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
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

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

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!