Nvidia's Q4 results, due later today, will reveal reduced margins - and a lower income as a result - thanks to long product cycle times at its main foundry partner, TSMC.

So claims a report from US investment house Pacific Crest Securities (PCS). "Nvidia's low gross margin over the past two quarters (27 to 28 per cent versus a 33.3 per cent average since 1999) has been the result of long product cycle times at... TSMC," Pacific Crest Securities analyst Michael McConnell writes.

"The number of mask steps required to fabricate the company's NV3x family of graphics processors led to cycle times in excess of 75 days, compared to a normalised 60-65 days in previous product generations," he adds.

The upshot, says McConnell, are earnings of just 11 cents a share on sales of $485 million. That's better than the previous quarter's four cents a share, but well below Q4 2003's 30 cents and Q4 2002's 43 cents.

The good news is that Nvidia's NV4x series of graphics chips will see better cycle times, the PCS report suggests, thanks to the involvement of a second foundry partner, IBM.

Next quarter, PCS reckons Nvidia will earn ten cents a share on sales of $480 million. This represents a lowering of estimates thanks to the inevitable post-Christmas lull. ®