My understanding of the motivation behind NV's Fermi and future product developments

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dev0lution

Senior member
Dec 23, 2004
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Nvidia is going away if they don't change gears.APU performance is gonna shrink the discrete market severly soon. 2 years from today the 5770's and gtx460 will be on the apu. this leaves what market space ? 5870 and above ?

Ironically, shrinking the discrete market hurts AMD as well. They're just cannibalizing their mainstream GPUs with Fusion. Now if they'd gotten Fusion out the door quicker, that might have helped them take CPU share from Intel, but Intel looks to have made some decent strides with SB so you're back to zero again.

Fusion and Sandy Bridge are just going to kill off chipset graphics and low end stuff.

The bargain PC segment is already facing competition from ARM/SoC based tablets and other portables anyway. Desktop isn't a growing market anymore and laptops will eventually plateau as most people's phones and tablets get "good enough" to do 80% of what they want to do. Grandma just wants to check email and share photos...

You're also forgetting that CPU design cycles are much longer. By the time a fusion-like CPU gets out of the door the graphics core is going to be 1 or more generations behind. For those who do need more power, a discrete card is still going to be the right choice.
 

Vesku

Diamond Member
Aug 25, 2005
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Before Fermi was even released there were reports of the full die being for professional cards. Didn't they cripple some of it's compute features compared to it's Tesla(?) version?

Nvidia's CEO was selling lots of stock before the Fermi launch. Pre-launch I half jokingly suggested some of the extra delay was so he wouldn't violate the 3 month or so rule for stock sales.

Bottom line is that Nvidia executives are very aware they need to find a new profitable sector to be the foundation of their business. It may end up being the professional and number crunching markets. There is a lot less competition there then in low power and mainstream graphics.
 

Janooo

Golden Member
Aug 22, 2005
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Before Fermi was even released there were reports of the full die being for professional cards. Didn't they cripple some of it's compute features compared to it's Tesla(?) version?

Nvidia's CEO was selling lots of stock before the Fermi launch. Pre-launch I half jokingly suggested some of the extra delay was so he wouldn't violate the 3 month or so rule for stock sales.

Bottom line is that Nvidia executives are very aware they need to find a new profitable sector to be the foundation of their business. It may end up being the professional and number crunching markets. There is a lot less competition there then in low power and mainstream graphics.
They'll get squeezed by improved AMD GPUs and Fusion CPUs.
Tegra could be the only major product in the future.
 

SolMiester

Diamond Member
Dec 19, 2004
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proactive mind?

You make it sounds like AMD want to kill off a market with a single chip. Unfortunately, that is not proactive mind. Who with the right mind will try to combine a market by using one chip? If you think AMD's fusion is going to kill anything, it is going to be itself.

Fusion is a new type of CPU, at best it will stay in the market, but can't kill a market. Let say there are 3 markets only. A rich, B mid, and C low. If a single chip can be used in A, B, and C, then this chip must be cheap and powerful at the same time. What does it mean? Market B and C will buy the chip and won't buy another one for years to come. Profit? To customer yes, big time. For the manufacturer? Short term yes, but will quickly dies out.

The definition of proactive is to create new markets. Nvidia opened the professional graphics as well as GPGPU, the high end computing with GPU at the supercomputing segment with tesla at the top end, tegra at the mobile segment, and ION to the mini PC segment. Those are all new markets for a GPU company. Harvesting those will make money until opponent steps in, which will saturate overtime.

Back to Fusion. It must create its own market, or it won't go far. It will eventually create a segment on the mini PC/notebook market if it is done right, which is what AMD needs to survive.

People with reactive mind will believe AMD will eventually kill off everything else that ever created because of the success of cypress. However, cypress' glory has long pass due and if they don't come up with something great again. Otherwise, they will lose whatever they have gained with cypress. Nvidia believed they are save with the 2xx series and believed that AMD is far away until they were hit by the cypress. In six months time Nvidia suffers huge hit in the discrete video card market until they finally come back with a decent card GTX460 to stop bleeding uncontrollably. But that is far far away from a knock out. If AMD don't have some surprises under its sleeves, the market will bounce right back to before cypress.

