NVIDIA predicts drop in Tegra chip sales due to Surface RT
NVIDIA has recently released its financial results for the second quarter of its 2014 fiscal year and although the company is making money it is predicting a difficult third quarter. In Q2 sales declined just over 6 percent to $977.2 million from which the company managed to make $96.4 million in profit, down 19 percent. The fall in sales is due in part to the declining sales of PC as consumers are moving to smartphones and tablets. According to Gartner, global PC shipments fell 10.9 percent to 76 million for April, May and June – the fifth consecutive drop in sales.
NVIDIA is also in the System-on-a-chip (SoC) market with its ARM based Tegra series of processors. It is the decline in sales for the Tegra line which will cause NVIDIA problems during Q3 and Q4. NVIDIA’s Tegra 3 chip was used in the Nexus 7 (2012) as well as Microsoft’s Surface RT tablet. It also has a new line of processors, the Tegra 4 series, which unfortunately aren’t selling as well as the company expected.
In 2012 NVIDIA sold some $750 million worth of Tegra chips, but now the company expects revenue from its Tegra line to decrease by some $200 million to $300 million. The reason for the slump has is due to the lack of enthusiasm for Microsoft’s Surface RT tablets. During a conference call to discuss the latest financial results, NVIDIA’s CEO Jen-Hsun Huang said the predicted shortfall was due to one particular platform, which though he didn’t actually name it, is generally believed to be Windows RT. “We don’t expect as much return from the investment as we had hoped,” added Huang.
The Windows RT tablet hasn’t sold very well and recently Microsoft took a charge of $900 million to cover the cost of the failure. This in turn is having a knock-on effect for the component suppliers including NVIDIA. According to CNET, NVIDIA is currently working with Microsoft on the next generation of the Surface RT which will include Outlook, something Huang sees as the killer app for Windows.
According to the latest financial results Tegra revenue for the quarter was $52.6 million, down by over 70 percent compared to the same quarter the year before.