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

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

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!