Seriously, usually people don't kill people. We simply try to survive. The same thing happens to companies. AMD won't want Nvidia to die or else Intel will kill it shortly after. Nvidia won't kill AMD either as Intel will kill it too. What they do want is to kill Intel, which they really can't. As soon as AMD successfully sued Intel, others immediately follow, including Nvidia. They can be best friend forever if the discrete market is big enough to feed all the employees. Unfortunately, it isn't enough. In fact, AMD is good at CPU, but since its opponent is too strong, they brought ATI so they can cover more ground. Unfortunately, Nvidia is very strong at GPU and Intel is very strong at CPU, leaving AMD very small room to breath. Fusion was the first project right after AMD and ATI become one, but for 15 years I still don't see AMD make well use of its advantage of having 2 blades. They are not dump, it is just too funky hard to do it.

Intel is the only one who have the muscle to kill others, but laws prevents them to do so. By killing i don't mean making better goods, but to use connections and relations to stop its target from functioning. Otherwise, their opponent will not die just because of a good product. "Duh, they simply cost more to buy!"

good post...well thought out!
 

SolMiester

Diamond Member
Dec 19, 2004
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Nvidia is going away if they don't change gears.APU performance is gonna shrink the discrete market severly soon. 2 years from today the 5770's and gtx460 will be on the apu. this leaves what market space ? 5870 and above ?

You seem to think current mid range will be fine for everything 3 yrs from now which is why discrete GPU will not go away.....

On-board graphics of current m/b are as good as mid range cards from like 4 yrs ago....moving GPU to CPU die is just an amalgamation to save money...A combination will never have the power of discrete GPUs and is why you are wrong.
AMD have good bang for buck, but not performance for watt which is where computing is going, always smaller and more powerful which is why Fusion will never compete with SB and neither will be enough for ever increasing graphics of games and applications.

AMD, jack of all trades, master of none!
 

ModestGamer

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Jun 30, 2010
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You seem to think current mid range will be fine for everything 3 yrs from now which is why discrete GPU will not go away.....

On-board graphics of current m/b are as good as mid range cards from like 4 yrs ago....moving GPU to CPU die is just an amalgamation to save money...A combination will never have the power of discrete GPUs and is why you are wrong.
AMD have good bang for buck, but not performance for watt which is where computing is going, always smaller and more powerful which is why Fusion will never compete with SB and neither will be enough for ever increasing graphics of games and applications.

AMD, jack of all trades, master of none!


why wouldn't a 1 year old graphics card say 5750 level not be adequate for 85% of users ?

you guys are making alot of assumption that AMD can't get or build good stuff. Its fud at best. The truth is they have already shown us demos of smooth gameplay "regardless of framerates" in AvP which is a intensive enough game to crippled alot of previous generations of cards.

All this R&D is totally aimed at the embeded market becuase scalability is where its at in smart appliance devices.

the real show down is going to be at the netbook and below level and I don't think Intel has enough graphics IP to compete there.
 

ModestGamer

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Jun 30, 2010
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It doesn't hurt AMD a bit as they stock more OEM systems.


Ironically, shrinking the discrete market hurts AMD as well. They're just cannibalizing their mainstream GPUs with Fusion. Now if they'd gotten Fusion out the door quicker, that might have helped them take CPU share from Intel, but Intel looks to have made some decent strides with SB so you're back to zero again.

Fusion and Sandy Bridge are just going to kill off chipset graphics and low end stuff.

The bargain PC segment is already facing competition from ARM/SoC based tablets and other portables anyway. Desktop isn't a growing market anymore and laptops will eventually plateau as most people's phones and tablets get "good enough" to do 80% of what they want to do. Grandma just wants to check email and share photos...

You're also forgetting that CPU design cycles are much longer. By the time a fusion-like CPU gets out of the door the graphics core is going to be 1 or more generations behind. For those who do need more power, a discrete card is still going to be the right choice.
 

RussianSensation

Elite Member
Sep 5, 2003
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Nvidia is going away if they don't change gears.APU performance is gonna shrink the discrete market severly soon. 2 years from today the 5770's and gtx460 will be on the apu. this leaves what market space ? 5870 and above ?

