by Josh Walrath

NVIDIA has been the darling of Wall Street for quite some time, and their business practices have certainly reflected this.  Even in hard times, NVIDIA has always been a well run organization, and have very rarely posted a loss.  Today they announced revenues of $456 million US, and earnings of $5.1 million US.  This is well below the $500 million US revenue mark that was set by the Street, as well as projected earnings in the $15 million US range.  Let us go over a few of the reasons for the decrease in revenues and profits, as well as take a look at what may happen in 3Q.

Competition from ATI

Across the board ATI has arguably had a superior product than NVIDIA for most of 2nd quarter.  The Radeon 9550 and 9600 covered the bases from $50 and up, and the performance of these chips in 3D applications was typically much better than the competing NVIDIA product, except for perhaps OpenGL performance in certain applications.  The 9550 and 9600 have cemented ATI as a favorite in many OEM circles, and these cards have done well in retail.  The NVIDIA GeForce FX 5200 has done very well in both OEM and retail circles, but over time due to pressure from the competing 9550 and 9600 products, it’s marketshare has eroded.  This is also due to the many mediocre reviews that these products have received.  While the FX 5200 series are not "bad", they certainly are not as capable as the ATI products in the same price class.

In the midrange market ATI has a series of products that span the spectrum between $100 and $260.  At the low-end is the Radeon 9600 Pro, which is still being produced and sold by ATI and its partners.  The midrange is covered by the Radeon 9600 XT, which is a faster product than the 9600 Pro, and built on TSMC’s 130 nm Low-K line.  Competing products from NVIDIA include the GeForce FX 5600 series, which is still based on the NV30 technology, and as such has very poor PS 2.0 performance in many of the latest games and applications.  The GeForce FX 5700 is a significant step up from the 5600 series due to it being based on the NV35 architecture, but its overall PS 2.0 performance is still slightly lower than the competing Radeon 9600 XT.  The GeForce FX 5700 is based on IBM’s 130 nm FSG process, and with the seemingly endless problems IBM has been facing with this process, NVIDIA has probably experienced production woes with this product in the past.

            The upper midrange experienced some drastic changes during the 2Q of this year.  The Radeon 9800 Pro 128 MB and 256 MB parts now constitute ATI’s offerings from the $199 to $300 price range.  To say that these products sold like hotcakes is understating things.  In checking with several retailers, the Radeon 9800 Pro 128 MB card has been a best seller, and the market is rife with them.  With such a mature product, there is plenty of supply, and with its outstanding price/performance ratio, many users have succumbed to the temptation of buying a new video card for their rig.  The $199 price point is usually the top price the majority of users will pay for a video card upgrade, and by offering such a high performing part at that price, many users did in fact decide to upgrade during this time.  The competing product from NVIDIA was the GeForce FX 5900 XT, and while it was a worthy competitor, it could not keep up with the Radeon 9800 Pro 128MB in many aspects (including sales).

            At the top end, ATI released their X800 series of cards.  All was not smooth sailing for ATI though, as the X800 XT PE was supposed to be available in quantity by early June.  This was not the case.  While there were some limited quantities of the X800 XT PE, the number of boards released were in the 1000’s, and not the 10’s of thousands that were expected.  The X800 Pro had much better luck, and many users were able to procure one days after ATI released the product.  While quantities of this product were not as great as hoped, the majority of users willing to spend $400+ for this card typically were able to get one within days of making their buying decision.  The competition for this part from NVIDIA was the GeForce FX 5900 Ultra and GeForce FX 5950, and both of those cards could not touch the overall speed and competence of the X800 series of cards.

Another factor worth mentioning is that many OEM's are now quite happy with the Catalyst driver program, and many feel that their requests to the "Catalyst Crew" are being addressed much more quickly than NVIDIA's driver program.  With so many compatibility issues with any driver release, ATI has certainly done a very good job getting their driver program into shape, and many OEM's appreciate this.  While NVIDIA had the “gold standard” of driver production at one time, ATI has certainly made leaps and bounds with their Catalyst program.

Next:  Intel Competition

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