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Nvidia shares rise following strong 3Q results

Shares of graphics card maker Nvidia Corp. rose sharply Friday after the company posted solid third-quarter results and raised its revenue forecast for the following quarter, exceeding analysts' expectations.

THE SPARK: The Santa Clara, Calif., company, whose graphics cards can be found in desktop and laptop computers, said Thursday that it had net income of $84.9 million, or 15 cents per share, beating the 14 cents per share expected by analysts surveyed by Thomson Reuters.

The company also predicted a 3 to 5 percent growth in revenue during the fourth quarter. Its estimated revenue of $869.2 million to $866.2 million beats analysts' $866.1 million estimate.

THE BIG PICTURE: Many PC manufacturers choose Nvidia's graphics cards when designing laptop and desktop computers. Nvidia's strong results bode well for PC manufacturers, which have had the challenge of selling computers against lighter, less expensive tablets. However, Nvidia will face increasing competition in the tablet category from heavyweights such as Intel Corp. and Advanced Micro Devices Inc.

THE ANALYSIS: Analyst firm Sterne, Agee & Leach Equity Research reiterated its "Neutral" rating on Nvidia , saying Friday that in the short-term, the company will benefit from a rebounding PC market, an uptick in sales of powerful, professional-grade workstation computers and graphics shortages. Longer-term, however, Nvidia will have to compete with Intel and AMD when it comes to selling chips to tablet makers.

SHARE ACTION: Up 69 cents, or 5.5 percent, to $13.30 in midday trading.