Nvidia forecasts lower revenue, notebook failures

Despite posting its best first fiscal quarter ever in May, Nvidia has forecast lower-than-expected revenue and gross margin for the following quarter that will end on July 27. Nvidia now expects revenue of $875 million to $950 million for its second fiscal quarter, potentially down from $935.3 million a year before and $1.15 billion in the first quarter.

Why the drop? Nvidia blames a variety of factors, including weak markets, a delayed next-generation chipset, and GPU price adjustments in response to "competitive products"—presumably a reference to the GeForce 9800 GTX’s recent drop to $199 after the launch of AMD’s Radeon HD 4850.

Separately, Nvidia says it will "take a one-time charge . . . against cost of revenue" of $150 million to $200 million because of notebook graphics and chipset problems:

[The charge will cover] anticipated warranty, repair, return, replacement and other costs and expenses, arising from a weak die/packaging material set in certain versions of its previous generation GPU and MCP products used in notebook systems. Certain notebook configurations with GPUs and MCPs manufactured with a certain die/packaging material set are failing in the field at higher than normal rates. To date, abnormal failure rates with systems other than certain notebook systems have not been seen. NVIDIA has initiated discussions with its supply chain regarding this material set issue and the Company will also seek to access insurance coverage for this matter.

To quell these issues in the future, Nvidia CEO Jen-Hsun Huang says, "We have switched production to a more robust die/package material set and are working proactively with our OEM partners to develop system management software that will provide better thermal management to the GPU."

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