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Nvidia Swings to a Loss

Sales slip 5%.



(NVDA) - Get NVIDIA Corporation Report

swung to a loss in its second quarter, as intense price competition and defects in a line of its graphics chips took a toll on the company's financial performance.

Sales for the three months ended July 27 totaled $892.7 million, down 5% year-over-year and slightly below analysts' dampened expectations of $908.3 million.

Nvidia had warned investors to expect a sales shortfall in July, when it pre-announced some of its financial results.

Describing its second-quarter results as "disappointing," Nvidia CEO Jen-Hsun Huang blamed a weakening worldwide market for desktop PCs and the company's "miscalculation" of its competitive price position.

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"Our focus now is to drive cost improvements and to further enhance our competitiveness through the many exciting initiatives we have planned for the rest of the year," Huang said in a statement.

He noted that outside of the desktop graphics processor business, Nvidia's other businesses, including notebook PC graphics chips and chipsets, as well as its workstation products, grew a combined 27% year-over-year.

Nvidia posted a loss of $120.9 million, or 22 cents a share, vs. net income of $172.7 million, or 29 cents a share at this time last year.

The results included a $196 million charge against the company's cost of revenue to account for customer warranty and repair costs associated with defects in its previous generation of chips.

Excluding that charge, as well as the associated tax impact, and 7 cents a share worth of stock option compensation expenses, Nvidia said it earned 13 cents a share.

Analysts polled by Thomson Reuters were expecting 12 cents a share excluding stock compensation charges.

The company did not provide immediate financial guidance for the current quarter, but is scheduled to host a conference call with analysts Tuesday.

Shares of Nvidia were off 16 cents in extended trading to $10.91.