Thats basing it on todays hardware for comparisons sake.

Nvidia would do better to start buying AMD hardware and becoming a deep board/technoloigy partner if it wants to survive.

but we could put money on nvidias survival in 5 years if you like.

You are being too extreme. History has shown time and time again that when NV is most down, it comes back harder than ever. So to say NV will not exist in 5 years is far fetched. People have been saying AMD was going to disappear for a long time and they are still around.

Plus if you think onboard GPUs will be as fast as 5770/GTX460 in only 2 years you are smoking something. You see a couple of games from Anandtech's article about SB 12UE running Batman/DofW2/COD:MW2 at 1024x768 with 0AA at the lowest level and you think suddenly Intel will have a card that can run MW2 at 1920x1080 4AA (cuz that's exactly what GTX460 can do) in just 2 years? I'll believe it when I see it. Everything about Intel graphics has always been just hype. You need to have good driver support too. You do realize in all of the games tested in that review, at 1024x768 High Quality with 4AA, those games would be running at 15fps right :rolleyes:

Plus you are assuming that discrete graphics won't improve in the next 2 years and 5770/GTX460 will still be mid-range in 2 years? Of course not. What's threatening discrete graphics more than ever is consoles. People buy a laptop with a 3d-unusable Intel onboard graphics card. They could care less about its performance because they are gaming on a PS2/3, Xbox360 or the Wii. Onboard graphics is only part of the threat. The other major factor is that notebooks have surpassed desktops. So naturally less people are interested in buying a desktop, which means they likely don't even care for discrete graphics performance if they are buying a slow notebook in the first place.
 
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ModestGamer

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Jun 30, 2010
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You are being too extreme. History has shown time and time again that when NV is most down, it comes back harder than ever.

Plus if you think onboard GPUs will be as fast as 5770/GTX460 in only 2 years you are smoking something. You see a couple of games from Anandtech's article about SB 12UE running Batman/DofW2/COD:MW2 at 1024x768 with 0AA at the lowest level and you think suddenly Intel will have a card that can run MW2 at 1920x1080 4AA (cuz that's exactly what GTX460 can do) in just 2 years?

You do realize in all of the games tested in that review, at 1024x768 High Quality with 4AA, those games would be running at 15fps right :rolleyes:

again with the enthusist mentality. Nvidia can rally all the discrete cards they want. It won't matter when 30%+ of their bussiness model goes poof on chipsets.

Try to understand this.

Integrated chipsets.

Its what keeps them afloat to finance new product.

Imagine what would happen if ford stopped selling f150's.

can you get it now ?????

its not going to matter. They will be loosing anchor product revenue stream. There is no where to go except for consules and AMD has several product in the pipline along with intel to dislodge them there.

There is no place to go but discrete compute power.

they would smarter today to get with AMD to buy AMd hardware to rebox and develop their own drivers then continuing forward trying to build there own. They could work a good solid revenue sharing model and make a bit less but with dramatically lower overhead. ATI moves more parts nvidia stays aflaot. We all benefit.

Nvidia is a dead man walking unless they find 50% more bussiness somewhere else.

Its just a fact of life. They Lost and it wasn't due to insider deal. Intel and AMd just built better mouse traps for OEM's. OEM's thats where the money to build top tier product comes from.

I own and enjoy several fine nvidia products and I think they currently have a good line up. Won't matter soon.
 
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RussianSensation

Elite Member
Sep 5, 2003
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again with the enthusist mentality. Nvidia can rally all the discrete cards they want. It won't matter when 30%+ of their bussiness model goes poof on chipsets.

Try to understand this.

Integrated chipsets.

Its what keeps them afloat to finance new product.

What in the world are you talking about? 30% of their business line is chipsets?????????? Did you miss the entire point of this thread? :eek:

Integrated chipsets represent less than 10% of NV's bottom line. NV's own CEO admitted that the integrated chipset market is dead for them. That has never been their core market segment.

