Non-GAAP EPS: $0.44 (vs $0.37 estimate)
Revenue: $1.12B (vs $1.01B estimate)
Non-GAAP Net Income: $264M
Cash flow: $278M
Cash: $1.85B
Revenue: $1.12B (vs $1.01B estimate)
Non-GAAP Net Income: $264M
Cash flow: $278M
Cash: $1.85B
CC Transcript said:[Jen-Hsun]
- Record revenue, record net income and record gross margins.
- First billion dollar quarter; grew 19% sequentially and 36% from last year.
- 46.2% record gross margins.
- Remains one of the fastest growing semiconductor company in the world.
- Record desktop and notebook revenue. Standalone notebook GPU share grew to 72%.
- Shipped first Intel IGP, approximately 40M addressable units next year.
- Launched 8800 GT, best performance and best HD video. Comparable to Ti4200.
- Workstation had record revenue, several new product launches.
- Believe the CAD market will continue growing etc.
- Began shipments of the Tesla GPUs. [insert CUDA marketing]
[Marvin]
- Only difference between GAAP and non-GAAP is stock compensation and its tax effect.
- Concerns never materialized, very strong quarter.
- Desktop GPUs grew 14% sequentially.
- MCP business grew 26% sequentially, beginning to see Intel IGP traction.
- Delivered higher margins mainly thanks to GF8, PS3 royalties and workstation.
- Had to accrue a one-time catch-up because of higher full-year estimates.
- 195(?) out of 2xx (?) of the new employees are in engineering (couldn't hear).
- New testers due to higher production and bought land for $27M.
- Cash ended at $1.85B despite buybacks of $185M (not sure?) during the quarter.
- On the outlook, we currently see strong demand for our products.
- Revenue growth within the 5-7% range is to be expected.
- For gross margins, we made excellent progress and will continue to work on it.
- In summary, we expect an excellent Q4.
[Jen-Hsun]
- [marketing about GPUs, video game market, Vista and Google Earth, etc.]
- [marketing about the importance of the GPU driving growth]
- We believe the PC game market is continuing to grow.
- [huge growth in the 'enthusiast' market, but undefined so hard to judge]
- [marketing about Intel IGPs and Hybrid SLI market opportunity]
- [marketing about ESA and how it advances the capabilities of the PC]
- Growth of workstations is driving the growth of Quadro. China and India opportunity.
- [marketing about Tesla]
- CUDA will enhance video, image and physics processing for consumers.
- We expect our next-generation Application Processor to sample at the beginning of next year.
- [marketing about PC-like handhelds]
- AP15 (codename of their next-gen) is the the combination of several hundred manyears of R&D.
[Q&A]
Q: Congrats. GeForce 7000 motherboard GPU; what kind of ASP are we seeing there on the Intel side?
A: MCP73 ASPs are higher than MCP68. Targeted at the mainstream price segment.
ASPs are intended to be in the teens to maximize the addressable market.
Q: What do you expect for notebooks? vs IGPs? Market share in general?
A: Hard to say what our market share will be in the future.
We have been competing with IGPs for quite a long time, and our ability to succeed will depend on coming up with great ideas like SLI and Hybrid SLI. If we do our job well, we will continue to grow, otherwise our competition will grow.
Q: Power consumption?
A: How is their integrated graphics lower power than ours? [marketing about G8x power efficiency]
Q: Update on double-ordering, too good for too long, backlog, etc.?
A: The strength of the orders in Q2 continued straight through Q3. There was no change in orders or shipments.
You're always concerned about double-ordering, but we don't see the evidence of that.
[Jen-Hsun]: We don't know what we don't know, but the marketplace is rather robust. For us, new products always help. 8800 GT is arguably our best product in 5 years, very very big hopes for it. MCP73 is our first product of that category, wonderful adoption.
[Marketing about China, workstations, importance of the GPU, Tesla, etc.]
Q: What areas are capacity-limited?
A: MCP73 is tight, some GF8s are still capacity-limited, or rather production-limited.
Q: Q4 guidance relating to share gain etc.?
A: We don't count on share growth, that happens after you're done counting. We don't typically count that. We look at our strategic position and the new products we're introducing, etc. - but we try not to be too bullish on share gains.
[Marvin] Also not expecting ASP growth.
[Jen-Hsun] So expecting robust demand and entering new markets, such as Tesla.
8800 GT is an existing market that we serve but it's very disruptive, so it promotes very very quick adoption.
Q: Motherboard GPU replacing discrete?
A: GF7 IGP isn't fast enough to replace even our entry-level discrete GPUs. So that's really targeting the segment underneath that we aren't serving today.
Q: 8800GT - great product, but do you think it might have an effect on other products? Gross margin effects?
A: We always try to be thoughtful about cannabilizing our own products. But if we can do that, we'd rather do it ourselves than somebody else. We want to remain aggressive. I am not inclined really to slow down; my own business will have to figure out how to deal with my own business.
