Thursday, July 03, 2008

Nvidia Has a Thermal Event

Nvidia (NVDA) just let investors know that the guidance they 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 they let investors know they intend on taking a charge of $150 to $200 million because of higher failure rates than anticipated. They are not sure officially what the problem is but testing indicates a weak die/packaging material set. They are looking at their insurance policy and their broker probably does not want to answer the phone.

When it rains it pours. The question becomes was Nvidia trying too hard and pushed a supplier too far? Was the supplier perceiving pressure and started to cut 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 they refer you to the 8k for more complete information. There is nothing more in the 8k to help you out.