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NVIDIA Corporation (NVDA)

F2Q11 (Qtr End 08/01/10) Earnings Call Transcript

August 12, 2010 5:00 pm ET

Executives

Michael Hara – SVP, IR & Communications

David White – EVP & CFO

Jen-Hsun Huang – Co-Founder, President & CEO

Analysts

Raji Gill – Needham & Company

Hans Mosesmann – Raymond James

Daniel Berenbaum – Auriga USA

Ross Seymore – Deutsche Bank Securities

Shawn Simmons – Oppenheimer & Company

Krishna Shankar – ThinkEquity

Alex Gauna – JMP Securities

Craig Berger – Friedman, Billings and Ramsey

Glen Yeung – Citigroup

Arnab Chanda – Roth Capital Partners

James Schneider – Goldman Sachs

Shawn Webster – Macquarie

Kevin Cassidy – Thomas Weisel Partners

Patrick Wang – Wedbush Morgan

Presentation

Operator

Good afternoon. Thank you for holding. I would now like to turn the call over to Michael Hara, Vice President, Investor Relations. Thank you. Sir, you may begin.

Michael Hara

Thanks, Will. Good afternoon, and welcome to NVIDIA's conference call for the second quarter of fiscal 2011. With me on the call today from NVIDIA are Jen-Hsun Huang, President and Chief Executive Officer; and David White, Chief Financial Officer. After our prepared remarks, we will open up the call to a question-and-answer session. Please limit yourself to one initial question with one follow up.

Before we begin, I would like to remind you that today's call is being webcast live on NVIDIA's Investor Relations website and is also being recorded. A replay of the conference call will be available via telephone until August 19, 2010, and the webcast will be available for replay until our conference call to discuss our financial results for our third quarter of fiscal 2011. The content of today's conference call is NVIDIA's property and cannot be reproduced or transcribed without our prior written consent.

During the course of this call, we may make forward-looking statements based on current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today's earnings release, our Form 10-Q for the fiscal period ended May 2, 2010, and the reports we may file from time to time on Form 8-K filed with the Securities and Exchange Commission.

All of our statements are made as of today, August 12 based on information available to us as of today and except as required by law, we assume no obligation to update any such statements. Unless otherwise noted, all references to market research and market-share numbers throughout the call come from Mercury Research or Jon Peddie Research. With that, let's begin.

Rapidly changing market conditions made Q2 a challenging quarter. We experienced softness in consumer PC demand in Europe and China, our largest GeForce regions. Weak consumer market and the weak euro shifted demand away from the premium experienced PC segment that GeForce serves. At the end of Q1, we began selling our new Fermi based GeForce GTX480 and 470 GPUs into strong demand and saw healthy in-channel sell out for GeForce products across our line-up. We entered Q2 with high expectation. As the quarter progressed, rising memory cost, the weakness of the euro increased end market price of the graphics add-in cards.

In addition, the growing economic concerns in Europe and China began to create pressure on discretionary spending. Because discrete GPU attach rates in Europe and China are among the highest in the world and our share in both these regions are also very high, these factors hit our consumer business particularly hard. Today, we also announced an additional charge to cover cost resulting from a weak die/packaging material set in certain GPU and MCP products shipped before July 2008. This is the same issue we disclosed previously. We’ve provided more detail in the CFO commentary which was released prior to the call.

Although the end markets remain uncertain, we have exciting new products that can drive revenue and share growth. We are continuing to regain our GeForce consumer GPU leadership position across the entire product set. The GTX480 has claimed the top stop in the Enthusiast segment. Our focus is now on the gamer sweet spot, the $199 performance segment.

In July we launched the GTX460. GTX460 uses our second generation Fermi architecture and delivers the perfect balance of price, performance, and power specifically for the $199 segment. The industry reviews underscores that 460’s unrivalled competitive position. (inaudible) “it performs admirably, it’s dead quiet, it tips power, it runs cool, and overclocks like a monster without voltage modification.”

GameStar Hardware explained, “NVIDIA is back. The GTX 460 is fast, really fast and at the same time, enjoy the quiet at much lower power consumption.” Hardware CPU also wrote in a following report, “if our earlier articles have not proved it yet, this one surely put the final nail on the coffin. GTX460 1 gig SLI real world gaming performance is superior to even AMD’s fastest high-end single GPU video card in a CrossFireX configuration.” And nontech put it simply. “NVIDIA’s GeForce GTX460 is a $200 king.”

GTX460 is a showcase of the revolutionary Fermi architecture designed from the ground up for DX11. We are now ramping the rest of the Fermi GPUs from top to bottom and including notebooks and workstations.

At SIGGRAPH, we launched the era of computational visualization for designers, engineers, researchers and animators with the introduction of our Fermi-class Quadro GPUs and new NVIDIA 3D Vision Pro solution. Computational visualization combines the parallel computing power of the Femi architecture with utilization to enable a breakthrough capability for designers. Powered by our new Fermi-class Quadro, artists can create photorealistic imageries for print ads, commercials, and movies in a minutes rather than hours.

Read the rest of this transcript for free on seekingalpha.com