Nvidia’s Q2 forecast gloomy – strong dollar and weak PC sales

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By Larry Banks

Nvidia (NASDAQ: NVDA) has forecast lower than expected Q2 revenue, largely due to lower demand for its GPU chips caused by a fall in PC sales, and a strong dollar.

The graphics chipmaker’s shares fell more than 4% in extended trading Thursday after it reported Q1 revenue and profit were also below estimates.

Nvidia hurt by PC sales, strong dollar

Company CFO Colette Kress said the weak forecast was caused by falling demand from OEM manufacturers and ‘softness’ in the PC market in general.

PC shipments worldwide fell 6.7% to 68.5 million units in the first quarter of the year, and are expected to fall another 4.9% during the year, according to research firm IDC in April.

Rival chip company AMD (NASDAQ:AMD) reported a sharp fall in Q1 sales last month, and said it expect weak demand in the PC market to continue going forward.

The dollar, which has risen 9% against several major currencies, also contributed to Nvidia’s weak results and forecast.

“Nvidia does a lot of their business in US dollars and due to the change in currency and strength of the dollar it has made their GPU (graphics processor unit) gaming more expensive and probably … cost prohibitive”, Wedbush Securities analyst Betsy Van Hees told Reuters recently.

Nvidia, which also competes with Intel (NASDAQ:INTC), forecast Q2 revenue of $1.01 +/- 2%, which was below the average estimate of $1.18 billion. The company became well know for high end graphics cards and chips for powerful PCs, but has not been able to expand rapidly into smartphones, a market that is dominated by Qualcomm (NASDAQ:QCOM).

Nvidia said this week that it would wind down its Icera modem operations, which the company bought back in 2011, existing the mobile chip market. Overall, its net income fell to $134 million (24 cents per share) in Q1 ending April 26, missing estimates of 26 cents.

SOURCE: Reuters

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