Nvidia Says Tegra Chip For Tablets, Smartphones Will Push Sales

Nvidia CEO Jen-Hsun Huang said during the chip maker's third quarter earnings call he's confident of significant gains as the company steps up its presence in the tablet and smartphone markets with its Tegra chips.

The graphics chip maker reported earnings Thursday of $85 million for its fiscal third quarter ending October 31, compared with $108 million in the third quarter of 2010. Nvidia's revenue for the third quarter was down to $844 million from $903 million in the year-before quarter.

However, gross margin was up to 46.5 percent from 43.4 percent in the year-ago quarter. On Friday, Nvidia stock rose 65 cents, or 5.2 percent, to $13.26 on the Nasdaq exchange, Bloomberg reported. Nvidia CEO Jen-Hsun Huang said during the earnings call that he believes the introduction of the Tegra chip in mobile devices such as smartphones and tablets will help help power earnings.

"Our Tegra business should be quite large. It'll be one of our largest businesses over time," he said.

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The company plans to enter that market by combining low-powered processors designed by ARM Holdings with Nvidia's Tegra GPUs designed for mobile devices. Nvidia said several embedded devices running Google's Android OS were set to go to market next year and would be powered by Nvidia's upcoming Tegra processors.

’The business conditions that impacted our GPU business in the second quarter, namely rising memory costs and the weakness of the Euro, abated somewhat in the third quarter," said David White, Nvidia’s chief financial officer, during the conference call.

’While we lost share in a significantly reduced notebook segment, we believe the market is stabilizing and we expect to regain share with the new notebook product cycle late in the fourth quarter or early in the first quarter of our fiscal 2012," he added.

Nvidia specializes in high-performance graphics cards for gaming. Earlier this week, the company released its high-end GeForce GTX 580 card and launched a support Website for customers using its GeForce products.

However, as rival AMD prepares its Cayman chips to compete with the GTX 580, along with the Radeon 5000 and 6000 high-end cards formerly branded under ATI, competition in the graphics space is intensifying.

In addition, AMD earlier this week shipped its first integrated Fusion chips, which feature traditional CPU and GPU capabilities on a single-die, while leading semiconductor firm Intel prepares its Oak Trail platform for CPU-GPU integration to power products set to go to market next year.

The integrated chips could pose a serious threat to Nvidia's lower-end graphics cards, though the company's Fermi architecture for parallel processing and Tegra chips for mobile devices could help supplement its discrete graphics card business.