NVIDIA shows signs ... [2008 - 2017]

So, no problem with GF104 gross margin.

 

No enough time to show in the Q2. Q3 will tell that story.

 

45% margins -2%

http://www.hexus.net/content/item.php?item=25925

 

But it's 2% up to $20, isn't it? So in fact, that would amount to 40 cents for almost all GPUs.

According to Mercury Research, NVIDIA sold 24,225,000 units this quarter. So the total licensing fees would amount to $9,690,000 per quarter. That's quite significant.

 

It's probably the same deal current licensees have so they just got brought down to a level playing field. My question is whether Rambus is also suing for past damages for patent infringement all these years.

Also, I wonder if their seeming inability to make a fast GDDR5 controller is somehow related to attempts to avoid infringing Rambus patents. Maybe now they can do it right

 

Yes they are. Rambus have been quite bullish and have said they are prepared to go to court, and having had the rest of the industry pay up years ago, and Nvidia tech having been found to infringe, they are probably on strong ground.

Nvidia may well offer a deal to stay out of court, but it's all a question of what Rambus will accept not to go back to the judge. Knowing how litigious Rambus is, and how they make money chasing people through the courts to get their IP licenced, I doubt they have any qualms about going back to the lawyers. There's no reason for Rambus to be nice to Nvidia - they are in it for the licensing money, and Nvidia are exactly the sort of big customer they make their living from.

So I think Nvidia has the choice of paying up for past indiscretions, or going to court, paying a load of lawyers, getting hit with damages or having their infringing products seized and blocked at the border, and still having to pay up what Rambus want.

Expect to see more one-off charges over the coming quarters as Nvidia pay off their Rambus licensing fees retrospectively.

 

Could they have to pay as much as 40 cents for each product they sold that infringed on Rambus's patents? More? That would amount to a lot of cash.

 

AMD pays $75M for 5 years, or at least, that was their last agreement that ended next month and was extended to 2015 (fee unknown).

 

If gross margins for GF104 has no problems with gross margins, Cypress must be doing quite well boosting AMD's overall margins. Either way, I didn't expect there to be any negative financial fallout from GF104, that's a pretty good product.

And yes, it's mainly the GF100 based consumer cards that are likely to be very low (possibly single digit or negative) margins. But move up to the 1000+ USD segments for Quadro/Tesla and margins improve fairly quickly.

It still makes me wonder if they perhaps have a GF101/102 that they are trying to get out ASAP (Winter/Spring) in a similar vein to to G71 and G92. It's something they desperately need, IMO.

Regards,
SB

 

Significantly more. Rambus is likely asking for at least 40c per product for past licensing fees, a minimum of 40c per product as punitive/damages, and all of Rambus' legal costs related to the case.

 

It seems fair that NVIDIA should pay at least 40 cents for each product they've sold since they've been infringing on Rambus's patents, and I'm assuming from AMD's deal that it's been about 5 years. Because if they ended up paying less than that, then their infringement would actually be worth it, and I don't think any court would deem that to be fair.

But if NVIDIA sold about 24 million units this quarter, they must have sold something like 24 × 4 quarters × 5 years = 480 million units, let's call it 400 million to account for growth.

So 160*million dollars for past licensing fees alone… I'm not sure Rambus will get as much as an additional 40c/product as damages, but they're likely to get something, plus interest, so it looks like NVIDIA is in for at least $200 million.

 

Wow.
What do you think about the margin of cypress? Same process, same memory... Should be less then 10%, huh?

 

I like the way you think

 

Different design - that's why one came out on time, and one was half a year late and still doesn't work the way it was supposed to.

 

Same process, up to 50% more memory, 58% bigger die, bigger cooling and power supply system, (much) lower yields, and retail prices within 15% of Cypress's…

Yeah, margins should be similar…

 

They can still sell part or all of the inventory that was written off (even after the write off they are pointing out they still have high inventory levels) which will then be, effectively, very high margin sales in at least Q3. It is difficult to conclude that GF104, as it stands right now, is good margin based on future predictions of margin - it is also likely that as GTX 465 and GTX 470 inventory is depleted they will move GF104 into a higher segment, improving the overall margin mix for GF104.

These results are a classic "throw the baby out with the bath water" reporting in order to look better for subsequent quarters.

 

An analyst explicitly asked if they expected to be able to sell the written off inventory at any point and the CFO said no.

 

A big problem with what they did was it indicates they really suck at successfully managing their inventories and product demands well. Probably because they are under estimating the abilties of their competitors.

 

I don't buy it and agree with Speccy, this is just an attempt to get all the bad news out at once and benefit from the depressed COGS next quarter. Also, I doubt any of these companies ever dump chips. Anything can be sold given the right price, although not necessarily for a profit.

They probably got blindsided by the pace with which AMD produced down-market Cypress variants. That completely wiped out their competitiveness in that segment. And then they had serious troubles in the high-end segment with GF100 too. Recipe for what we're seeing now.

 

Aye, both AMD and Nvidia have used that in the past. Writing off inventory and then showing a boost the next few quarters from sales of such...

Regards,
SB