NVIDIA 2008 Annual Report Download - page 19

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In September 2008, we announced a workforce reduction to allow for continued investment in strategic growth areas, which was completed in the third
quarter of fiscal year 2009. As a result, we eliminated approximately 360 positions worldwide, or about 6.5% of our global workforce. During fiscal year 2009,
expenses associated with the workforce reduction, which were comprised primarily of severance and benefits payments to these employees, totaled $8.0 million.
We anticipate that the expected decrease in operating expenses from this action will be offset by continued investment in strategic growth areas. In addition, in
response to the current economic environment, we have commenced several cost reduction measures which are designed to reduce our operating expenses and
will continue to focus on reducing our operating expenses during fiscal year 2010. Please refer to the discussion in Note 19 to the Notes to the Consolidated
Financial Statements in Part IV, Item 15 of this Form 10
-
K for the potential impact of the tender offer on operating expenses during the first quarter of fiscal year
2010.
Any one or more of the risks discussed in this Annual Report on Form 10
-
K or other factors could prevent us from achieving our expected future revenue or
net income. Accordingly, we believe that period
-
to
-
period comparisons of our results of operations should not be relied upon as an indication of future
performance. Similarly, the results of any quarterly or full fiscal year period are not necessarily indicative of results to be expected for a subsequent quarter or a full
fiscal year. As a result, it is possible that in some quarters our operating results could be below the expectations of securities analysts or investors, which could
cause the trading price of our common stock to decline. We believe that our quarterly and annual results of operations may continue to be affected by a variety of
factors that could harm our revenue, gross profit and results of operations.
Our failure to estimate customer demand properly could adversely affect our financial results.
We manufacture our products based on forecasts of customer demand in order to have shorter shipment lead times and quicker delivery schedules for our
customers. As a result, we may build inventories for anticipated periods of growth which do not occur or may build inventory anticipating demand for a product
that does not materialize. The current negative worldwide economic conditions and market instability makes it increasingly difficult for us, our customers and our
suppliers to accurately forecast future product demand trends. In forecasting demand, we make multiple assumptions any of which may prove to be incorrect.
Situations that may result in excess or obsolete inventory include:
Any inability to sell products to which we have devoted resources could harm our business. In addition, cancellation or deferral of customer purchase
orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. Additionally,
because we often sell a substantial portion of our products in the last month of each quarter, we may not be able to reduce our inventory purchase commitments in
a timely manner in response to customer cancellations or deferrals. We could be subject to excess or obsolete inventories and be required to take corresponding
inventory write
-
downs and/or a reduction in average selling prices if growth slows or does not materialize, or if we incorrectly forecast product demand, which
could negatively impact our financial results.
Conversely, if we underestimate our customers
’
demand for our products, our third party manufacturing partners may not have adequate lead
-
time or
capacity to increase production for us meaning that we may not be able to obtain sufficient inventory to fill our customers
’
orders on a timely basis. Even if we are
able to increase production levels to meet customer demand, we may not be able to do so in a cost effective or timely manner. Inability to fulfill our customers
’
orders on a timely basis, or at all, could damage our customer relationships, result in lost revenue, cause a loss in market share, impact our customer relationships
or damage our reputation, any of which could adversely impact our business.
Because our gross margin for any period depends on a number of factors, our failure to forecast changes in any of these factors could adversely affect
our gross margin.
We are focused on improving our gross margin. Our gross margin for any period depends on a number of factors, including:
During the fourth quarter of fiscal year 2009, our gross margin declined to 29.4% as compared to 45.7% during the fourth quarter of fiscal year 2008 and
decreased from 41.0% from the third quarter of fiscal year 2009. If we do not correctly forecast the impact of any of the relevant factors on our business, there may
not be any actions we can take or we may not be able to take any possible actions in time to counteract any negative impact on our gross margin. Additionally,
during fiscal year 2009, the revenue and gross margins from our sale of desktop products decreased primarily due to a decline in the Standalone Desktop market
segment as reported in the December 2008 PC Graphics Report from Mercury Research. This decline was driven by a combination of market migration from desktop
PCs towards notebook PCs and an overall market shift in the mix of products towards lower priced products. If the overall shift in the demand from the consumer
continues to shift towards lower priced products, it will have an adverse impact on our gross margin. In addition, if we are unable to meet our gross margin target
for any period or the target set by analysts, the trading price of our common stock may decline.
·
if there were a sudden and significant decrease in demand for our products;
·
if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements;
·
if we fail to estimate customer demand properly for our older products as our newer products are introduced; or
·
if our competition were to take unexpected competitive pricing actions.
·
the mix of our products sold;
·
average selling prices;
·
introduction of new products;
·
product transitions;
·
sales discounts;
·
unexpected pricing actions by our competitors;
·
the cost of product components; and
·
the yield of wafers produced by the foundries that manufacture our products.
16