ATYT and NVDA company summaries

[tbates757]

I was looking at investing in some tech stocks, and although nVidia is thought to be the larger of the two companies, their market capital is 2.4 billion dollars and ATi's is 4.25 billion dollars. Is there a reason for this? nVidia's quarterly revenue for this Q3 is about 510 million dollars and I believe ATi is around $600 million this quarter. So does this mean ATi is the actual leader is graphics chipsets and nVidia is now the minority?

 

[Acanthus]

Originally posted by: tbates757
I was looking at investing in some tech stocks, and although nVidia is thought to be the larger of the two companies, their market capital is 2.4 billion dollars and ATi's is 4.25 billion dollars. Is there a reason for this? nVidia's quarterly revenue for this Q3 is about 510 million dollars and I believe ATi is around $600 million this quarter. So does this mean ATi is the actual leader is graphics chipsets and nVidia is now the minority?

Intel is the leader in graphics chipsets.

Look at NVIDIAs share volume in comparison to ATis.

Also consider that neither company exclusively produces graphics solutions. NV and ATi both make mobo chipsets, capture hardware, sound chips, etc.

 

[reever]

Nvidia isn't the larger of the two companies

 

[Acanthus]

Originally posted by: reever
Nvidia isn't the larger of the two companies

Define larger?

NVIDIA has a higher R&D budget, more employees, higher share volume and higher net returns. (last time i checked).

 

[imported_kouch]

sigh I can see this turning into ATI vs Nvidia flame war soon

 

[Acanthus]

Originally posted by: kouch
sigh I can see this turning into ATI vs Nvidia flame war soon

Unlike video card reviews, the numbers here arent skewed its pretty hard to say that profit isnt profit etc.

 

[jiffylube1024]

Originally posted by: reever
Nvidia isn't the larger of the two companies

Nvidia is a much larger company. Check the volumes.

Also, ATI is primarily a GPU/video card company with no current mainstream motherboards (in volume sales). Nvidia makes GPUs and has one of the most popular (if not the most popular) motherboard chipset for AMD chips, and they've been right up there since Nforce (And especially Nforce2) debuted.

And as Acanthus said, Intel still actually has the most "video cards" out there, unfortunately that is because their "extreme" integrated setup is on something like 50% of all PC's. Enthusiasts are only a minor percentage of the market.

 

[Pete]

ATi has more employees, AFAIK: ATi, nV. I think it always has, too, given that it's been around longer than nV.

I'm not sure what you mean by volume, jiffy. Sorry if I'm being pedantic (or wrong!), but this volume number (ATi's)just means number of shares traded, which should be higher for nV given the both good and bad news just released (higher than expected earnings, but slipping discrete graphics share). AFAIK, ATi also has twice as many shares out there, as it has the same stock price but double the market cap. nV's P/E ratio is twice ATi's, though. If P/E means profit/earnings, then that's a good thing.

Is it that obvious I'm not an economist or even a stock trader?

 

[dug777]

Price/Earnings ratio- the higher the P/E, the more investors are willing to payfor a firms stock given their expectations about the firms future earnings

 

[Pete]

*smacks forehead* Of course--it'd probably be friggin' illegal to have a profit/earning ratio that high.

 

[yhelothar]

nvidia still has more/better programmers

 

[Elvis2]

look here

 

[Pete]

Originally posted by: virtualgames0
nvidia still has more/better programmers

If they do, it'll certainly benefit them going forward, as more and more capable/complicated GPUs are going to rely more and more on good compilers (much like CPUs). No doubt ATi has an eye on this, too.

 

[RussianSensation]

#1 Neither ATI nor Nvidia has shipped large volumes of their high-end cards. I am sure from the articles you guys have read it seems that low prices of 9800 and 9600, as well as 9200 cards, have contributed largely to ATI's dominance in the market. Since 9200 costs < than 5200 and there is really no fairly priced competitor to the $106 9600pro, we know who is dominating on the low-end and mainstream. With respect to 9800Pro, it is a better videocard than the FX series as well.

