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GeForce FX, Xbox chips drive bottom line

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Nvidia saw its sales rise sequentially and annually during the second quarter of its 2004 financial year, the graphics chip maker said yesterday. Its income was up too, despite earlier warnings the company's gross margins wouldn't be up to scratch.

Revenue for the three months to 27 July totalled $459.8 million, up eight per cent on Q2 2003's $427.3 million and 11.9 per cent on the $405 million it reported for Q1 2004.

The quarter's sales yielded a net income of $24.2 million (14 cents a share), compared to the $19.7 million (12 cents a share) it racked up last quarter and the $5.3 million (three cents a share) it announced this time last year.

Revenue for the half-year was $864.8 million, compared to $1.01 billion for the same period last year. Net income for the six months to 27 July was $43.9 million (26 cents a share), compared to $88.5 million (51 cents a share), for the year-ago half.

Last month, Nvidia said it would meet its sales forecast but its gross margin would fall below expectations thanks to higher-than-anticipated costs related to its 130nm process technology.

According to a report published by Pacific Crest Securities analyst Michael McConnell, "Nvidia has informed its add-in board partners that yield problems on the NV35 and NV31 will be remedied by the end of August", so Nvidia should do rather better out of its GeForce FX series this quarter.

Nvidia president and CEO Jen-Hsun Huang attributed the company's Q2 revenue growth to the FX family, so improving yields should directly lead to improve profitability this quarter.

He also pointed to increased Xbox component shipments as a driver for Nvidia's income growth, and noted that the company is already ramping up for the coming Christmas sales season.

However, Huang would not be drawn into commenting on speculation that Nvidia's arch-rival, ATI, has won the contract to supply Microsoft with chipset and graphics technology for the next generation of the games console. ®

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