Gauna also noted that the Motorola Xoom 2 booted Nvidia's Tegra for Texas Instruments' OMAP chip. Motorola also ditched Nvidia for Texas Instruments with the Droid Razr. Meanwhile, Amazon and Barnes & Noble both use TI's OMAP processor. Other analysts such as Evercore's Patrick Wang noted concerns about Tegra's design wins.

Add it up and Nvidia looks like it will face a skeptical crowd on its earnings call on Thursday. Analysts are expecting an in-line quarter. Wall Street is looking for earnings of 26 cents a share on revenue of $1.06 billion.


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