#2....But, let's consider today. For the most part, the report only tells us information about what has happened on the market yesterday and close to today, but not necessarily today. The only time we will see how the market has changed is in the next industry report, because it will reflect the business situtation today and several months from now. So where does Nvidia stand?

6200 beats the crap out of X300 cards and ATI is yet to introduce a better competitor on the low end. 6600GT is a better card than ATI's X700XT and once the volumes increase, Nvidia will do much better there as well. At the same time 6600Gt will make 9800Pro obsolete once it becomes available in AGP form. Nvidia currently has no competitors with its 6800nu card. With the introduction of the cheaper to manufacture 6700 replacement of the 6800 card, things will only get brighter.

#3 "The first is that in the highest of the high-end figures - Direct X 9 performance cards - Nvidia took 64% of the market with its GeForce 6800 parts, not an insignificant achievement." - Link On the high-end, Nvidia is now dominating and is expected to increase its share with the introduction of SLI; thus strengthining its brand name and image as the graphics card company with the fastest cards.

#4 Either way, whichever company is able to ship more mainstream cards during this holiday season (this primarily refers to new tech), that company will be able to generate significant profits as a result. Based on performance, Nvidia pretty much dominates in all price segments, except on the low-low end (down there with 9200se). The problem is that these new tech cards haven't had time to have an effect on the market due to low adoption rates, further slowed by high priced of the new tech, and low volume of shipment of those cards.

#5 We can't simply look at profits, as that tells us little about how much cash flow the company is generating. In fact, often low profits would mean lower taxes and the ability of a company to save cash. With the introduction of a brand new 6800GPU and Nforce 4, Nvidia has committed a lot more towards R&amp;D than ATI, thus helping to decrease its profits even more. To be able to see what the value of each firm is, we'd have to figure out the cash flows generated by assets and the ability of each firm to generate future cash flows. I'd like to stress on the latter, since I believe that Nvidia is in a much better position than the figures tell us. It takes the market a while before the adoption of new tech occurs. Therefore, it would take a while for the new tech to help contribute to earnings and help recoup the production and R&amp;D costs. I do think, however, that Nvidia is lacking on the mobile market and things have to be improved there.

#6 It seems ATI made the right move by decreasing manufacturing and development costs with the introduction of X800 series. The old core was competitive enough to survive 1 more cycle, and the ability to save 60 million transistors for PS3.0 certainly helped to decrease manufacturing costs. From Nvidia's perspective, they took the initial step of introducing PS3.0 and video acceleration (albeit not working on 6800 cards right now?). This helps to show that they are innovative and are competing for the #1 position in the market and aren't just cruising along collecting $$$ like ATI is at the moment.

Either way, I think it's important to look at the situation around January of 2005 and see how things turn out. I am not trying to take away from ATi's success by any means, but in this particular industry, things change bac

 

[Pete]

Is that 64% of discrete high-end DX9 cards? B/c I think ATi was more successful in OEM sales, and that *might* even things out. I agree that the 6800 deserves to be winning in the high end, but if HL2 shows ATi cards as having an edge, the scales may balance.

And though the 6600GT is sweet, don't forget ATi also has the X700XT. The problem for ATi, though, is that apparently they won't have the X700 in AGP form until next year, whereas AGP 6600s may be available in a matter of weeks.

I do expect nV to at least break even with ATi in Q4, if not overall, then at least with MSRP$200+ cards.

I'm not sure you can say nV committed more R&amp;D than ATi in Q3 (at least, not without hard numbers), as surely the Xbox2 GPU (and the PC versions to follow) cost ATi a little sumtin' sumtin'.

 

[ponyo]

Originally posted by: dug777
Price/Earnings ratio- the higher the P/E, the more investors are willing to payfor a firms stock given their expectations about the firms future earnings

That's incorrect. P/E is just what it says it is. Price of the stock divided by Earnings per share. It has nothing to do with expectations of future earnings. A company with low current P/E can have high P/E the following quarter or no P/E. And vice versa. P/E is just one of many statistics you can look at.

