New chips less profitable for Nvidia

Article Excerpt

NVIDIA CORP. $57 (Nasdaq symbol NVDA; WSSF Rating: Average) has about 80% of the market for high-end graphic chips that make games and video signals appear more life-like and run smoother on computers and home video game consoles. This business supplies 70% of its revenue. But the company faces strong competition from chief rival ATI Technologies, as well as Intel, which makes less expensive graphics chips. Nvidia now aims to cut its reliance on this niche market by developing chips for other devices, such as cellphones and digital TV sets. However, the cellphone chip market is crowded and prices are falling. In fact, Nvidia’s cellphone chip business lost $34.9 million in the fiscal year ended January 31, 2006, on $58.7 million in sales. To put that in context, Nvidia earned $1.65 a share (total $302.6 million) in fiscal 2006, up sharply from $0.57 a share ($100.4 million) in 2005 (we have not adjusted these per-share figures for a 2-for-1 stock split planned…

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