nVidia is making like a Chrysler with this cliff-drop revenue warning:
Total revenue for the fourth quarter of fiscal 2009 is now expected to decline 40 percent to 50 percent sequentially as a result of further weakness in end-user demand and inventory reductions by NVIDIA's channel partners in the global PC supply chain.
Translation
What nVidia says is not necessarily what it means. As Stacey Higginbotham of GigaOM notes, "All of which is in line with the company’s inability to be open about problems, as exemplified by its treatment of the faulty chips that have caused GPU failures for the owners of Dell, Apple and HP laptops." So, let's translate their statement:
40-50% sequential decline -- means that Q4 revenue will be $538-$449 million, down from Q3's $897.7 million.
Companies usually, however, report year-over-year changes (Q4 vs Q4); nVidia is trying to make things less bleak by reporting the sequential drop in sales (Q4 vs Q3). That's because revenues a year ago were $1.2 billion, so the more accurate drop is 55-62%.
weakness in end-user demand -- customers have cut back their orders.
But nVidia can't just blame customers for failing to buy its products. It must blame itself for badly-constructed GPUs and overpriced graphics boards. Who's gonna pay $1,999 for a graphics board in recession-bound 2009? Not me, nor you.
inventory reductions -- resellers are lowering their warehouse levels as they notice that their customers are no longer gadget-crazy these days.
Rewrite
Let's rewrite the nVidia statement with greater transparency:
Total revenue for the fourth quarter of fiscal 2009 is now expected to decline 55 percent to 62 percent year-over-year as a result of further weakness in end-user demand due to poor handling of product recalls and bad timing in releasing luxury-priced goods.
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