I would be extremely careful with shorting this stock. They have cut down their earnings estimates significantly for next quarter, and they took a big write-off this quarter. Part of the writeoffs were the Nforce-1 chipsets (which they just landed a contract with Dell for), and the other part was Xbox chipsets.
If the sales on Nforce-1 with Dell go well, they will be able to use some of those written off chips in next quarters profits. That will show as pure profit. Likewise, when the ongoing negotiation about the Xbox chipset prices are resolved, there will most likely be a sudden pop in earnings (currently 48 million, IIRC, or about 30 cents a share is "in limbo" waiting for the results of the arbitration with Nvidia).
In general, the graphics arena is becoming almost impossible for smaller companies to make an entry into. The only real players left are ATI and Nvidia. Even a seasoned player like Matrox could not make a significant impact with their Parhelia chipset that was recently released.
This is similar to what happened in CPU's. I.e. what happened to Cyrix, Transmeta, heck even Motorola isn't really competing in CPU's anymore. Only Intel and AMD left, and no one else is likely to compete with them in the foreseeable future.
Sure, Nvda may go down in the near term. Of course, this can be said for any stock in the current environment. But medium to long term this is one stock I wouldn't bet against at these levels. (but to each his own) |
