Nvidia doesn't blame Microsoft, blames everything

Wanted to clarify your Nvidia "Blames MS for Stock Write Down" story.

If you listen to the conference call - you'll notice that there were a number of reasons for the less than encouraging Q2 financials we announced yesterday.

Q2 was a very difficult quarter for the entire industry - in retrospect and as many other companies in the PC industry have reported - Q1 customer forecast and demand throughout the entire supply chain far exceeded the market demand.

As a result there was a build-up of product in various stages of the supply chain leaving Q1, which affected new product sales in Q2.

Secondly, as evidenced by the results delivered by Intel, AMD, Apple and others, actual PC unit sales were far worse than expected, down about 13% from Q1.

Also, Intel's quarterly results and numerous market reports, Intel shipped an unusual mix of low end P3-based Celeron inventory to make room for P4 based Celerons. Low end Celerons do not offer external graphics, therefore reducing the overall TAM for standalone GPUs.

Lastly, a significant inventory of last generation, low end P4 chipsets had built up in Q1. While focusing on clearing out the chipset and mobo inventory to make room for next-gen chipsets, an anomaly was created in the mix of Performance to Value PCs, with the mix shifting to the value segment. As a result, our value GPUs, the TNT2 M64 & GeF2 MX, exceeded our forecasts, effectively lowering our ASPs.

We never blamed Xbox.

What we said about Xbox was that we reached a volume discount milestone, further reducing the margins. And that we will be taking an inventory write off in Q2 related to the amount of Xbox MCPs that were made obsolete when MSFT transitioned to a new security code (by way of the MIT hacker) and excess in nForce chipsets that we built in anticipation of higher demand of Athlon-based PCs.

Derek Perez
PR Director
Nvidia