Don’t Count NVIDIA Corporation (NVDA) Out in the Smartphone Wars

Page 1 of 2

Chip maker NVIDIA Corporation (NASDAQ:NVDA) has had a tough time transitioning from being a graphics card specialist to being a major player in the mobile processor market. The company’s Tegra line of mobile processors has shown much promise, but sales have been underwhelming in the past two years.

NVIDIA has had particular trouble gaining traction in the smartphone market. The dominance of Apple Inc. (NASDAQ:AAPL) and Samsung (each of which designs application processors in-house) has limited NVIDIA’s addressable market. The recent trend toward integrated application/baseband processors, an area where QUALCOMM, Inc. (NASDAQ:QCOM) has a huge head start, has presented another roadblock for the company.

NVIDIA Corporation (NASDAQ:NVDA)Nevertheless, NVIDIA has the technology necessary to become a major provider of mobile processors for the smartphone market. Moreover, CEO Jen-Hsun Huang appears committed to transforming NVIDIA into a mobile processor leader. The company is expected to bring its first integrated application/baseband processor (code-named “Grey”) to market later this year. All in all, it is too early to count NVIDIA out in the smartphone wars.

The rise and fall of Tegra
NVIDIA’s stock was severely battered during the recession in 2008-2009, and came under pressure again as the 2010 release of Apple’s iPad created the specter of PC death. Many investors hoped that NVIDIA’s Tegra 2 processor would be the company’s savior, and the hype surrounding that product launch briefly drove the stock back over $25 in early 2011. Since then, as NVIDIA has had trouble making the Tegra business profitable, the stock has lost half its value (see chart below).

NVDA Chart

NVIDIA stock price. Data by YCharts.

NVIDIA scored its biggest Tegra design win to date with Google Inc (NASDAQ:GOOG)‘s Nexus 7 $199 tablet. While formal sales numbers have not been announced, the sales pace had ramped to about 1 million units per month by last fall. Unfortunately, other high-profile Tegra design wins like Motorola’s Xoom tablet and Atrix smartphone, as well as the Microsoft Corporation (NASDAQ:MSFT) Surface RT, have sold poorly in the marketplace.

Overall, NVIDIA’s performance in the tablet market has been satisfactory, and has been primarily held back by the failure of Android and Windows RT devices to break the iPad’s dominance. However, the smartphone market is much larger, even if Apple and Samsung are excluded. Unfortunately, NVIDIA has always seemed to be a step behind market-leader Qualcomm in smartphones.

Integration: key to the smartphone market
During the past two years, the integration of the application processor and baseband processor on a single chip has become increasingly common (and important). Qualcomm has been the leader in this shift, and has emphasized the cost and power efficiency benefits of integrated processors, particularly for LTE-equipped phones. Integration tends to improve power management, which is essential for achieving acceptable battery life for heavily used smartphones.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!