NVIDIA Corporation (NVDA)
Q4 2009 Earnings Call Transcript
February 10, 2009 5:00 p.m. ET

Executives

Michael W. Hara – Vice President of Investor Relations
Jen-Hsun Huang – President and Chief Executive Officer
Marvin D. Burkett – Chief Financial Officer

Analysts

Patrick Wang - Wedbush Morgan Securities
Daniel Ernst - Hudson Square Research
Joanne Feeney - FTN Midwest Securities Corp.
Tim Luke - Barclays Capital
Doug Freedman - Broadpoint Am Tech
Suji De Silva - Kaufman Bros.
David Wu - Global Crown Capital
Shawn Webster - J.P. Morgan
Uche Orji - UBS
James Schneider - Goldman Sachs
Glen Yeung - Citigroup

Presentation

Operator

Good afternoon. Thank you for holding. I would now like to turn the call over to Michael Hara, Vice President Investor Relations. Thank you sir, you may begin.

Michael W. Hara – Vice President Investor Relations

Thanks Will. Good afternoon and welcome to NVIDIA’s conference call for the fourth quarter ended January 25, 2009. Today’s call is being recorded. If you have any objections please disconnect at this time. On the call today for NVIDIA are Jen-Hsun Huang, NVIDIA’s President and Chief Executive Officer; and Marv Burkett, NVIDIA’s Chief Financial Officer. Before we begin I’d like to remind you that you can find copies of our SEC filings, our earnings release and a replay of this webcast on the investor relations page of our website at www.nvidia.com. The webcast will be available for replay until our conference call to discuss our financial results for the first quarter of fiscal 2010. Also our shareholders can listen to a live webcast of today’s call via the investor relations page of our website.

During this call we will discuss some non-GAAP financial measures and diluted net income per share, tax rate and gross margin when talking about our results. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our financial release which is posted on our website. Unless otherwise noted, all references to research market and market share numbers throughout the call come from Mercury Research or Jon Peddie Research. Content of today’s conference call is NVIDIA’s property and cannot be reproduced or transcribed without our prior written consent.

During the course of this conference call we may make forward-looking statements based on current expectations. These forward-looking statements are subject to a number of significant risks and uncertainties including statements as of our financial outlook and projections; the impact, performance and availability of and demand and uses for our products and technologies; our competitive position in market share; our cash conservation efforts; and our gross priorities, initiatives, innovations, and advancements in strategies. Our actual results may differ materially from results discussed in any forward-looking statements. For a complete discussion of factors that could affect our future financial results and business, please refer to our Form 10-Q for the fiscal period ended October 26, 2008 and reports on Form 8-K filed with the Securities and Exchange Commission. All forward-looking statements are made as of the date hereof, based on information available to us today, and except as required by law we assume no obligation to update any such statements.

The content of the webcast contains time sensitive information that is accurate only as of February 10, 2009. Consistent with requirements under Regulation FD, we will provide public guidance directly in the conference call and will be unable to provide significantly more information in offline conversations or during the quarter. Therefore, questions around our financial expectations should be asked during this call. At the end of our prepared remarks there will be a time for your questions. In order to allow more people to ask questions, please limit yourself to one question. After our response we will allow one follow-up question.

With that I’ll hand the call over to Jen-Hsun.

Jen-Hsun Huang – Chief Executive Officer

Thanks Mike. Good afternoon and thank you for joining us today. Fiscal 2009 ended in extraordinary fashion. We reported revenue for the year of $3.4 billion and a GAAP loss of $0.05 per share. The environment is clearly difficult and uncertain. So our first priority is to set an operating expense level that balances cash conservation while allowing us to continue to invest in initiatives that are of great importance to the market and in which we lead the industry. We have initiatives in all areas to reduce operating expenses. Our stretch goal is to reduce operating expense by $35 million from the current level of $300 million per quarter by the end of Q2. Although fiscal 2009 was extremely difficult, it was also one of our best years for innovation. We made important advances in many areas.

In graphics processing, after a stumble in Q2 we have regained our performance leadership position with the GeForce GTX 295, GTX 285 and GTX 260. We introduced PhysX, the industry’s first GPU accelerated physics processing. Major studios including Electronic Arts, THQ and Take 2 have standardized on PhysX. DriverHeaven noted that “there are real visual benefits to be had from enabling PhysX in games such as Mirror’s Edge.” Bit-tech said that “the PhysX content enhances the gaming experience, giving a tangible benefit to being a video card owner.” Gamers have been stunned by our 3-D vision, full HD stereoscopic solution. 3-D vision is the first ever high resolution, stereo 3-D solution for the home. Bjorn3d said that “once you have it, you will never give it up.” PC Magazine described it as “a mind blowing innovation.”

In Q4 we recaptured market share in the performance segment. We intend to continue share gains by offering the highest performance products while differentiating with our advantages in PhysX, CUDA and 3-D Vision. We shipped Tesla for revenues this year and officially started the era of GPU computing, where our CUDA parallel processing architecture can accelerate compute intensive applications by 100 times over a CPU alone. CUDA has well over 25,000 developers around the world. With CUDA we’re able to speed up general purpose computer intensive applications like we do for 3-D graphics processing. Developers are finding major speed ups for algorithms ranging from nano-molecular dynamics to image processing; medical image reconstruction; and derivatives modeling for financial risk analysis. Over 100 universities around the world including the MIT, the University of Illinois at Urbana-Champaign and the National Taiwan University now teach parallel computing with CUDA. ASoos, Bull, Cray, Dell, HP and Lenovo now offer high performance computing solutions with Tesla. There are now over 1,000 customers around the world including Motorola, Chevron, GE Healthcare and even General Mills the consumer products company.

Tesla has become the first GPU used in super computing and now powers Japan’s Tsubame, the 29th fastest supercomputer in the world. And Wipro Technologies responding to market demand now offers CUDA programming services. Aside from the thousands of researchers who have used CUDA to accelerate their time to discovery, popular off the shelf software packages such as ANSYS, LANView and Mathematica are now CUDA accelerated. Symcor sells check scanners that use CUDA for image recognition to detect fraud. SciComp uses CUDA in their derivatives pricing software. And medical equipment is available from TechniScan that uses CUDA to enhance early detection of breast cancer, reducing the analysis from a three hour process to just 16 minutes, making single visit diagnosis possible for the first time.

We launched the Tesla personal supercomputer and enabled a four Teraflop supercomputer at the price of a typical workstation. We estimate 15 million scientists and engineers worldwide can benefit from this breakthrough. HPC, High Performance Computing Wire described it as “the biggest news of the supercomputing ’08 show.” Cray with the CX-1 was the first to ship a Tesla personal supercomputer. One of our major initiatives last year was to capture a significant position in mobile computing by introducing innovative and market defining products. Notebook is the fastest growing segment of the PC market and one that we can offer a great deal of value. Through low power architecture innovation, our GPU’s can simultaneously increase notebook performance while extending battery life. We announced Ion, a high performance GPU that also incorporates all system networking and I/O functions into a single chip. Steve Jobst called it “an incredible chip.” Ion is at the core of every MAC book from the Air to the pro. The Ion platform is now shipping or will be soon from virtually every major PC OEM.