Thanks a lot, Nick.

Operator

Our next question comes from the line of Arnab Chanda with Roth Capital Partners. Please proceed with your question.

Arnab Chanda - Roth Capital Partners

Thank you. I have a question about gross margins. Jen-Hsun, this is basically, as far as, I can tell, pretty much a record gross margin, maybe even better than your record if you assume this non-GAAP business exclude the stock.

It seems like your products basically have a better gross margin than your current business so that mix improvement should only get better. Is there a target that you’d like to let us think about longer term, where you think you can get to?

Jen-Hsun Huang

Let me answer it in pieces. First of all, I don’t think this is our record.

David L. White

It’s two points lower.

Jen-Hsun Huang

And secondarily, it’s not at the internal targets. Our business is increasingly moving from a great chip business to much more of a software-rich business. If you look at our Quadro business it’s nearly all software. The enormous R&D that we invest in Quadro and the technology we create for Quadro is all software, because it’s -- in the final analysis, it’s still built on video GPUs.

So you see the same thing with GeForce now. The work we did in 3D Vision, tons of software, the work that we did with 3D Blu-ray, tons of software. So the work that we do with CUDA, the work we do with PhysX, tons of software.

So I think increasingly that’s going to become the nature of our business. Tesla is just all software, right, software tools and software compilers and libraries. And these are profilers and debuggers. I mean, it’s a software, it’s become increasingly a software-oriented-type business and that’s where our differentiation really is and that’s where NVIDIA has historically been really, really excellent.

And so in order for us to differentiate the basic commodity platform and turn it into an extraordinary experience for gamers or scientists or digital creators or for clouds or for netbooks or for tablets, it’s increasingly a software business.

And so that’s where a lot of our differentiation becomes and I think if you think of our business from that perspective, a gross margin of 40 -- the 44 points -- the 44.7% that we had this quarter should be far from our expectations. And then it’s…

Arnab Chanda - Roth Capital Partners

Okay. And then one question about your, actually a couple of questions about your products. So when you look at Tegra you talked a lot about your, the tablet potential there, where do you see taking that business. Do you think that will be confined to tablets? Are you expecting to take it down the SmartPhones?

And then with Fermi, is there a possibility with ASP growth that you could offset normal seasonality when it starts to launch significantly in the second quarter?

Jen-Hsun Huang