Integrated Desktop GPUs - 5.3% of NV's profits
Integrated Notebook GPUs - 4.5% of NV's profits
 
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ModestGamer

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Jun 30, 2010
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good post...well thought out!


No bad post. The thing thats going to kill nvidia is integrated OEM chipsets for motherboards and other appliances.

Thats the money that keeps them afloat.

with integrated gpu its not about performance its about lower parts counts. If performance is equal or better and cheap to build.

geuss what happens.
 

ModestGamer

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Jun 30, 2010
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What in the world are you talking about? 30% of their business line is chipsets?????????? Did you miss the entire point of this thread?

Integrated chipsets represent less than 10% of NV's bottom line. NV's own CEO admitted that the integrated chipset market is dead for them. That has never been their core market segment.


no its 10% of their profit and 35% of their gross revenue.you should learn how to read a rigged financial. Nvidia is in so much trouble their CEO and board members are dumping stock.

You really don't get it do you. There are about a dozen other small plications like OEM installed graphics cards that are going to vanish to.

AMD and Intel want nvidia gone.

Wave goodbye.
 

railven

Diamond Member
Mar 25, 2010
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What in the world are you talking about? 30% of their business line is chipsets?????????? Did you miss the entire point of this thread?

Integrated chipsets represent less than 10% of NV's bottom line. NV's own CEO admitted that the integrated chipset market is dead for them. That has never been their core market segment.

Catching up on this thread, it seems he completely did.

Even as a hardcore ATI fanboy I don't see AMD/Intel's chips eradicating the discrete market. Would it eat into? Sure, but at the point where the cost of a low entry GPU is already included in the price of the computer who is going to stop a person from going the extra yard and add a better GPU.

It's funny that they argue tomorrow's requirements with today's hardware.
 

ModestGamer

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Jun 30, 2010
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Catching up on this thread, it seems he completely did.

Even as a hardcore ATI fanboy I don't see AMD/Intel's chips eradicating the discrete market. Would it eat into? Sure, but at the point where the cost of a low entry GPU is already included in the price of the computer who is going to stop a person from going the extra yard and add a better GPU.

It's funny that they argue tomorrow's requirements with today's hardware.


Your not getting it. 85% of computer owners NEVER UPGRADE ANYTHING !If its good enough as delivered its good enough

85%

Thats most of the market !!!!

Most of the market that AMD and INTEL have only between themsleves.

The part nvidia no longer has a stake in.

integrated laptops GONE
intergrate pc's GONE
intgrated cell phones GONE
Game consoulse Gone or going

Nvidia has only discrete left.

Lower parts counts are

CHEAPER TO BUILD FOR THE SAME PERFORMANCE

Higher Profits !!!!!!
 
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evolucion8

Platinum Member
Jun 17, 2005
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Hmmm that article is from 2009..... didn't something happen since then?

http://www.semiaccurate.com/2010/08/04/intel-settles-ftc-and-nvidia-win-big/



Game on.

Interesting that you post a semiaccurate article, specially when you are the first attacking Charlie's bias toward AMD and call his articles pure FUD. pot meet kettle...

who has integrated graphics that can compete with a $150 video card right now? or even a $30 video card for that matter. SB will be out in ~ 6 months, and the top of the line SB will compete with a 5450. that's not exactly going to convince a lot of people to stop buying discrete cards. BD is probably going to be much faster, but that is 12-18 months away, by which time we'll have gone through another generation or perhaps even 2 gens of gpus.

Don't get me wrong, I think that the low end consumer gpu market is going to go away, but it's not happening for a while. we need 1 more and possibly 2 more gens of APU's to really ratchet up some decent performance imho.

And for the time that Fusion is released and matches the HD 5450, faster low end solutions will be out, like you stated, Fusion isn't gonna replace the discreet graphic card market, may be the very low end entry cards like the HD 5450, but HD 5670 is 3 times faster. So I think that since most of the money comes from the low end and integrated graphics, Fusion and Sandy Bridge makes more sense, and definitively will be far more profitable than ever in that market segment.
 

railven

Diamond Member
Mar 25, 2010
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Your not getting it. 85% of computer owners NEVER UPGRADE ANYTHING !If its good enough as delivered its good enough

85%

Thats most of the market !!!!

