Nvidia falls on chip shortage, lowered Tegra outlook

Reuters News
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Posted: Feb 16, 2012 10:23 AM
Nvidia falls on chip shortage, lowered Tegra outlook

(Reuters) - Shares of Nvidia Corp slipped 6 percent before the bell on Thursday, after it scaled back sales expectations for its Tegra 3 processors used in mobile devices and warned that delays at its contract manufacturer were hurting sales of its PC graphics chips.

The company, once known for graphics cards, has stepped up its presence in the smartphone and tablet market as it takes on industry leaders such as Qualcomm and Texas Instruments.

On Wednesday, Nvidia said its cutting-edge 28-nanometer chips were in short supply as its contract manufacturer TSMC adapted to the new technology and warned that a hard drive shortage caused by the Thailand floods would keep the PC industry from growing this year.

Nvidia backed away from the $1 billion sales estimate that it had set for its Tegra 3 processors for 2012 a few months ago. It now expects sales to grow at least 50 percent this year, suggesting about $540 million in sales.

"We wish in the future the company did not put such aggressive targets out there, such as the one around Tegra, or risk losing additional credibility," BMO Capital Markets said in a research note to clients.

The brokerage has a "market perform" rating on Nvidia's stock, which fell to $15.20 in trading before the bell.

The shares, which had risen to their highest levels in eight months, closed at $16.15 on Wednesday on the Nasdaq.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Roshni Menon)