Nvda
- Thread starter PatrickL
- Start date
Evildeus said:
Arbitration went in NVIDIA's favour, meaning that MS had to pay the prices they didn't want to pay, ergo I'd say its safe to say it say they are profitable.
http://finance.yahoo.com/q/bc?s=ATYT&t=2y&l=off&z=l&q=l&c=NVDA
Whenever I'm saddened about how Nvidia's marketing is doing stupid things, I just look there, and see that it really doesn't change anything...
Whenever I'm saddened about how Nvidia's marketing is doing stupid things, I just look there, and see that it really doesn't change anything...
The only statement was that they would work together to finds ways of reducing the cost of the chips, not that prices of the chips had dropped.
Evildeus said:
ED, there wasn't a single report at the time of the arbitration settlement that indicated that MSFT would pay less per Xbox chipset. NVDA won the dispute, but the PR statements were crafted to reflect an ongoing collaboration between both companies to try to reduce the console's costs. This was confirmed by Forbes, along with the fact that this segment is still profitable for NVDA, with gross margins at 25%.
NVDA also mentions the settlement in various sections of their 2003 10-K annual report. On page 17 you will note that Xbox revenues accounted for a whopping 23% ($439 M) of NVDA's revenues for 2003, which is going to begin dwindling even before the Xbox2 release, especially if MSFT kills its production prematurely because of ongoing losses.
I never really thought of it that way, and I guess it does make me feel a bit better about the whole affair.Eronarn said:
Karma is a beyotch. 8)
overclocked_enthusiasm
Regular
A gross margin of anything above 0% is hypothetically profitable. The one time fee from MSFT to NVDA was to make up for the chips sold to date (at the time of the ruling) at a loss. In addition, the going forward price was set and profitable for NVDA at approx. a 25% gross margin.
FYI
http://ccbn.tenkwizard.com/filing.p...=ON&LK=0000FF&AL=FF0000&VL=800080
*Edit* The arbitration agreement set the price of the chip going forward so NVDA should not be subject to MSFT's price cuts. It is generally assumed that the settlement made the deal slightly profitable for NVDA and there would of course be some expected manufacturing savings over time.
FYI
http://ccbn.tenkwizard.com/filing.p...=ON&LK=0000FF&AL=FF0000&VL=800080
*Edit* The arbitration agreement set the price of the chip going forward so NVDA should not be subject to MSFT's price cuts. It is generally assumed that the settlement made the deal slightly profitable for NVDA and there would of course be some expected manufacturing savings over time.
The point is, before the agreement the gross margin was 25%. The other point is, firms nowadays put a standard to the profitable business and 25% could be or not profitable from Nv's point of view. Finally, the agreement changed the future prices of the chip hence an impact on the future gross profit.
FYI, my master is in finance and economics...
FYI, my master is in finance and economics...
Really? Mine's at work right now, I was just getting ready to get the kids into the Pathfinder to take her lunch. (And I prefer to call her my "wife".Evildeus said:
)Neat info, I'm loving this thread...VERY edumacational!
ED, as overclocked_enthusiasm has mentioned, a positive gross profit margin indicates that the business segment is contributing to overall corporate profits, even though other segments might be relatively more profitable.
MSFT did not pay anything 'without compensation'. It paid for $40 million worth of chipsets that NVDA had already shipped under the pricing terms of their contract. Since it was decided to go to arbitration, NVDA did not report that revenue in its books until the dispute was settled in case they lost and had to reimburse part of the money. So it's just a matter of NVDA delaying the recognition of that revenue in its financials, nothing more.
By the way, the NVDA annual report I linked to was for fiscal 2003, whereas NVDA had already completed fiscal 2004. Xbox revenue accounted for a smaller percentage (15%) of total revenue for 2004.
Edit: ED, noticed your comment about the profit margin - I won't disagree that we don't know how a 25% gross profit margin impacts the company's profitability objectives overall. However, those were the terms (and anticipated margins) that NVDA agreed to when it signed the deal. I disagree that they changed the pricing on Xbox chipsets. Not a single source has reported so.
MSFT did not pay anything 'without compensation'. It paid for $40 million worth of chipsets that NVDA had already shipped under the pricing terms of their contract. Since it was decided to go to arbitration, NVDA did not report that revenue in its books until the dispute was settled in case they lost and had to reimburse part of the money. So it's just a matter of NVDA delaying the recognition of that revenue in its financials, nothing more.
By the way, the NVDA annual report I linked to was for fiscal 2003, whereas NVDA had already completed fiscal 2004. Xbox revenue accounted for a smaller percentage (15%) of total revenue for 2004.
Edit: ED, noticed your comment about the profit margin - I won't disagree that we don't know how a 25% gross profit margin impacts the company's profitability objectives overall. However, those were the terms (and anticipated margins) that NVDA agreed to when it signed the deal. I disagree that they changed the pricing on Xbox chipsets. Not a single source has reported so.
