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| Nvidia's Meltdown? |
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| Saturday, 02 August 2008 | |
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Page 2 of 5 The Mobile Platform Debacle It all started with this little 8k filing . From Yahoo... "On July 2, 2008, NVIDIA Corporation stated that it would take a $150 million to $200 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other consequential costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. All newly manufactured products and all products currently shipping in volume have a different and more robust material set." Initially, analysts were informed that these issues were mostly isolated to specific batches of products sold to HP. Now we see strong evidence that the problem is far more widespread. Reading between the lines and doing some digging, it appears that basically *all* G84/G86 products are effected due to a problematic substrate material. Thermal related failures are less likely in desktop products than mobile ones, so most of the pain here is being felt in the mobile sector.  All of the major OEM's are experiencing pain in this area due to apparently overwhelming recall/return rates with mobile platform systems built around G84/G86 derived chipsets. Recall rates for even older Geforce Go chipsets seem to be on the rise as well. In this sense, the situation is far worse financially for the industry at large than the above linked 8K filing indicates, as channel partners are taking equally large financial hits. The sorts of large financial hits that may make the big OEM's reluctant to sign future contractsWe expect, from examining the math behind the equation, that this may just be the tip of the iceburg for nVidia. At this stage it doesn't appear likely that a $200 million charge will be anywhere near enough to put out the fire. As to whether this played any role in the announced retirement earlier this year of nVidia's CFO Marvin D. Burkett, who has seemingly yet to be replaced, remains to be seen. Nvidia does have significant cash reserves at its disposal, but the full aftermath of this situation may very well be poised to eat a significantly large chunk of their reserves at a time when nVidia is already facing several significant market challenges simultaneously as they go forward. |