NVIDIA 2010 Annual Report Download - page 26

To be successful, we must also enter new markets or develop new uses for our future or existing products. We cannot accurately
predict if our current or existing products or technologies will be successful in the new opportunities or markets that we identify for
them or that we will compete successfully in any new markets we may enter. For example, we have developed products and other
technology in order for certain general-purpose computing operations to be performed on a GPU rather than a CPU. This general
purpose computing, which is often referred to as GP computing, was a new use for the GPU which had been entirely used for graphics
rendering. During fiscal year 2008, we introduced our NVIDIA Tesla family of products, which was our entry into the
high-performance computing industry, a new market for us. During fiscal year 2010, we introduced our next generation CUDA GPU
architecture, codenamed “Fermi,” which we expect to be the foundation for computational GPUs and enable breakthroughs in both
graphics and parallel computing. Some of our competitors, including Intel, are now developing their own solutions for the discrete
graphics and computing markets. Our failure to successfully develop, introduce or achieve market acceptance for new GPUs, other
products or other technologies or to enter into new markets or identify new uses for existing or future products, could result in rapidly
declining average selling prices, reduced demand for our products or loss of market share any of which could cause our revenue, gross
margin and overall financial results to suffer.
If we are unable to achieve design wins, our products may not be adopted by our target markets or customers either of which
could negatively impact our financial results.
The success of our business depends to a significant extent on our ability to develop new competitive products for our target
markets and customers. We believe achieving design wins, which entails having our existing and future products chosen for hardware
components or subassemblies designed by OEMs, ODMs, add-in board and motherboard manufacturers, is an integral part of our
future success. Our OEM, ODM, and add-in board and motherboard manufacturers’ customers typically introduce new system
configurations as often as twice per year, typically based on spring and fall design cycles or in connection with trade shows.
Accordingly, when our customers are making their design decisions, our existing products must have competitive performance levels
or we must timely introduce new products in order to be included in our customers’ new system configurations. This requires that we:
• anticipate the features and functionality that customers and consumers will demand;
• incorporate those features and functionalities into products that meet the exacting design requirements of our customers;
• price our products competitively; and
• introduce products to the market within our customers’ limited design cycles.
If OEMs, ODMs, and add-in board and motherboard manufacturers do not include our products in their systems, they will
typically not use our products in their systems until at least the next design configuration. Therefore, we endeavor to develop close
relationships with our OEMs and ODMs, in an attempt to better anticipate and address customer needs in new products so that we will
achieve design wins.
Our ability to achieve design wins also depends in part on our ability to identify and be compliant with evolving industry
standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major
hardware manufacturers and software developers like AMD, Intel and Microsoft Corporation, or Microsoft. If our products are not in
compliance with prevailing industry standards, we may not be designed into our customers’ product designs. However, to be
compliant with changes to industry standards, we may have to invest significant time and resources to redesign our products which
could negatively impact our gross margin or operating results. If we are unable to achieve new design wins for existing or new
customers, we may lose market share and our operating results would be negatively impacted.
If our products do not continue to be adopted by our target markets or if the demand for new and innovative products in our
target markets decreases, our business and operating results would suffer.
Our success depends in part upon continued broad adoption of our processors for 3D graphics and multimedia in desktop PC,
notebook PC, workstation, high-performance computing, netbooks, smartbooks, tablets, smartphones, and video game console
applications. The market for processors has been characterized by unpredictable and sometimes rapid shifts in the popularity of
products, often caused by the publication of competitive industry benchmark results, changes in pricing of dynamic random-access
memory devices and other changes in the total system cost of add-in boards, as well as by severe price competition and by frequent
new technology and product introductions. Broad market acceptance is difficult to achieve and such market acceptance, if achieved, is
difficult to sustain due to intense competition and frequent new technology and product introductions. Our GPU and MCP businesses
together comprised approximately 79%, 75% and 79% of our revenue for fiscal years 2010, 2009 and 2008, respectively. As such, our
financial results would suffer if for any reason our current or future GPUs or MCPs do not continue to achieve widespread adoption by
the PC market. If we are unable to complete the timely development of new products or if we were unable to successfully and
cost-effectively manufacture and deliver products that meet the requirements of the desktop PC, notebook PC, workstation,
high-performance computing, netbook, smartbooks, tablets, smartphones, and video game console markets, we may experience a
decrease in revenue which could negatively impact our operating results.
Additionally, there can be no assurance that the industry will continue to demand new products with improved standards, features
or performance. If our customers, OEMs, ODMs, add-in-card and motherboard manufacturers, system builders and consumer
electronics companies, do not continue to design products that require more advanced or efficient processors and/or the market does
not continue to demand new products with increased performance, features, functionality or standards, sales of our products could
decline and the markets for our products could shrink. Decreased sales of our products for these markets could negatively impact our
revenue and our financial results.
Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