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
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

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!