NVIDIA 2007 Annual Report Download - page 40

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During the fourth quarter of fiscal 2007, the NVIDIA nForce MCP product line achieved record revenue for its tenth consecutive
quarter. NVIDIA nForce MCP revenue grew 16% sequentially from the third quarter fiscal 2007 and 89% year−over−year. Our MCP
growth was driven in part by increased adoption of our NVIDIA nForce notebook solutions by large PC manufacturers.
For fiscal 2008, our key growth objectives for our MCP Business are to deliver new motherboard products for the Intel CPU
segment and maintain our leadership positions on AMD platforms. We believe that Intel−based consumers will demand
NVIDIA−branded graphics and system performance.
Handheld GPU Business
In March 2006, NVIDIA and Intel announced a collaboration to bring a 3D gaming and multimedia platform to handheld devices.
The collaboration combines the NVIDIA GoForce family of handheld GPUs with Intel processors to deliver a development platform
to content developers.
Our GoForce handheld GPUs ship in the Motorola 3G RAZR V3X, SLVR L6i, SLVR L7i, MOTORAZR Maxx, and Sony
Ericsson Walkman phones. Our newest handheld GPU, the NVIDIA GoForce 5500 GPU, has been designed into Digital Video
Broadcast − Handheld, or DVB−H, phones in North America, Europe, and Integrated Services Digital Broadcasting − Terrestrial, or
ISDB−T, in Japan.
In March 2006, we acquired Hybrid Graphics Ltd., or Hybrid Graphics, a developer of embedded 2D and 3D graphics software
for handheld devices.
In June 2006, we launched our MobileMedia Platform for handheld devices running Windows Mobile 5.0. The MobileMedia
Platform is a development kit, containing both software and hardware components, that enables handheld manufacturers to design and
release digital media−rich devices with Windows Mobile 5.0.
In January 2007, we completed our acquisition of PortalPlayer, Inc., or PortalPlayer. Until recently, our Handheld GPU strategy
has been to focus on establishing ourselves in the market as the leader of multimedia technology by leveraging our expertise in
graphics, video, and image processing. With the acquisition of PortalPlayer's expertise in building low power application processors
for personal media players, or PMPs, we are now focused on delivering Systems−On−A−Chip, or SOCs, that combine our application
processors and GPUs. We expect SOCs such as these to power next generation smart phone and PMP devices.
Consumer Electronics Business
We record license revenue from our initial agreement with SCE to jointly develop a custom GPU for SCE's PlayStation 3
computer entertainment system, as well as from certain additional agreements with them. In addition, we record royalty revenue from
SCE based on per unit sales of the PlayStation 3, which was launched by SCE in November 2006.
Gross Margin Improvement
We continue to remain focused on improving our gross margin. Beginning in fiscal 2005, we implemented profit improvement
initiatives across our company which were designed to improve business and operational processes. During fiscal 2007, our gross
margin was 42.4%, which represents an increase of over 410 basis points from our gross margin of 38.3% for fiscal 2006. Our gross
margin was 38.3% for fiscal 2006, which represents an increase of 610 basis points from our gross margin of 32.2% for fiscal 2005.
We will continue to focus on improving our gross margin during fiscal 2008.
33
Source: NVIDIA CORP, 10−K, March 16, 2007