Is NVIDIA Corporation (NVDA) About to Lose Its Tablet Kingdom?

Page 1 of 2

Manufacturer of graphics processors for computers and “wannabe maker” of mobile processors NVIDA Corporation (NASDAQ:NVDA) impressed the Street yet again with solid fourth-quarter results. The company delivered a solid year-over-year jump in revenue and earnings; it improved its GPU business and market share considerably, and expects mobile chips to drive its growth in the future. But, it’s the last part regarding the future that’s the most worrisome.

NVIDIA Corporation (NASDAQ:NVDA)

NVIDIA Corporation (NASDAQ:NVDA)’s guidance for the current quarter came in way behind consensus estimates. You don’t expect a company which harbors great mobile ambitions to guide for a paltry 1.6% revenue jump from last year. But, it doesn’t come as a surprise to me that NVIDIA guided for just $940 million in revenue at mid-point, while the Street expected $1.07 billion.

A reality check

It was something just waiting to happen. NVIDIA guided lower due to two reasons — 1. Lower GPU sales, and 2. Lower sales of Tegra 3 due to launch of Tegra 4. It won’t be surprising if the chipmaker is handicapped by these reasons in the future as well, since NVIDIA leads a market which is shrinking and is an also-ran in a market which is growing.

There’s no doubt that sales of GPUs grew in the previous quarter, driven by strong sales of Tesla and Kepler. It is leading the pack in notebook and supercomputer GPU sales, and is looking to take GPUs to the next level through its GRID initiative. But, while NVIDIA might harp all it can about its achievements over the past year, the outlook for the ongoing quarter is the stark reality it has to face.

A growing market share in traditional computing devices, notebooks and supercomputers is undoubtedly a positive, but the fact that NVIDIA lowered its outlook due to decline in PC shipments tells us that it’s the king in a market which isn’t growing. Quite evidently, PC sales are being chopped down by tablets and this isn’t something new. Few might argue that tablets aren’t good enough to replace PCs just yet, but if that was the case, sales of computers wouldn’t have been falling at such consistent rates.

Tablet fort under attack

This is clearly a threat for NVIDIA, as has been the case for quite some time now. But, it is also an opportunity. NVIDIA can turn the tormentors of its traditional business into catalysts and has made some headway by capturing second place in the tablet processor market with 17% share. But, the going won’t be great even here as well. The tablet market is dominated by Apple Inc. (NASDAQ:AAPL) at 43.6%, followed by Samsung at 15% and Amazon.com, Inc. (NASDAQ:AMZN) at 11.5%, according to IDC.

The problem for NVIDIA is that I don’t see any of these manufacturers using the Tegra processor, and this makes things a bit complicated. Market leader Apple uses its own custom chips across its devices, effectively washing away NVIDIA’s ambition of dominating the market to a large extent. The Cupertino-based behemoth has witnessed solid growth in sales of iPads, selling 48% more iPads in the previous quarter, and NVIDIA can’t do much to tap on that growth yet.

Second-placed Samsung also uses its own Exynos processors in its devices, while Amazon went for Texas Instruments Incorporated (NASDAQ:TXN)’ OMAP processor in the latest Kindle Fire HD. The only saving grace for NVIDIA was Google Inc (NASDAQ:GOOG)’s Nexus 7 tablet, which used the Tegra 3 processor, but rumors suggest that the spot will be taken up by QUALCOMM, Inc. (NASDAQ:QCOM) in the next iteration of the successful tablet.

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

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!