Tuesday, January 09, 2007

Calls of Note Part 2

- ThinkEquity's Eric Ross comments on NVIDIA (NASDAQ:NVDA) saying they have heard that NVDA has slowed wafer starts at its foundry suppliers. This could just be a re-adjustment of inventories, but the firm has found that this is typically a reduction of overall product inventories. Graphics card makers are worried business is slow. They have seen a seasonal drop-off in demand, but privately they worry demand could be weaker.

Firm still expects NVDA to take share from ATI through March 2007. NVDA has been migrating customers up from its 6200 and 6300 processors to its 7200 and 7300 processors. ATI is unlikely to have a competitive product until it starts ramping its R600 in March (delayed from February). After that, NVDA's G84 and G88 should arrive at Computex (in June) and may take share back.

It does not seem likely to the firm that AMD/ATI will gain significant share back from NVDA in laptops, despite two new Inspirons AMD/ATI is likely to launch in summer 2007 according to sources at the Consumer Electronics Show (CES). They also believe Vista will be a minor driver until 2H07.

They still believe Playstation3 will lag versus the run-away success of Wii. This could constrain NVDA's gaming revenues. The biggest risk? If Intel's newest GPU (expected in September) is a decent GPU, both NVDA and ATI could lose share. It is planned to support DirectX10, and could offer real gaming capabilities.

Reits Sell and $28 tgt.

Notablecalls: ThinkEquity has yet again demonstrated their superior intelligence gathering skills. I don't think the note will do any damage to the stock in the s-t, though. Eric's comments regarding INTC's GPU warrant a closer look.

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