NVIDIA shows signs ... [2008 - 2017]

An inventory writeoff doesn't mean that no money was paid - it means the opposite; in financial terms it means that they feel that the money that was paid won't be re-couped.

Once a write-off or write-down of inventory has occured rarely would you scrap the goods that are writen off (unless its just completely useless). All it means is that you have financially taken the cost off the goods off your books, but you still physically have the goods - in which case you can both sell them for any price and they will effectively increase your overall margin (in subsequent quarters that they are sold) because as you've already written the costs off they are pure margin when they are sold.

 

Tech industry doesn't work that way, they would rather take the write off and scrap the parts. Because they won't make money on them, they deperciate too fast, within a year a high end graphics card is worth half, 2 years its worth less then 1/5. Its better for them to actually take the tax break from the write off then actually try to sell the parts. Corporate tax state and fed will end up in 55% range, that 200 million write of nV did last quarter effectively gave then ~90 million tax break. Now last quarter the write off was for gf8 lines most likely, thats already a 2 year chip, they won't make money on those cards now.

http://www.sfgate.com/cgi-bin/artic.../archive/2001/05/08/BU54900.DTL&type=business

two colored areas you are correct but if they take that tax break they can't use those parts

 

Incorrect. As I said, companies pay payroll taxes on employee salaries. Yes, the employee also pays "payroll" taxes on the salary (social security tax). The payroll tax is split between the employee and employer.

 

no income tax isn't, only 2 taxes that are payed by employer SS taxes which is ~6% (total 12% it is split between the empolyer and employee) and medicaid taxes which are around ~1% (2% split evenly).(fica)

 

Wow, that Charlie article certainly is one of the most laughably inaccurate ones I've seen from him in some time. Let me make this clear: I agree NV's financial position is a joke right now and I'd argue based on short-term earning estimates and my global economic forecasts even their current share price is too high, but that doesn't mean Charlie should be able to just spout random bullshit. I probably shouldn't have bothered, but here we go:

Tegra was never supposed to have a product out before about November, which is two quarters ago. One of those was a PND for example because those have shorter design cycles, but I suspect it might have been canceled completely. Frankly many handheld semiconductor companies are saying publicly that they are witnessing unusually many customer delays and cancellations in the industry, it's not just NV.

It would incredibly clear to anyone who knows anything about NV's MCP business (hint: not Charlie, wasn't MCP division supposed to be gone by now?) that he's not encompassing any GeForce integrated GPU. He's simply describing Ion as MCP79, aka GeForce 9300/9400 IGPs for Intel. Other IGPs aren't included! Any analyst who doesn't know Atom-based IGPs aren't shipping much yet clearly isn't earning his paycheck. So I don't see where the problem is.

So now dual-core automagically halves CPU bottlenecks? How cute. Certainly the Atom 230 can be a major bottleneck, but I have never seen any indication that HW-accelerated HD video actually benefits from dual-core, at least in Cyberlink. It just needs enough CPU power, so Atom 330 numbers should be nearly identical to Atom 230 if you don't multitask.

You can't dismiss the other explanations unless they are actually wrong. This explanation is probably correct as a complementary one though.

Assuming Charlie meant G9x instead of DX9 (did G78 even exist?) that is still a gross oversimplification. If it's inventory dumping, how do you explain ASPs weren't really down? They maintained share in the low-end and increased in the high-end (+IGPs), not the other way around. Certainly excess legacy (i.e. 65nm) inventory had some margin impact - but how is that unusual in such a dramatic demand falloff? It's not like AMD hasn't had any inventory write-offs since September either...

His calculations are too pessimistic for GPU and too optimistic for the rest, although he's not completely wrong here at least.

You've got the IGP business with ~32% margins at 28% of total revenue. You've got PSB with ~65% margins at 16% of total revenue. Then you've got GPU at 53% of total revenue and unknown margins. And finally 3% that don't add up, presumably bad rounding+royalties+contract R&D. This gives us a gross profit of ~$60M for MCP and ~$70M for PSB - which leaves about $70M gross profits for GPU since the total is ~$203M. Then to get GPU margins: 70/(664*0.53) = ~0.199 -> ~20% gross margins.

That is certainly *not* good, and I would assume *consumer* GT200b gross margins to be even lower (wouldn't exclude zero or negative, ugh!) but I wouldn't call that "struggling to have double-digit margins".

I guess Charlie hasn't yet figured out that it's harder to recover market share with new products than it is to recover gross margins with new products. Companies don't get addicted to marketshare just for the free bonus miles.

Of course they failed to meet their ETAs, but that doesn't tell you anything about what the *ramp* looks like *right now*, i.e. how many products NV is churning through the production line and at what yields - which is, y'know, what Jen-Hsun talked about. Oh well, can't miss the opportunity to call someone a liar even when it makes no sense I guess...

You still have no idea what NV's 40nm roadmap was, now do you Charlie?

How cute. Wasn't it TSMC themselves that said their 40nm yields weren't meeting their goals in their quarterly conference call? TSMC's definition of yields should be based mostly on test structures, this has nothing to do with NVIDIA screwing anything up. Of course, you won't learn that 40nm yields were low (along with a high wafer cost) for the RV740 ramp from your AMD sources... I'm not saying it wasn't still more cost-effective than an equivalent 55nm part, but let's be realistic here.