Most of the market that AMD and INTEL have only between themsleves.

The part nvidia no longer has a stake in.

integrated laptops GONE
intergrate pc's GONE
intgrated cell phones GONE
Game consoulse Gone or going

Nvidia has only discrete left.

Lower parts counts are

CHEAPER TO BUILD FOR THE SAME PERFORMANCE

Higher Profits !!!!!!

There you go. Glad you used the big fonts, so everyone see where you agreed with me :D Was that so hard? Sheesh. :thumbsup:
 

ModestGamer

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Jun 30, 2010
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There you go. Glad you used the big fonts, so everyone see where you agreed with me :D Was that so hard? Sheesh. :thumbsup:


the dirty secret in the room is that nvidia with current gpu costs can't stay in bussiness selling discretes if they continue build there own gpu architecture.
 

ModestGamer

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Interesting that you post a semiaccurate article, specially when you are the first attacking Charlie's bias toward AMD and call his articles pure FUD. pot meet kettle...



And for the time that Fusion is released and matches the HD 5450, faster low end solutions will be out, like you stated, Fusion isn't gonna replace the discreet graphic card market, may be the very low end entry cards like the HD 5450, but HD 5670 is 3 times faster. So I think that since most of the money comes from the low end and integrated graphics, Fusion and Sandy Bridge makes more sense, and definitively will be far more profitable than ever in that market segment.


AMD hasn't made any official claims but AvP needs a 5670 FYI if the demo they played was real. There are also die shots showing 12 shader groups which should be pretty close to 5670 performance specs.

http://www.techpowerup.com/130101/B..._Shots_Surface_in_GlobalFoundaries_Event.html
 

RussianSensation

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Sep 5, 2003
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no its 10% of their profit and 35% of their gross revenue.you should learn how to read a rigged financial.

Ok but last time I checked, the value of a technology company is derived by computing the value of its debt + equity, which gives you the enterprise value.

To find the value of the company's equity you would generally use a DCF, or a capitalized cash flow approach (not a capitalized earnings approach since AMD outsources their manufacturing, which means it's not a capital intensive business). Then you would adjust their debt to market rates, if required, and arrive at the total EV. Revenue would not be a factor in such company valuation.

The only time one would consider a revenue multiple to value a technology company is either in its start-up phase or if the company has experienced a period of many years of negative earnings since you have no positive earnings to capitalize (or the earnings you do have are too low to exceed the Book Value).

Again, even if discrete chipsets were 99% of NV's revenue but only had 5% profitability, it's not a revenue stream one fears losing.

Also, your logic about teaming up with AMD hardly makes any sense.

1. AMD can sell their own products and receive a far higher ROE than the 3.5-5% royalty rate they would receive from NV if NV simply sold AMD products using AMD name.

2. NV's last quarter performance was largely affected by the $476 million write-down related to lawsuits for weak die/packaging material for laptops - http://news.cnet.com/8301-13924_3-20013543-64.html
This negatively affected their operating income.
 

ModestGamer

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Integrated finances all the other fancy tech. Why can't you get your head around this ? integrated is cashflow. you need cashflow to run a bussiness. I know I run a bussiness. I make stuff.

Nvidia has no tangiable bussiness model right now and they know it.

equity mean sqaut if you can't maintain cash flow for new product development.

Teaming with AMD on workstation cards make perfect sense. AMD has the process and engineering resources to make the hardware. They have shown zero interest in the workstation market. Nvidia has great market presence and substantially dimished cash flow from lossing the discrete market war.

Their best interests are served by partnering with their #1 rival in discrete to fend off intel. It helps AMD to but putting more AMD hardware in machines increasing cash flow.

Pity as this would benefit gamers and help fight back against what could be a potentiall intel market monopoly in every area if AMD pouchs BD and gets into serious financial trouble.


Ok but last time I checked, the value of a technology company is derived by computing the value of its debt + equity, which gives you the enterprise value.

