Graphics chip maker Nvidia said today that the PC market is experiencing weak sales in advance of the summer launch of Microsoft’s Windows 10 operating system.
“We see a very soft market going into Q2,” said Colette Kress, the chief financial officer of Nvidia, in a call with analysts after the company reported its first-fiscal quarter earnings.
A combination of seasonal weakness and a lull ahead of the Windows 10 launch are slowing PC sales. Nvidia guided second fiscal quarter revenues to about $1 billion, compared to estimates of $1.18 billion.
But Nvidia is trying to make the leap to car computing and other high-end processing markets. It is also focused on gaming and deep learning, Kress said.
Kress didn’t give an update on the launch date yet for the Nvidia Shield set-top gaming box, which is due to arrive sometime in May. Overall, Nvidia expects gaming revenues to grow year-over-year thanks to a resurgence of PC gaming, Kress said.
Chief executive Jen-Hsun Huang said on the call that there is a lot of anecdotal evidence that PC gaming is growing, thanks to the rise of digital gaming and e-sports. The growth of 4K displays could also spur more demand for both graphics and gaming devices, as will virtual reality, Huang said.
“Windows 10 is going to help, as well DirectX 12,” the latter being the new applications programming interface for graphics on PCs, Huang said.
Analyst Patrick Moorhead of Moor Insights & Strategy said, “Many expected the full force of Windows 10 to hit for the back-to-school selling season, but that’s not going to happen. Sure, users will be able to download upgrades for the Windows 7 and Windows 8 PC installed base, but that won’t positively impact new PC sales for back-to-school. The market will have to wait until the holiday selling season begins to see the Windows 10 effect. Microsoft just wasn’t ready with a high-quality enough OS version to meet the time frames of OEM pre-builds of HP, Dell or Lenovo.”
More than 5,000 deep-learning developers have signed up to create apps based on Nvidia’s tech. And Nvidia’s CUDA programming environment for non-graphics uses of graphics processors has been downloaded 3 million times since its 2006 launch.
Automotive had record quarter of $77 million. Multiple car makers are working with Nvidia to use its visual computing tech in cars.
Nvidia said its legal case against Samsung and Qualcomm is proceeding, with an International Trade Court hearing coming up next month. Nvidia increased its dividend by 15 percent. Huang said the company was spending $70 million to $90 million on the litigation, and he was confident the “return on that investment should be very very high.”
Nvidia is amid a pivot from smartphones and tablets to automotive and gaming chips. Shares of Nvidia rose earlier this week after the company said Tuesday that it would end its Icera cellular modem products and look into possibly selling the unit. In doing so, it followed baseband modem maker Broadcom in exiting that business. Qualcomm, MediaTek, Spreadtrum, and new contender Intel are heavily focused on that market. Icera has nearly 500 employees, and it was designing 4G LTE modems. Restructuring charges will be $100 million to $125 million, said Kress.
Analysts expected Nvidia’s first fiscal quarter revenue to be $1.16 billion, with net income per share of 26 cents. Nvidia reported net income of 33 cents a share (down 2 percent from a year ago) on a non-GAAP basis, with revenue at $1.15 billion (up 4 percent). Sales were driven by GeForce graphics processing units (GPUs) for gaming desktops and notebooks. Those sales were up 14 percent, thanks to a surge in PC gaming and the launch of Nvidia’s high-end Maxwell-based GPUs.
