Google Inc (GOOG), QUALCOMM, Inc. (QCOM): NVIDIA Corporation (NVDA)’s Tegra Is Losing Its Wheels

Early last year, the transition from Tegra 2 to Tegra 3 had hurt sales. Well, when you release a chip and then again you state that you’re going to release a better one with LTE, why will customers buy the older one! The company seems to have tinkered too much with the Tegra, and the fact that its 4G integrated chip has been late to the market has handed the initiative to QUALCOMM, Inc. (NASDAQ:QCOM).

Not enough firepower

So, while NVIDIA CEO Jen-Hsun Huang might call the previous quarter a trough for NVIDIA, I doubt that it’ll be able to succeed much in mobile, as long as it doesn’t land serious design wins. And that hasn’t been the case so far; in fact, as mentioned earlier, NVIDIA has lost key accounts. Google Inc (NASDAQ:GOOG) moving to Qualcomm for the Nexus wasn’t because of a Tegra transition, but probably because QUALCOMM, Inc. (NASDAQ:QCOM) offered the better chip when Google needed it.

Google Inc (NASDAQ:GOOG) wouldn’t have waited for NVIDIA Corporation (NASDAQ:NVDA) to integrate LTE into its chip, and given the fact that the Snapdragon 800 outpaced the Tegra 4 in GPU performance, things don’t look rosy for NVIDIA going forward. Moreover, management’s optimism regarding a ramp up of Tegra 4 in the current quarter seems based on tablets from the likes of AsusToshiba, and Hewlett-Packard Company (NYSE:HPQ), which isn’t exactly something to be too excited about.

And these design wins would seem mediocre when you stack them up against Qualcomm’s fifty design wins for the Snapdragon 600 and 800 processors. Considering QUALCOMM, Inc. (NASDAQ:QCOM)’s hegemony in the mobile baseband market and its cutting-edge innovation, it remains to be seen if the 4G modem-integrated Tegra 4i can succeed.

So, with NVIDIA’s famed Tegra initiative faltering as of now, the company is now effectively dependent on its traditional GPU business for growth, which doesn’t bode well since overall revenue declined in the previous quarter as Tegra slumped. And even there, the competition is present as the likes of Intel Corporation (NASDAQ:INTCwould provide a fight to NVIDIA’s GRID datacenter initiative with its own “Reimagine the Data Center.”

The takeaway

NVIDIA Corporation (NASDAQ:NVDA)’s guidance for the ongoing quarter was a disappointment, and even if the company achieves the mid-point of its revenue guidance, i.e. $1.05 billion, it would still be a double-digit decline from last year. The bottom line is that NVIDIA is in trouble and investors can do better by putting their money somewhere else.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Google and NVIDIA. The Motley Fool owns shares of Google and Qualcomm.