[Marvin] Margins on the 8800GT are excellent, well above corporate margins.
Q: Tesla applications for computational finance etc.
A: Very big opportunity for finance. Very very large step-up in performance, quite a bit of development in that area. Development is happening in London, in New York, etc. - very interesting for GPU Computing.
Q: G92 cross-over relative to G80?
A: Uhm. Cross-over. Let me explain it that way. We will ship more 8800 GTs this quarter than we shipped 8800 GTSs last quarter.
Q: Most aggressive ramp in history?
A: This is one of our most aggressive ramps, since it's such a great product. Really rich backlog of orders for it. And although the market now knows what the competition has, they're voting with their orders. We're going to be very very aggressive with our products. [insert marketing about 8800GT vs Ti4200]
Q: Think you can take more market share?
A: There's always competition in our space. It's one of the most vibrant industries. The reason for that is Moore's Law is still GPU's friend and vice-versa. One of the few technology segments where more transistors can still deliver better experiences. Other markets are seeing smaller die sizes and ASPs, but not the case for GPUs.
Q: OEM vs Channel? (for something specific? if so couldn't hear and Jen-Hsun didn't repeat)
A: We are expecting to be very successful with both OEMs and the channel. You'll see it soon.
Q: Notebook market has been doing very well, expectations regarding replacing desktops etc.?
A: The notebook market is certainly doing very well. I expect a lot more growth in the mobile gaming and mobile workstation segments, and we expect to be able to add a lot of value to these two platforms in the future. While people tend to have 1 or 2 PCs at home, they can have maybe 4 laptops. I have 8. So I think it's not completely a replacement market, it's additive.
Q: Notebook market is more competitive because of Intel bundling?
A: Intel is definitely a very competitive company, and we've competing against their bundling for quite some time. The bottom line is we've just got to add value. NVIDIA is not a commodity players. We serve the marketplace where visual computing really matters, if 3D matters to you... then we can add a lot of value to you.
Q: ASPs, on a mix-basis were ASPs able to improve from Q2 to Q3?
A: No, they were relatively flat.
Q: Margins were up, you talked about growth from Sony being a driver? Could you help us understand the impact of that?
A: Any increase in royalties is 100% gross margins. I would say PS3 royalties more than doubled from Q2 to Q3. Was it the driving factor? Probably not, but it was one of the factors that improved gross margins. It is probably true that it accounts for most of the increase in the consumer business.
Q: Professional business? Handset strategy, impact of a lack of baseband solution?
A: On the first one, we really haven't and we don't give too much guidance on that level.
All I can tell is it's been doing very well and we add a lot of value to that business.
With respect to our AP business, we are going to focus on the segments of the market place where computing is important. If you look at all the handhelds in the world, everyone wants to be a computer but besides the iPhone, everyone has a very long way to go. We can add a lot of value, and we are seeing a lot of interest in the work we are doing.
Q: Mainstream growth/low-end, growth domestic vs overseas? China and India? Secondly, current mobile phone business vs expectations?
A: Developing markets are being driven by online games, really a craze in China and India. Games are free and you pay for the service and as you go. Real growth driver there. Their purchasing power is improving too, and GPU is the best way to improve your experience for a small premium, irrespective of Vista. Vista is doing very well everywhere, not just domestically.
With respect to the handheld business, we haven't shipped many application processors, and haven't shipped any AP15s yet. Revenue for non-APs is likely to decline, we aren't really focusing on getting more design wins there.
Q: Gross margins in the next 12 months?
A: We have not raised our margins by raising prices, and the reason for that is it's hard to grow while raising your prices. Operational performance is where gross margin improvements can come from, and I still have a lot of work to do there. Execution etc.
[Marvin] Mix can improve margins, but we want to improve gross margins in all segments too.
Q: Professional services, ASPs for the quarter? Tesla contribution?
A: Tesla was just beginning to ship, expecting it to be small for the first year relative to the size of the company. With CUDA, we hope to bring GPU Computing to the masses though.
[Marvin]ASPs are in the hundreds of dollars. Complex mix I won't go into the details. Relatively flat over Q2.
Q: Expectation for ASPs over time? Tesla?
A: The more programmable we make the GPU, the more valuable we make it, the more people will be willing to pay for it. This has been the case in the last few quarters. I expect further value increases thus
Q: Other enthusiast refreshes?
A: We are *at* the end of the year, and we decided that the refresh we'd do at this time is 8800 GT. From 8800 GT, you could obviously do SLI. And soon you'll be able to do tri-way SLI. You're going to be able to put a lot of GPU horsepower in your system.
Q: Havok bought by Intel, are you in the market for that kind of IP?
A: Uhh, uh, uh no current plans.
Q: Repeat.
A: [...] Still a lot of innovation to happen in that market, possible negative synergies [...] I don't know why they did it.
[Jen-Hsun ending comments]
