Disclosure: I have no position in NVDA, but did liquidate my position about a week ago before I heard of the following news.
I was reading OSNEWS and saw the following headlines:
The future of integrated graphics processors lies somewhere on the dies of future processors, that much is a certainty. However, this creates a big problem for NVIDIA, whose chipset business will be out, of well, business. Beating everybody to the punch, the company announced yesterday that it is ceasing all development on future chipsets, citing unfair business practices from Intel.
Ok, so now comes my next question, what business will Nvidia be in? Have they hinted at that? Well it appears that they have.
As Intel and AMD continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.
We expect substantial competition from both Intel’s and AMD’s strategy of selling platform solutions, such as the success Intel achieved with its Centrino platform solution. AMD has also announced a platform solution. Additionally, we expect that Intel and AMD will extend this strategy to other segments, including the possibility of successfully integrating a central processing unit, or CPU, and a GPU on the same chip, as evidenced by AMD’s announcement of its Fusion processor project. If AMD and Intel continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.
Wow, if I ever heard of a warning shot then that was it. What does it mean from a bottom line perspective? About 25% of their revenue just went poof! This then has me asking the question is this the start of something more concerning? I say yes.
Look at what AMD is pushing: (Remember that AMD has bought out ATI and hence has the technology to do this)
But there’s a problem on the AMD side of the plate. For starters, AMD has seen sales slip in the down economy. Secondly, AMD is now making a very aggressive push to promote its CPU, GPU and chipsets all in one package with its Vision initiative. Come 2011, AMD releases Fusion, which will integrate the GPU onto the CPU and make chipsets irrelevant.
Nvidia is pushing its super computer, netbook, and mobile offerings, but I wonder how long Nvidia can hold out? Intel is going to do a good netbook CPU/GPU offering, thus cutting off Nvidia again.
So all I can say right now is that Nvidia is a sell. I would put a buy rating on Nvidia at 3.00 USD.
UPDATE: Nvidia has said that it will not exit the chipset business.
Though having read their “clarification” I still cannot lift the sell rating because I see that their days are being counted.
UPDATE 2: This hit Slashdot and here is a very interesting insight.
Yes and no. Their excuse is the legal inability, but they have known that for ~2 years. Why it suddenly becomes an issue AFTER they realized they needed to publicly have a scapegoat is something you will have to ask them.
The basic problem is that there will not be any chipsets in about a year, with memory controllers, graphics and PCIe moving on package or on die, depending on the exact chip, but on all on die shortly thereafter. What is a chipset? Sata controller, boot rom and USB ports? And why do I need an NVidia branded one for $50 commodity when everyone else is selling it for $5?
NV is out of the business, and they played a really stupid game with Wall Street. Then Wall Street didn’t like the surprise that wouldn’t have been there had Nvidia come clean about it a year ago. Now, the analysts based their models on something that not only wasn’t true, but NV knew it wasn’t.
The analysts look stupid, and NV is to blame. So they are putting out a childish attempt at the blame game. As someone who watches their little shenanigans, it would be entertaining as hell to write about, but since this is time #23 of this same game, it is just tiring.
Basically, NV ended the program(s) over a year ago. They lead the financial guys on to believe it was strong and ongoing, and the finance people took their word for it. When word got out (again, not mine, Ryan/PCPer’s above), they had to have an excuse NOW. So Intel! Yeah, they are big and bad, blame them! So they did.
Remember, nothing is Nvidia’s fault, EVER. They still have not released a list of the ‘Bumpgate’ bad chips, or done anything to help the affected people. If you intone something is their fault, you will be blacklisted. Blame something else or else! Been there, seen that, time for a new trick. Maybe if I buy some dog biscuits before CES……..