Nvidia: Tegra Set To Win Designs, Says Nomura

Nomura Equity Research’s Romit Shah today reiterates a Neutral rating on shares of chip maker Nvidia (NVDA) but emphasizes what could be a better-than-expected outlook for the company’s “Tegra” microprocessor when the company reports fiscal Q3 results tomorrow afternoon, after the bell.

In stark contrast to JMP Securities’s Alex Gauna, who earlier today cut his rating on Nvidia to the equivalent of a Hold, while citing the company’s apparent failure to win meaningful business for Tegra, Shah cites what appears to be momentum building behind the latest version of the Tegra, Tegra 3, also known as “Kal-El,” which is shipping in the Asustek (2357TW) “Transformer” tablet.

Shah notes other apparent or potential wins:

We expect HTC (2498TW) to launch a smartphone (EDGE) based on Tegra 3 early next year. We note that this is the first time HTC will be using NVIDIA��s chip. We believe HTC could also launch a tablet based on Tegra 3 in 1Q12. We also highlight that HTC shipped 13mn smartphones in 3Q11. Our checks indicate that Acer, LG, Motorola, and Samsung are also planning to launch Tegra 3-based devices in early 2012 running on Android��s latest release, Ice Cream Sandwich. We believe a few of these devices will be launched during the upcoming CES event in January.

Because of those possibilities, “Tegra guidance for January could be better than feared, he writes. The company’s consumer products business, containing Tegra, may see revenue decline 3% in Q4, he thinks.

Today’s is the second positive curtain-raiser to Q3 that Shah has offered this week. On Monday he cast doubt on worries about a Tegra shortfall in Q3 and also about worries over loss of share by the company in the PC graphics processor (GPU) market:

! Investor s seem preoccupied with the Mercury research Q3 GPU report but are underestimating product mix. While notebook attach rates decreased, desktop GPU shipments grew 11% qoq. We also believe professional graphics had a good quarter (see table 4). This mix should have a favorable sequential impact on the graphics business due to higher ASPs. As such, we believe our GPU sales estimate of $666mn (62% of revenue, 4% q/q growth) is conservative. Nvidia indicated in September that Tegra revenue would be up qoq vs guidance of flattish growth. Along those lines, Q3 Android tablet shipments totaled 4.5mn according to Strategy Analytics. At 70% share, Nvidia would have shipped 3mn chips, higher than our est of 1.2mn.

Nvidia shares today are