Different people look at different things when trading and investing. I care more about company's balance sheet than anything else. Nvidia has very nice balance sheet with nice chunk of cash per share and basically no debt. That's my kind of balance sheet.

I think Nvidia is doing very well in the high end but getting killed in the mid and low end. Plus, their mobile line sucks and that's a very big growth area they really need to concentrate on IMO. High end is very important because it influences people's perception about the company and it's products. Eventually the high end becomes mid and low end. High end might have the nice margins but mid and low end have the volume and the sales. ATI is currently reaping the reward of their previous high and mid line- 9800 and 9600 series. I think Nvidia will be able to do the same with their 6800 series later down the line.

ATI also has pretty decent balance sheet but not good as Nvidia. ATI has been doing very well past couple of quarters but people quickly forget ATI bled cash for many quarters. It lost money for many quarters until 9700 series came out and turned the company around. ATI is actually sitting kind of pretty right now due to their dominance in the mid and low end segments along with strong lineup and presence in mobile graphics market. Plus they got the OEM contract for Xbox2 and new Nintendo box that should add to the sales later at margin's expense most likely. How much of all of this is priced in is anyone's guess.

Graphics business is very volatile with technology leads changing quickly. I wouldn't invest in any of these companies longterm. Only short term trades. That said if I had to invest in one of these companies I would go with Nvidia. Of course the time to buy in was right after the last preannouncement when NVDA took almost 40% haircut.

 

[dug777]

Heh. I just copy and pasted out of a paper i was using as a source for one of my uni papers
However this defn. from investopedia or somesuch site kinda explains what i was getting at

'Sometimes the P/E is referred to as the "multiple," because it shows how much investors are willing to pay per dollar of earnings.

In general, a high P/E means high projected earnings in the future.'

 

[RussianSensation]

Originally posted by: Naustica

Originally posted by: dug777
Price/Earnings ratio- the higher the P/E, the more investors are willing to payfor a firms stock given their expectations about the firms future earnings

That's incorrect. P/E is just what it says it is. Price of the stock divided by Earnings per share. It has nothing to do with expectations of future earnings. A company with low current P/E can have high P/E the following quarter or no P/E. And vice versa. P/E is just one of many statistics you can look at.

Different people look at different things when trading and investing. I care more about company's balance sheet than anything else. Nvidia has very nice balance sheet with nice chunk of cash per share and basically no debt. That's my kind of balance sheet.

You do realize that a balance sheet is a financial snapshot of a company during that instance of time and has nothing to do with the market value of the company or its ability to generate future cash flows. Thus by itself it tells us absolutely nothing about the stance of the company and its value in the eyes of educated investors.

Furthermore, you mentioned that Nvidia has a "nice" balance sheet with a nice chunk of cash per share and basically no debt. First of all, off-balance sheet items such as committments and contractual obligations are not disclosed on the balance sheet and are shown in notes to financial statements. For instance, leases are obligations and thus constitute real cash outflows, which don't have to be shown on the balance sheet. Most importantly, the numbers on the financial statements are formulated by the same accountants that compile the income statement, making the price earnings figure just as valid (or not) as the balance sheet since the earnings figure from the income statement itself is also subject to manipulation. Having no debt doesn't tell us that a company is in a healthy position or not either. In imperfect financial markets with taxes and a probability of costly bankruptcy, the expected rate of return on equity for investors increases with greater leverage, since it helps to compensate for the increased risk associated with financial risk as well as business risk. As long as the cash inflow to shareholders is increased due to the corporate tax shield benefit from increased debt, assuming that value is greater than probability of bankruptcy of the firm x the costs associated with that bankruptcy, a firm is actually better off to have as much debt as it can to increase its value. Thus having less debt does not suggest that a company is in a healthier position.

To be able to judge which company is better we would have to consider the cash flows from assets today as well as be able to predict them in the future; analyze the mix of debt and equity financing and compare which company has a better capital structure mix; compare the market value of the tanginble assets and analyze intangible assets of each firm such as its workforce (especially engineers and ppl with creative ideas), brand name, customer loyalty, etc. I doubt that there are a lot of investment bankers on this forum who would be able to tell you which company is a better one as this requires an indepth analysis and not a glympse at the company's balance sheet.

With respect to P/E ratio. Let's look at this example:

"The superior prospects of a company are often reflected in its price-earnings ratio. With a stock price of say $75 and earnings of $5, the P/E ratio is $75/5 = $15. If that company had no growth opportunities, its stock price would be lower at say $40, its P/E would be $40/5 = 8.0. The P/E ratio, therefore, is an indicator of the prospects of the firm. To justify a high P/E, one must believe the firm is endowed with ample growth opportunities." - Fundamentals of Corporate Finance, 2003

"Since price-earnings ratio is the ratio of market price for a stock to its current annual earnings per share, the P/E ratio shows how much investors are willing to pay for $1 of earnings per share. Hence, investor would be willing to pay a large price (P) for the shares of the firm, only if he expected large earnings growth which would them increases in cash flows to him/her in the form of dividends or increased market share price due to company growth. If these expectations are realized, high P/E stocks will have high returns. If these earnings do not grow to meet expectations, these stocks will be very risky." - Corporate Finance, 2004

Of course growth opportunities imply growth in revenues or profits.

...So dug 777 is actually right. But again you have to be very careful when you analyze ratios since they stem from questionable accounting data in the first place and deeper analysis of the company is needed to analyze the justification of the target market price vs. current market price and so on. Nortel is a perfect example of how a high price earnings ratio and future expectations of growth can mean little in the real world if you do not take into consideration all other factors contributing to firm success (or failure).

As for everything else, I agree with you

Oh Pete, nice comments. I enjoy when people bring valid arguments and ideas into conversations. I find that I B/S once in a while or that my opinion is just that and isnt necessarily justified; and thanks to ppl like you who offer opposing views that are logical in nature, it makes discussions on the forums a lot more interesting.

 

[jiffylube1024]

^ In regards to my previous post - I really had no idea of what I was talking about. I'm pretty sure Nvidia was a larger company than ATI in the past but I honestly don't know how they stand today. I still think Nvidia is the bigger company right now though - they seem to be doing more still with R&amp;D and branching out into different markets, but it was conjecture on my part so I'm sorry if I'm way off base here...

Nvidia is still riding the fat Xbox contract right now, which is so good for them that MS took them to court over it (and lost), as well as their motherboard stuff, while ATI just has the Gamecube deal (which AFAIK is less good for their bottom line than Nvidia's Xbox deal) and their graphics cards; they haven't made much inroads with their motherboards.

 

[ponyo]

You do realize that a balance sheet is a financial snapshot of a company during that instance of time and has nothing to do with the market value of the company or its ability to generate future cash flows. Thus by itself it tells us absolutely nothing about the stance of the company and its value in the eyes of educated investors.

I'm fully aware of this. But strong balance sheet is nice safety net during tough times. Just as person with large savings and little or no debt can live on that savings for awhile without worries, so can companies. Of course the person would eventually need to get income and positive cash flow or risk using up all the savings. Same with the company. But strong balance sheet gives them the cushion to do that without at the mercy of the market. During good times, highly leveraged companies and people can out return. But during lean times, it can and will bite the company and the person. Obviously you can't just look at the balance sheet and buy the company. You have to look at the whole picture like gross sales, margin, net income, outlook, etc. I usually take all of this into account but it's always reassuring to me when I see companies I like that also have strong balance sheet. It's always a plus in my book. A quick read of company's 10-Q and K can tell you almost everything you want to know about the company.

P/E is backwards looking indicator. It says nothing about future earnings. P/E can go up and down or be nonexistent. Plenty of companies traded or trade with no P/E.

Some people like to look at PEG ratio. But this is highly flawed too IMO.

You have to figure out what type of investor you are and choose a mythology that works for you. You can look at all the statistics you want but it comes down to luck. MoMo and big money rules Wall Street. Us little guys just pray and hop on for the ride.