NVIDIA 2009 Annual Report Download - page 21

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We are dependent on the personal computer market and its rate of growth in the future may have a negative impact on our
business.
We derive and expect to continue to derive the majority of our revenue from the sale or license of products for use in the desktop
personal computer, or PC, and notebook PC markets, including professional workstations. A reduction in sales of PCs, or a reduction
in the growth rate of PC sales, may reduce demand for our products. These changes in demand could be large and sudden. During
fiscal year 2009, sales of our desktop GPU products decreased by approximately 29% compared to fiscal year 2008. These decreases
were primarily due to the Standalone Desktop GPU market segment decline as reported in the PC Graphics December 2008 Report
from Mercury Research. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with
excess inventories if growth slows or if they incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly
suspend substantially all purchases of additional inventory from suppliers like us until their excess inventory has been absorbed, which
would have a negative impact on our financial results.
If we are unable to compete in the markets for our products, our financial results could be adversely impacted.
The market for GPUs, MCPs, and computer-on-a-chip products that support netbooks, PNDs, PMPs, PDAs, cellular phones or other
handheld devices is intensely competitive and is characterized by rapid technological change, new product introductions, evolving
industry standards and declining average selling prices. We believe that the principal competitive factors in this market are
performance, breadth of product offerings, access to customers and distribution channels, software support, conformity to industry
standard Application Programming Interface, or APIs, manufacturing capabilities, price of processors, and total system costs. We
believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that
customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality. We
expect competition to increase from both existing competitors and new market entrants with products that may be less costly than
ours, or may provide better performance or additional features not provided by our products. In addition, it is possible that new
competitors or alliances among competitors could emerge and acquire significant market share. We believe other factors impacting
our ability to compete are:
• product performance;
• product bundling by competitors with multiple product lines;
• breadth and frequency of product offerings;
• access to customers and distribution channels;
• backward-forward software support;
• conformity to industry standard application programming interfaces; and
• manufacturing capabilities.
A significant source of competition is from companies that provide or intend to provide GPU, MCP, and computer-on-a-chip
products that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices. Some of our competitors may have
greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or
technological changes. Currently, Intel Corporation, or Intel, which has greater resources than we do, is working on a multi-core
architecture code-named Larrabee, which may compete with our products in various markets. Intel may also release an enthusiast
level discrete GPU based on the Larrabee architecture. Additionally, in fiscal year 2009, Intel also introduced the Intel Atom processor
which is designed for lower cost PCs. Intel may also release a second generation of Atom chips by 2010 which is expected to have an
improved battery life. The Intel Atom processor may compete with our products that support netbooks, PDAs, cellular phones and
other handheld devices.
17
Source: NVIDIA CORP, 10-K, March 13, 2009 Powered by Morningstar® Document Research℠