NVIDIA 2006 Annual Report Download - page 13

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Sales and Marketing
Our worldwide sales and marketing strategy is a key part of our objective to become the leading supplier of performance GPUs,
MCPs, and handheld GPUs for PCs, handheld devices and consumer electronics platforms. Our sales and marketing teams work
closely with each industry's respective OEMs, ODMs, system integrators, motherboard manufacturers, add−in board manufacturers
and industry trendsetters, collectively our channel, to define product features, performance, price and timing of new products.
Members of our sales team have a high level of technical expertise and product and industry knowledge to support a competitive and
complex design win process. We also employ a highly skilled team of application engineers to assist the channel in designing, testing
and qualifying system designs that incorporate our products. We believe that the depth and quality of our design support are key to
improving the channel's time−to−market, maintaining a high level of customer satisfaction within the channel and fostering
relationships that encourage customers to use the next generation of our products.
In the GPU, MCP, and handheld GPU segments we serve, the sales process involves achieving key design wins with leading
OEMs and major system integrators and supporting the product design into high volume production with key ODMs, motherboard
manufacturers and add−in board manufacturers. These design wins in turn influence the retail and system integrator channel that is
serviced by add−in board and motherboard manufacturers. Our distribution strategy is to work with a number of leading independent
contract equipment manufacturers, or CEMs, ODMs, motherboard manufacturers, add−in board manufacturers and distributors each
of which has relationships with a broad range of major OEMs and/or strong brand name recognition in the retail channel. In the
handheld GPU segments we serve, the sales process primarily involves achieving key design wins directly with the leading handheld
OEMs and supporting the product design into high−volume production. Currently, we sell a significant portion of our digital media
processors directly to distributors, CEMs, ODMs, motherboard manufacturers and add−in board manufacturers, which then sell boards
and systems with our products to leading OEMs, retail outlets and to a large number of system integrators. Although a small number
of our customers represent the majority of our revenue, their end customers include a large number of OEMs and system integrators
throughout the world.
As a result of our channel strategy, our sales are focused on a small number of customers. Sales to Edom Technology Co., Ltd., or
Edom, accounted for 14% and sales to Asustek Computer Inc., or Asustek, accounted for 12% of our total revenue for fiscal 2006.
Edom is an independent distributor and Asustek is a CEM.
To encourage software title developers and publishers to develop games optimized for platforms utilizing our products, we seek to
establish and maintain strong relationships in the software development community. Engineering and marketing personnel interact
with and visit key software developers to promote and discuss our products, as well as to ascertain product requirements and solve
technical problems. Our developer program makes products available to developers prior to volume availability in order to encourage
the development of software titles that are optimized for our products.
Backlog
Our sales are primarily made pursuant to standard purchase orders. The quantity of products purchased by our customers as well
as shipment schedules are subject to revisions that reflect changes in both the customers' requirements and in manufacturing
availability. The semiconductor industry is characterized by short lead time orders and quick delivery schedules. In light of industry
practice and experience, we believe that only a small portion of our backlog is non−cancelable and that the dollar amount associated
with the non−cancelable portion is not significant. We do not believe that a backlog as of any particular date is indicative of future
results.
Seasonality
Our industry is largely focused on the consumer products market. Due to the seasonality in this market, we typically expect to see
stronger revenue performance in the second half of the calendar year related to the back−to−school and holiday seasons.
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