Nvidia revenue, outlook beat Street; shares jump

(Reuters) – Nvidia Corp’s quarterly revenue and outlook were ahead of low Wall Street estimates on better-than-expected sales of its latest graphics chips, sending its shares up 9 percent.

The chipmaker reported strong demand for its newly launched chips for desktop computers and contract wins for its Tegra smartphone chips but said revenue and profit is still being limited by supply constraints and macro economic issues.

The revenue surprise came off very low expectations as Nvidia had warned in February of weak sales linked to capacity constraints and new competition in cellphone chips as a big customer became a competitor.

"There was a lot of fears going into the call that supply constraints would continue to be an issue. It wasn’t was bad as feared," said Pacific Crest analyst Michael McConnell.

However, the analyst said even though Nvidia was seeing good demand from its phone and computer customers, it was not clear that consumer demand would be strong.

"Now the question is if people show up at the stores and buy these things," he said.

The company’s shares rose $1.14 to $13.56 in morning trade on Nasdaq, but were still well below their $16.17 close before the February warning.

Nvidia has invested heavily to move beyond its traditional business of designing graphics chips for PCs, by expanding into the market for mobile device chips.

On top of supply constraints Nvidia also faces tough competition from the likes of chip developers Qualcomm Inc and Intel Corp.

Also top phone maker Samsung Electronics Co. depends increasingly on its own chips instead of Nvidia’s and Apple Inc uses custom-designed chips in the iPhone.

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Posted by Awais Khan on May 12 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry