NVIDIA (NVDA) 4Q07 Earnings Preview

Secondary Plays: AMD, BRCM, INTC, QCOM, MRCY*

NVDA 02/12 closed at $27.02 (+3.92%), aftermarket high $28.60
INTC 02/12 closed at $21.21 (+1,48%), aftermarket high $21.44
AMC, BRCM, QCOM no significant moves noticed

02/13/2008 Update

NVIDIA beats by $0.02, beats on revs (27.02 +1.02) : Reports Q4 (Jan) earnings of $0.49 per share, $0.02 better than the First Call consensus of $0.47; revenues rose 36.8% year/year to $1.2 bln vs the $1.19 bln consensus. Co also reports Q4 non-GAAP gross margins 45.9% vs the 46.4% street expectation.

About NVIDIA (NVDA)
As the only remaining major independent player in the market for Graphic Processing Units (GPUs) used in PCs, NVIDIA is well positioned to benefit from increased graphics requirements. However, indications of a slowing U.S. and potentially global economy are likely to dampen the outlook for IT spending. Under this environment, PC replacements are likely to be delayed.

Revenue segmentation for the first nine months of fiscal year 2008
1) GPUs accounted for 60.5% of total revenue
2) MCPs accounted for 17.5% of total revenue
3) PSBs accounted for 14.5% of total revenue
4) CPBs accounted for 6.8% of total revenue
4) while the remaining 0.7% came from its All Other segment

Geographical revenue segmentation during the first nine months of fiscal 2008:
1) 32.6% from Taiwan
2) 23.0% from China
3) 21.1% from Other Asia/Pacific
4) 8.9% of revenue from the United States
5) 4.6% from Other Americas
6) and the remaining 9.8% from Europe

02/12/2008 Earnings Preview

NVDA is expected to report 4Q07 earnings 02/12 after the close with a conference call to follow at 5:00 PM ET...

NVDA Consensus: 4Q07 EPS street expectation of $0.47, revs of $1.187 bln; 1Q08 EPS of $0.41, revs of $1.11 bln; FY08 EPS of $1.76, revs of $4.713 bln...

Guidance: Co guided on Q3 call (11/8) for Q4 revs to grow 5-7% which equates to $1.18-1.20 bln (vs $1.07 bln consensus at the time)...

Analyst Expectations: Heading into earnings, analysts are expecting the co to post in-line to above consensus EPS and revenue results. However, the predominantly cautious outlook on PC demand for FY08, especially within notebooks, has tempered analysts' view on NVDA's guidance. The Street will also be focusing on the co's gross margins in the earnings release. It will be interesting to see if the co was able to hold pricing power, continue to cut costs and be able to deliver a favorable mix. Analysts are split on NVDA's competition, whereas some see the co losing design wins to AMD's ATI while others see limited competitive pressures...

Areas of Focus on the Call:
1) Revenue Guidance - The co historically issues sequential rev guidance for the following qtr. Guidance should help offer some outlook to overall PC demand;
2) GPU adoption/growth -- Investors will be focusing on desktop GPU and notebook GPU. Also there are reports that the co is in early developmental stages of its first Mac-bound GPGPUs;
3) Competition -- AMD's recent purchase of ATI encroaches on NVDA's dominance in graphic chips. AMD recently touted the new ATI Radeon HD 3870 X2 card as the clear speed leader;
4) X 2500 applications processor -- Introduced on 2/12, the HD chip works on Windows Mobile. Co may give insight to the potential addressable market...

* About Mercury Computer Systems (MRCY)
On November 13, 2007, NVIDIA and Mercury Computer Systems, Inc. announced a collaboration toprovide exploration and production (E&P) application developers with a comprehensive solution forsimultaneous computation and visualization of huge 3D seismic data sets, or any highly demandingcomputing tasks in the interpretation and simulation workflows. Mercury will integrate NVIDIA's TeslaGPU compute power inside the Open Inventor 3D development toolkit for computing tasks in the dataanalysis, interpretation, and simulation E&P workflows. Mercury has facilitated the interoperability of Open Inventor with NVIDIA's CUDA language, to provide application developers with a unique, integratedsolution.