NVIDIA (NVDA) posted soaring revenue and earnings gains for its 4th quarter of fiscal 2008 ending January 27, 2008. At the analyst conference on February 13, 2008, management told how this was done and predicted a bright future. For details see my NVIDIA analyst conference summary.
Revenues of $1.20 billion were up 7% sequentially from $1.12 billion and up 37% from $879 million year-earlier. Net income of $257.0 milion was up 9% sequentially from $235.7 million and up 57% from $163.5 million year-earlier. Q1 is expected to be down only slightly, instead of the usual seasonal dip.
Management declared this "the era of visual computing." I agree. NVIDIA has led the charge on ever-better graphics processing and presentation capabilities for personal computers. The chips (GPUs, graphics processing units) they sell today are marvellous, and the chips they promise for the future will be even more capable.
Even though everything reduces to 2 dimensions on your LCD screen, for games and other 3-D applications the math processing power needed to make realistic (detailed and fast-changing) scenes is only now beginning to come online. NVIDIAs GeForce 8800 GT GPU has a larger die size and more transistors than most CPU chips. Because of that there was some extra expense in Q4 trying to get good yields of this new top-of-the-line chip out of the fab.
NVIDIA management believes that for most people it now makes more sense to buy a medium or even low-end CPU and combine it with a high-end GPU in order to get maximum use from their computers. This would be especially true if you mainly use your computer for gaming or viewing videos. On the other hand the ability of programmers to find new uses for any extra CPU processing power is a well known trend that is not likely to break up. Right now programmers are behind the curve created by multiple core processors, but I expect new products in 2009 will bring that more into balance. Of course if you have a CPU that mainly just idles while waiting for you to type, even the CPU's of ten years ago are powerful enough. Still, the trend towards doing more computing on the GPU is a good one that will provide programmers with increased flexibility and power.
As to the competition, which is the ATI devision of AMD, NVIDIA management was not worried about them. On the one hand, to illustrate the new trend towards mid-range PCs with high-quality graphics, management picked the Gateway Effects 7020 desktop PC built with an AMD Phenom quad core CPU and an NVIDIA GeForce 8800 GPU.
On the other hand they thought ATI graphics chips are really competitive only in the low-end market, particularly in the low-end notebook computer market. Management went out of its way to dismiss the new X2 cards from ATI as not fast enough and occupying too much space in a computer. These cards have two HD 3870 graphics CPUs on a single card. NVIDIA favors the one-chip per card design, but hedged a bit by saying that they could produce a two-GPU per card competitor if the X2 design catches on. One analyst was surprised enough by this assertion to ask a follow up question and get the same dismissive answer. CNET reviewers, who I respect but sometimes disagree with, said the X2 outscore NVIDIA's GPUs on many games.
I am not a gamer, so I'll leave it to the pros to decide.
NVIDIA is a great technology company and its stock is cheap right now due solely to the liquidity squeeze and global economic uncertainty. I don't own the stock but have been very tempted to buy it lately.
See also my NVIDIA (NVDA) main page