Tech Stocks: NVIDIA Corp. (Nasdaq: NVDA) Earnings Must Show Move to Mobile

NVIDIA Corp. (Nasdaq: NVDA) will join tech stocks reporting earnings this week when it releases fourth-quarter results after the bell today (Wednesday) – and attempts to attract investors with a plan to profit from mobile computing growth.

Analysts polled by Thomson Reuters forecast quarterly earnings of 19 cents per share on $950.5 million in revenue.

The graphics chipmaker already cut its revenue outlook in January from $1.066 billion to $950 million. It said flooding in Thailand had slowed the global hard-drive market, lowering PC shipments.

NVIDIA invented the graphics processing unit (GPU) in 1999, and its graphics cards are used in many desktop computers and notebooks. Graphics card sales account for 30% of the company's revenue.

But the industry is changing in a way that will render NVIDIA'S core business obsolete. Competitors are releasing new processors more advanced than NVIDIA's.

What investors should look for in Wednesday's report are NVIDIA's plans to expand beyond its PC focus into the next era of computing, and if those plans can stand up to stiff competition.

NVIDIA Corp. (Nasdaq: NVDA) and the Move to Mobile

In order to remain relevant, NVIDIA has to diversify more from its focus on GPUs in desktop and notebook computers and establish a healthy presence in the mobile computing market.

Global smartphone shipments rose 55% in 2011's fourth quarter to 158 million units, according to Bloomberg News. Tablet shipments rose by 150% to hit 26.8 million.

NVIDIA has started the shift, but needs a boost to earnings to prove efforts are working.

In early 2011 it released the world's first dual-core mobile application processors, Tegra 2. Then the company launched in the fourth quarter a new chip, Tegra 3, for mobile devices. It expects to double Tegra 3 shipments in 2012 to 25 million, and should post solid growth later in the year in mobile computing chip revenue.

Tegra 2 sales slowed more than expected in the fourth quarter, which could weigh on today's earnings.

NVIDIA also announced last year the ambitious Project Denver with ARM Holdings. This is the initiative to build chip processing units (CPUs) based on ARM's processor architecture, and will be used in personal computers, servers, workstations, and supercomputers.

"ARM is the fastest-growing CPU architecture in history," said Jen-Hsun Huang, president and chief executive officer of NVIDIA. "This marks the beginning of the Internet Everywhere era, where every device provides instant access to the Internet, using advanced CPU cores and rich operating systems."

The CPUs are expected to be released in 2013.

But the company needs to keep fending off competition from Intel Corp. (Nasdaq: INTC), Qualcomm Inc. (Nasdaq: QCOM), and Advanced Micro Devices Inc. (NYSE: AMD). Both Intel and AMD launched new microprocessors in 2011 more advanced than NVIDIA'S systems and eliminating the requirement for both integrated graphics chips and entry level graphics cards.

Investors will have to watch the NVDA earnings report for clues on how the company is adapting to this new tech environment.

NVIDIA Corp. (Nasdaq: NVDA) stock is up more than 18% this year, closing at $16.24 a day ahead of earnings.

News and Related Story Links:

• Money Morning:
  3D Chips Will Deliver an Era of Radical Change
• Forbes:
  Nvidia Looks Like $21 Stock On Eve Of Earnings
• Forbes:
  Nvidia Goes Far Beyond GPUs, Stock Going To $21
• Bloomberg News:
  NVIDIA Announces "Project Denver" to Build Custom CPU Cores