NVIDIA (NVDA) has an overheating problem in chips for notebook computers, which has caused higher-than-normal failure rates in certain GPUs (graphics-processing units) and chip sets. The company blames "weak materials" and says it is fixing the problem. More importantly, global economic weakness will cause NVIDIA to miss its quarterly revenue target by a shocking 20%. WSJ:
Nvidia said it will take a one-time charge of $150 million to $200 million in the second quarter to cover anticipated costs associated with repairs or replacing those products.
The company, while hoping insurers will help cover those costs, has switched the materials it uses, and is discussing the problem and potential responses with suppliers and computer makers.
"We have a responsibility to our customers and will take our part in resolving this problem," said Jen-Hsun Huang, Nvidia's chief executive officer.
The company said it is also being hurt by "end-market weakness around the world," delays in boosting production of a next-generation chip-set product, and price cuts on its GPUs to respond to competition. Rival Advanced Micro Devices Inc. recently introduced an improved product line.
The company now expects revenue to be in the $875 million-$950 million range this quarter. Consensus revenue was $1.1 billion. That's quite a miss. (And let's just hope those "weak" materials don't start showing up in more of NVDA's products.) Meanwhile, the stock is down over 20% in pre-market trading.
See Also:
NVIDIA (NVDA): Lehman Cuts Estimates on Price Pressure (NVDA, AMD)
NVIDIA (NVDA): Limited Near-Term Upside (NVDA, AMD)
