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Nvidia posts decent first quarter despite underwhelming Tegra performance

Nvidia on Thursday reported a modest bump in first-quarter revenue and a big jump in net income, compared with the same period a year ago.

The graphics chip maker had $954.7 million (£618 million) in sales, a 3.2 per cent increase from the first quarter of 2012, while reporting $77.9 million (£50 million) in profits, up 29 per cent. Earnings per share also grew 30 per cent from the year-ago quarter to $0.13 (8p), a good sign for a company that earlier said it plans to "return in excess of $1 billion this fiscal year to shareholders in the form of share repurchases and quarterly dividend payments."

"The success of Kepler-based GPUs within and beyond the PC helped drive another quarter of record margins. Kepler is capturing share among gamers, strengthening our workstation and supercomputing segments, and will fuel new growth opportunities for our GRID server graphics solutions," Nvidia president and CEO Jen-Hsun Huang said in a statement.

Semiconductor companies like Nvidia with a big stake in the PC market have struggled in recent quarters in the face of competition from mobile devices like smartphones and tablets, according to research from IHS iSuppli and others. In 2012, nine of the top 25 semiconductor companies tracked by IHS suffered double-digit declines in yearly sales as compared with their 2011 numbers, with many of those companies concentrated on developing products for the PC market.

The main way Nvidia has avoided getting caught out in this sluggish period for PC sales is with its growing mobile chip business — though in this particular quarter, the company's Tegra products for mobile and embedded devices may have actually underperformed a bit, according to Patrick Moorhead.

"Nvidia once again did significantly better than the PC industry, indicating strength in Kepler-based solutions for the gaming and workstation markets," said Moorhead, principal analyst for Moor Insights & Strategy. "Tegra had a very challenging quarter, but Tegra 4i in phones, Tegra 4 in tablets, and Shield are all future upsides to the business over the next few quarters.

"Tegra 4i is the biggest unit volume driver potential and will be a major test for their high-risk, high-return software-defined modem strategy driven by their Icera acquisition back in 2011," he said.

Nvidia said earlier this year that it would be incorporating its Kepler architecture in future Tegra products, a significant improvement on the older chip design currently used in the product line, though that likely won't happen until 2014. Even before that happens, Jen-Hsun predicted that Nvidia's mobile chip business would perform better than it did in the most recent quarter.

"With Tegra 4 devices and Tegra 4i certification on the way, we're gearing up to return to growth in the second half," he said.