And you still have no idea what NV's 40nm roadmap is right now, now do you Charlie?

And you really have absolutely no idea whatsoever what the hell GT215 might actually be, now do you Charlie?

There's a reasonable chance Charlie is right there, but I'd love to watch him eat a hat if he's not given how clearcut that claim was.

Oh, right. Like Charlie knew R600's performance... Can't help but wonder if he even changed sources since then!

So they'll be magically have a chance to competitive next Spring based on GT300 derivatives, but GT300 itself is not going to be competitive with RV870? Intriguing! Sigh...

For once, I kinda agree with Charlie; the same is true for AMD or Intel though, forecasts generally aren't very valuable in this industry. But of course, he is himself even less credible than they are...

 

Where did these margin numbers come from?

Jawed

 

Ion/MCP79 margins were said to be "About or better than corporate average" during this CC, so that's >30.6%. I very optimistically assumed that other MCP products had similar or slightly better margins so that the GPU margins would be conservative (i.e. on the low side) - as for PSB, it was from my Analyst Day notes iirc, where they had a graph of it hovering between 65 and 70%. And I obviously doubt they went up since then...

 

Normally you'd rather sell them. These types of writedowns are often done because a quarter is looking bad so you throw the baby out with the bathwater in that quarter in order to make subsequent quarters look better.

GF8 spans a lot of lines. If the write-off was for low end GF8 parts, which aren't as tech or performance sensitive, then its very easy to offload them dirt cheap into the market for cheap IGP upgrades and have a positive effect on marketshare.

In the CC they openly stated that both inventory witten down and inventory written off in Q4 were sold this last quarter (though admit they had not written it down enough):

http://seekingalpha.com/article/136355-nvidia-f1q10-qtr-end-4-26-09-earnings-call-transcript?page=-1

 

http://forum.beyond3d.com/showpost.php?p=1291980&postcount=626

They're referring to an historical corporate average margin. I don't know what that is, and whether they're referring to MCP-specific historical average or NVidia's historical average. With the continued growth of MCP sales in absolute terms it is presumably enjoying higher margins now than in prior quarters as NVidia captures more share in the Intel market (i.e. beyond Apple shores). Although, to be honest, I don't know the MCP revenue picture, historically.

Jawed

 

I can't remember for sure from when I listened (I could recheck if you want), but the seekingalpha transcript seems to say otherwise:

 

"Better than this quarter" meaning "not this quarter's average, but better (historical)". It's definitely not "this quarter's average".

Obviously, in trivial terms, it's >30.6%. I just don't know what the corporate historical average is (would be fairly tedious to compute, too) which is why I guessed with 40%, so just wondering why you went with 32%...

Jawed

 

Yes, this is called a "payroll tax" as I mentioned in my previous two posts. It is a tax, right? I refer you to Wiki. Take careful note of the first sentence. Also note that employees have a maximum amount that they are taxed for social security, but I don't believe that cap applies to employers.

 

I think my english is pretty good and it's obvious he was referring to the current quarter's average. It's crystal clear in that snippet Arun quoted.

 

I can see it. Obviously wasn't crystal clear to me

Jawed

 

Why is it important to have anything for Win7 launch at all? Does Charlie now that DX11 isn't tied to Win7? There probably won't be even synthetic benchmarks for DX11 until sometime in 2010 and games will follow even later than that (mostly in the form of DX9 console ports btw).
What's important is to switch to 40nm in low margins segment by the end of the year - and i'm thinking that NV will do that pretty soon. But if they'll do that pretty soon then what'll stop them from launching G3x0 GPUs in the 2nd half of the year? Charlie's articles?

 

http://www.theinquirer.net/inquirer/news/1137286/apple-dell-hp-owners-sue-nvidia

when it rains it pours for the G86/84M screw up.

 

Yea, and aside from that, DX11 isn't even directly tied to hardware either.
Some of the most compelling features, like multithreaded rendering and Compute Shaders work fine on nVidia's current product line. In fact, the Compute Shaders may help nVidia to make their GPGPU products even more popular.

Now unless ATi has DX11 hardware planned at (or before) the Win7 release, I see no reason why nVidia would have to have it.

 

Did you miss the bit where they work on ATI's current products?

Jawed

 

but its not a tax on the money the corporation makes. Payroll tax is also concidered a business expenditure.

 

There we go again. Would you mind controlling your ATi-fanboyism for once, and not go ranting everytime someone 'forgets' to credit ATi in a topic that isn't about ATi in the first place? (Or the other way around for that matter... Like last time when we were in a topic about Avivo, and you started ranting how I didn't criticise Badaboom in that thread?).
Now if I said that ATi *didn't* support them, perhaps that would give you the right to start a rant. But I didn't. I just didn't think it was necessary to mention ATi, since we were discussing nVidia here. Besides, I think most people here know that any DX10/DX10.1 parts will support it. Oh wait, that includes S3 aswell (and even Intel's IGPs?). Did you miss that bit?
Please...