Nvidia's Thermal Event

Nvidia (NVDA) let investors know that the guidance it issued a short eight weeks ago no longer applies. The cold water on the face includes smaller margins and smaller sales. Ouch. The quote from the press release reads “The estimated decrease in revenue and gross margin is due to several reasons: end-market weakness around the world, the delayed ramp of a next generation MCP, and price adjustments of our GPU products to respond to competitive products.”

If that is not enough, the company let investors know it intends on taking a charge of $150 to $200 million because of higher failure rates than anticipated. It is not sure officially what the problem is, but testing indicates a weak die/packaging material set. The company is looking at its insurance policy and its broker probably does not want to answer the phone.

When it rains it pours. The question becomes was Nvidia trying too hard and  did it push a supplier too far? Was the supplier perceiving pressure and did it start cutting corners somewhere? Or do mistakes just happen to the tune of $150 to $200 million and investors just need to live with it?

By the way, the company refers you to the 8k for more complete information. There is nothing more in the 8k to help you out.

Disclosure: None

Comments

[Toni:]

A can of whoop ass!

Nice CEO.

2008 Jul 07 12:16 PM

[Robt1947:]

Nvidia's character is now being challenged for the first time in 3 years. Let's see how they respond.

2008 Jul 07 05:16 PM

[nukldrager:]

With market cap 6.7b and p/e 8.7 don't they have some wiggle room?

2008 Jul 08 06:59 AM

[OrangeValue...:]

The Jan of 2010 Options calls seems very cheap to me at the moment at $4,60 for the $10 strike price!

2008 Jul 09 12:35 PM

[amdman:]

All Nvidia G84 and G86s are bad
www.theinquirer.net/gb...

2008 Jul 10 07:25 PM

[Ames Tiedeman:]

NVDA is a great company for the long haul. Do not count them out.

2008 Jul 12 01:30 PM