Computers graphics card maker Nvidia Corp. reported stronger than expected first-quarter results on Thursday while admitting that manufacturing problems continue to hurt the company’s growing demand. The company has been met with a shortfall of chipsets as Taiwan Semiconductor Manufacturing Co., the company responsible for creating Nvidia products has had problems developing the 28 nanometer (billionths of a meter) chips Nvidia has been gravitating towards.
While Nvidia formerly gave a gloom outlook for the first-quarter the company ended up reporting revenue numbers on the higher end of expectations thanks to the strength of its graphics processing units (GPUs), specifically the company’s new discrete graphics cards code named Kepler.
According to Chief Executive Jen-Hsun Huang the company’s profits are being driven by notebook graphics which posted a record quarter while the Tegra mobile chip saw improved sales following a weak Q4 2011.
On the strength of the company’s current business practices Nvidia expected Q2 sales of $990 million to $1.05 billion, that number would beat analyst expectations of $976 million.
Shares at Nvidia were down 32% over the last 12 months but jumped 8.8% to $13.52 after earnings were reported.
Nvidia also noted that gross margin fell in Q1 from 50.4% to 50.1% compared to the year prior. Nvidia in the meantime expected margins to grow as Kepler shipments begin to pick up steam. Huang admits though that 28-nanometer yields have been good but he doesn’t expect manufacturing problems to be worked out until later this year.
In the meantime Nvidia expects 28-nanometer chips to make up 30% of its business in Q2 2012.
According to Huang:
“There’s just not enough capacity. In combination between us and TSMC, we underplanned for the supply of 28 nanometer, and we need to fix that in the future.”
Investors in the meantime are paying close attention to new graphics processors from Intel Corp. and Advanced Micro Devices Inc. which integrate graphics and computing technology on the same piece of silicon. It is largely because of those new dual-chipsets that Nvidia has tried to make a bigger push into mobile devices.
Overall revenue for Nvidia’s consumer products business rose 21% to $132.6 million compared to Q4 2011, while revenue in the desktop and notebook sector fell by 6.7% to $579.7 million.
Nvidia overall recorded a profit of $60.4 million or 10 cents per share (matching analysts expectations) compared to a year prior when profit reached $135.2 million or 22 cents a share.