NVIDIA Corporation (NVDA) Shield Delayed: Does It Matter?

At the Consumer Electronics Show back in January, graphics-chip specialist NVIDIA Corporation (NASDAQ:NVDA) showed off a new portable gaming device that it called Project Shield. As my colleagues Eric Bleeker and Austin Smith discussed at the time, creating Shield was an odd move for NVIDIA.

After all, NVIDIA Corporation (NASDAQ:NVDA)’s core competency is building graphics chips: particularly for hardcore gamers. More recently, it has moved to become a major player in the mobile processor market. While it’s understandable that NVIDIA wants to encourage a “marriage” of gaming and mobile computing, building its own portable gaming system could make investors wonder whether the company is losing focus.

On Wednesday afternoon, investors got another reason to worry. With Shield scheduled to go on sale the following day, NVIDIA Corporation (NASDAQ:NVDA) announced that shipments will be delayed until July because of a third-party mechanical component that did not meet NVIDIA’s standards. Is NVIDIA Corporation (NASDAQ:NVDA) in trouble, or is this a minor incident that will have no lasting impact on the company?

Safeguarding the brand
As Patrick Moorhead of Forbes recently wrote, NVIDIA’s decision to delay Shield was wise if there really was a quality control problem. Had the company released a faulty product in its first foray into the device market, it could have doomed the entire project.

That said, it’s disturbing that NVIDIA Corporation (NASDAQ:NVDA) got so close to the launch date before deciding to postpone it. Since Shield was supposed to go on sale on Thursday, retailers who are carrying the device probably have faulty units already in stock, which now need to get shipped back to NVIDIA and fixed or written off. Furthermore, if it took until the last day to recognize and react to this quality control issue, it’s possible that other issues were also missed earlier in the testing process.

Looking forward
Now the company needs to scramble to fix the problem, which could distract management from the core chip-making business. There have already been some hiccups there recently; the company’s Tegra 4 mobile processor was delayed, possibly costing NVIDIA Corporation (NASDAQ:NVDA) some design wins . Whereas Tegra 3 hit the market (in limited quantities) in December of 2011, Tegra 4 is just starting to show up in devices now.  That lag in product introductions is much greater than the one-year industry standard.