To find the value of the company's equity you would generally use a DCF, or a capitalized cash flow approach (not a capitalized earnings approach since AMD outsources their manufacturing, which means it's not a capital intensive business). Then you would adjust their debt to market rates, if required, and arrive at the total EV. Revenue would not be a factor in such company valuation.

The only time one would consider a revenue multiple to value a technology company is either in its start-up phase or if the company has experienced a period of many years of negative earnings since you have no positive earnings to capitalize (or the earnings you do have are too low to exceed the Book Value).

Again, even if discrete chipsets were 99% of NV's revenue but only had 5% profitability, it's not a revenue stream one fears losing.

Also, your logic about teaming up with AMD hardly makes any sense.

1. AMD can sell their own products and receive a far higher ROE than the 3.5-5% royalty rate they would receive from NV if NV simply sold AMD products using AMD name.

2. NV's last quarter performance was largely affected by the $476 million write-down related to lawsuits for weak die/packaging material for laptops - http://news.cnet.com/8301-13924_3-20013543-64.html
This negatively affected their operating income.
 
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railven

Diamond Member
Mar 25, 2010
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Well, i guess you want it with a spoon.

SB and BD higher version APUs probably wont launch before the 6xxx series.

You used your HD4850 as an example of midrange. Im sorry to say, but when you compare HD67xx series to that, its not midrange, its lowend.

And again, read his post and the words "100 bucks and under". Do you understand the meaning of those words put together?

It means: 100 bucks and under, which excludes anything above 100 bucks.


HD4850s cost more than 100 bucks, even today. gtx460 768 mbs cost anything from 170 bucks and up.


Now..did i make myself clear or are you just going to misunderstand me again?

I think you should drop the condescending attitude and follow the conversation. In his first post, which I responded to, he said Points 2-5, 2 being the discrete market, would be gone.

You restating the obvious doesn't make it any less or more real. several of us have been telling you this for days.

Yet now you need ot read it somwehere else.

expect sales points 2-5 to disappear to nvidia leaving them with 1 and 6

I simply asked wouldn't it be plausible for nVidia to make a big chip for the professional market and gimp it for the consumer gaming market (ala GF100 and GF104) as a solution to keep points 1 and 2 viable for profits.

No where did I argue integrated or low end. My example of the 4850 was to represent what I felt was mid-range in it's era, and added to it that mid-range to me in this era is better than 57xx (examples I gave were GTX 460 768 and HD 5830.) Why not clarify for me what is categorized as mid-range for you?

Maybe we disagree on what cards should be categorized as mid-range. But re-read what I re-quoted for you and even put in bold, he specifically said mid-range. For you to completely ignore that and get on some high horse completely blows my mind.

If you scroll up you'll even see where he said "Nvidia has only discrete left" which is a clear contradiction of the post I responded to where he said the discrete market would be gone.
 

ModestGamer

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I think you should drop the condescending attitude and follow the conversation. In his first post, which I responded to, he said Points 2-5, 2 being the discrete market, would be gone.



I simply asked wouldn't it be plausible for nVidia to make a big chip for the professional market and gimp it for the consumer gaming market (ala GF100 and GF104) as a solution to keep points 1 and 2 viable for profits.

No where did I argue integrated or low end. My example of the 4850 was to represent what I felt was mid-range in it's era, and added to it that mid-range to me in this era is better than 57xx (examples I gave were GTX 460 768 and HD 5830.) Why not clarify for me what is categorized as mid-range for you?

Maybe we disagree on what cards should be categorized as mid-range. But re-read what I re-quoted for you and even put in bold, he specifically said mid-range. For you to completely ignore that and get on some high horse completely blows my mind.

If you scroll up you'll even see where he said "Nvidia has only discrete left" which is a clear contradiction of the post I responded to where he said the discrete market would be gone.

Its late I am tired. I am meaning to say integrated.
 

RussianSensation

Elite Member
Sep 5, 2003
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Dude I don't know how to spell it out for you any clearer.

This is what you said:

"integrated laptops - gone" = 4.5% of NV's profits

"integrated cell phones - gone" = Proof? Neither AMD nor Intel make anything remotely competitive in this market, dominated by ARM and Qualcomm. So you are saying that AMD and Intel have something better than Tegra 2? Really? What is it?

