Nvidia's 3Q earnings fall sharply, but top outlook

SANTA CLARA, Calif. - Graphics chip maker Nvidia Corp. on Thursday posted a nearly 74 percent drop in third-quarter earnings on declining revenue and one-time costs. But adjusted results topped Wall Street expectations, and shares rose nearly 7 percent in aftermarket electronic trading.

For the company's fiscal 2009 third quarter, profit fell to $61.7 million, or 11 cents per share, from $235.7 million, or 38 cents, a year ago. Excluding stock-based compensation, a restructuring charge and costs related to a royalty dispute, the company would have earned $111.4 million, or 20 cents per share, in the latest quarter.

Revenue fell 20 percent to $897.7 million from $1.12 billion.

The results easily beat the average estimates of analysts polled by Thomson Reuters, who had forecast earnings of 12 cents per share on revenue of $889.5 million. Analysts' estimates typically exclude one-time costs.

Shares rose 53 cents, or nearly 7 percent, to $8.15 in after-hours electronic trading, having closed the regular session down 89 cents, or 10.5 percent, at $7.62.

Last week, Citi Investment Research analyst Glen Yeung said that despite a woeful economic forecast, the forthcoming semiconductor downcycle will not be as severe as past cycles given today's well-controlled inventory environment. He said then that Nvidia, which has lost "noticeable" market share to rival Advanced Micro Devices Inc., will likely regain some as its products are "apt to be more competitive relative to AMD in early 2009."

The chip sector has taken a beating this year, with sector leader Intel's shares down nearly 40 percent year-to-date and Nvidia down about 74 percent, for example.

Industry-wide, chip sales have been inching higher, as demand grows for some memory products but pricing pressures continued to hurt sales.

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