NVIDIA 2006 Annual Report Download - page 12

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Our objective is to be the leading supplier of performance GPUs, MCPs and handheld GPUs. Our current focus is on the desktop
PC, professional workstation, notebook PC, servers, mulitmedia−rich cellular phones and video game console product lines, and we
plan to expand into other product lines. Our strategy to achieve this objective includes the following key elements:
Build Award−Winning, Architecturally−Compatible 3D Graphics, HD Video, Media Communications and Low Power Product
Families for the PC, Handheld and Digital Entertainment Platforms. Our strategy is to achieve market share leadership in these
platforms by providing award−winning performance at every price point. By developing 3D graphics, HD video and media
communications solutions that provide superior performance and address the key requirements of these platforms, we believe that we
will accelerate the adoption of 3D graphics and rich digital media.
Target Leading OEMs, ODMs and System Builders. Our strategy is to enable our leading PC, handheld and consumer
electronics OEMs, ODMs and major system builder customers to differentiate their products in a highly competitive marketplace by
using our digital media processors. We believe that design wins with these industry leaders provide market validation of our products,
increase brand awareness and enhance our ability to penetrate additional leading customer accounts. In addition, we believe that close
relationships with OEMs and ODMs will allow us to better anticipate and address customer needs with future generations of our
products.
Sustain Technology and Product Leadership in 3D Graphics and HD Video, and Media Communications and Low Power. We
are focused on using our advanced engineering capabilities to accelerate the quality and performance of 3D graphics, HD video, media
communications and low power processing in PCs and handheld devices. A fundamental aspect of our strategy is to actively recruit
the best 3D graphics and HD video, networking and communications engineers in the industry, and we believe that we have assembled
an exceptionally experienced and talented engineering team. Our research and development strategy is to focus on concurrently
developing multiple generations of GPUs, MCPs and handheld GPUs using independent design teams. As we have in the past, we
intend to use this strategy to achieve new levels of graphics, networking and communications features and performance and low power
designs, enabling our customers to achieve award−winning performance in their products.
Increase Market Share. We believe that substantial market share will be important to achieving success. We intend to achieve a
leading share of the market by devoting substantial resources to building award−winning families of products for a wide range of
applications.
Use Our Expertise in Digital Multimedia. We believe the synergy created by the combination of 3D graphics, HD video and the
Internet will fundamentally change the way people work, learn, communicate and play. We believe that our expertise in HD graphics
and system architecture positions us to help drive this transformation. We are using our expertise in the processing and transmission of
high−bandwidth digital media to develop products designed to address the requirements of high−bandwidth concurrent multimedia.
Use our Intellectual Property and Resources to Enter into License and Development Contracts. During fiscal 2006, we entered
into license arrangements that require significant customization of our intellectual property components and we anticipate that we will
enter into additional agreements during fiscal 2007. For license arrangements that require significant customization of our intellectual
property components, we generally recognize this license revenue using the percentage−of−completion method of accounting over the
period that services are performed. For example, in April 2005, we finalized our definitive agreement with SCE to jointly develop a
custom GPU incorporating our next−generation GeForce GPU and SCE's system solutions in SCE's PlayStation3. Our collaboration
with SCE includes license fees and royalties for the PlayStation3 and all derivatives, including next−generation digital consumer
electronics devices. In addition, we are licensing software development tools for creating shaders and advanced graphics capabilities
to SCE.
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