I guess you missed the memo where AMD said: "Advanced Micro Devices has no plans to develop direct competitors to system-on-chips (SoCs) based on designs developed by ARM holdings, such as those that power smartphones or the most popular tablet at present, the Apple iPad.
http://www.xbitlabs.com/news/cpu/di...M_System_on_Chip_Devices_Chief_Executive.html

What about Intel: They are just thinking about starting to compete in the mobile space with their recent acquisition of Infineon - http://www.dailytech.com/Intel+Acqu...ises+Not+to+Kill+ARM+Support/article19480.htm

"Integrated PCs - gone" = 5.3% of NV's profits

"Game consoles - gone" = I didn't know you have insider information on what GPUs will be in the next PS4, Xbox 720 and Wii 2. We all would love to know this info, so please share.

I am not going to continue to argue with you because you provide:

1. No facts/evidence to support your claims. (such as if 85% of users don't upgrade their computers, why have nV and AMD been in business of discrete graphics for the last 15 years? If this it to hurt NV, then this statement also implies that the majority of discrete graphics purchases are driven by upgrades and not OEM or new system builds?

Or, such as failure to backup your claims that integrated chipset business finances future product development at NV more than any other revenue stream as "integrated" is less than 10% of their cash flows...so how can that be?)

2. You just keep derailing the thread with "NV will die" attitude, without conveying what you are trying to say in a more coherent manner that won't offend posters in this thread.
 
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Juncar

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Jul 5, 2009
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Ok but last time I checked, the value of a technology company is derived by computing the value of its debt + equity, which gives you the enterprise value.

To find the value of the company's equity you would generally use a DCF, or a capitalized cash flow approach (not a capitalized earnings approach since AMD outsources their manufacturing, which means it's not a capital intensive business). Then you would adjust their debt to market rates, if required, and arrive at the total EV. Revenue would not be a factor in such company valuation.

The only time one would consider a revenue multiple to value a technology company is either in its start-up phase or if the company has experienced a period of many years of negative earnings since you have no positive earnings to capitalize (or the earnings you do have are too low to exceed the Book Value).

Again, even if discrete chipsets were 99% of NV's revenue but only had 5% profitability, it's not a revenue stream one fears losing.

Also, your logic about teaming up with AMD hardly makes any sense.

1. AMD can sell their own products and receive a far higher ROE than the 3.5-5% royalty rate they would receive from NV if NV simply sold AMD products using AMD name.

2. NV's last quarter performance was largely affected by the $476 million write-down related to lawsuits for weak die/packaging material for laptops - http://news.cnet.com/8301-13924_3-20013543-64.html
This negatively affected their operating income.

Actually if discrete chipsets were 99% of their revenue, they should fear losing it. Because a decrease of revenue of that magnitude would mean a severe change in the cash flow, they would have to fire the majority of their employees and close down many facilities. They have to decrease the expense since their revenue decreased by a large magnitude. That kind of situation, a large downsizing, does not do well for investor confidence.
 

RussianSensation

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Sep 5, 2003
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Actually if discrete chipsets were 99% of their revenue, they should fear losing it. Because a decrease of revenue of that magnitude would mean a severe change in the cash flow

How? If 99% of product A only results in a 5% Net Income vs. 1% of revenue for product B that results in 95% of your Net Income. Revenue only matter if the revenue stream had good gross margins and low associated expenses required to generate the cash flow associate with that revenue stream (i.e, brand costs, workforce costs, marketing and selling expenses, etc). Long term, revenue by itself is a meaningless metric, unless there is profitability. This is why companies discontinue unprofitable product lines even if they do generate solid revenue. GM and Chrysler quickly come to mind!

But that's not the point here - the integrated chipset market for NV is only about 10% of their profits vs. 30+% for professional graphics and 19% for discrete graphics, which includes laptops and desktops. Therefore, when the company designs their products within limited time and cost constraints, they will focus on their most profitable lines first and foremost, wouldn't you agree?
 
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