The IT Nerd

If problems with their graphic chipsets followed by lawsuits from ticked off users isn’t enough to cause Nvidia pain, this will. Their own insurance company is now suing them. Why? Here’s a few reasons from National Union (Nvidia’s insurance company):

“Concurrently with, or prior to, placing National Union on notice of the chip claims, Nvidia has engaged in settlement negotiations with the chip claimants and, on information and belief, has agreed to settlements and/or the material terms of settlements with respect to some or all of the chip claims,” the filing says.

But, complains NUFI: “Nvidia has not permitted National Union to participate in Nvidia’s negotiations of the chip claims or the determination of any settlement or agreements.”

NUFI alleges that Nvidia won’t tell it about the chip claims, and instead has “flooded National Union with technical data” and provided it with details about the GPUs themselves.

It continues that Nvidia has “cloaked its refusals to provide information under the guise of preserving commercial relationships with the chip claimants.” But NUFI says it wants objective, material and non-proprietary information – for example the records of the repairs made.

That translates to something along the lines of  this: Nvidia been covering up essential information that NUFI is entitled to receive as Nvidia’s insurer by refusing to disclose even the most basic facts about the company’s GPU chip failures. But it gets better (or worse depending on if you’re Nvidia or not):

“The chip claims arise out of allegedly defectively designed Nvidia chips G86, G86A2, G84, C51, G72, G72M, G73, G72A3, MCP67 and NV42.”

If that’s true, then Nvidia is truly screwed, because that’s a much larger list of potentially defective hardware than Nvidia led people to believe. Some of the chipsets on that list are desktop chipsets. I should point out that this was raised as a possibility some time ago. But now that there’s more then just rumor, I can just see the lawyers prepping the class action lawsuits to serve up to Nvidia.

Oh, what does their insurance company want out of all of this? Simple:

So National Union doesn’t want to pay up. It wants the court to declare it has no duty to indemnify Nvidia because Nvidia has breached the terms of the agreement.

That means that if they win, their insurance company doesn’t have to pay a dime. I suspect that it would like cripple or kill Nvidia too. I guess that Nvidia should have taken my advice from this posting:

Nvidia has to step up to the table regardless of whether this is fact or not and clear this up once and for all. Users of their chipsets have the right to know if the Nvidia chipset they have in their computer is faulty or not. If they are, users of their products have the right to a speedy replacement with a part that works. If Nvidia doesn’t do that and these chips are faulty, then they deserve to be run out of business.

Looks like Nvidia’s days are numbered. It sucks to be them.

Many people think that reading the 10Q documents (AKA: their annual report) of major corporations is as dry as toast. But you can sometimes find some interesting tidbits in them. Take Nvidia for example. In their annual report, I note the following items. You might recall that Nvidia had set aside $150 – $200 million to deal with graphics chips that were failing at a obscene rate. Nvidia has spent $43.6 million so far according to their annual report. But the telling point is in this paragraph:

In September, October and November 2008, several putative class action lawsuits were filed against us, asserting various claims related to the impacted MCP and GPU products. Such lawsuits could result in the diversion of management’s time and attention away from business operations, which could harm our business. In addition, the costs of defense and any damages resulting from this litigation, a ruling against us, or a settlement of the litigation could adversely affect our cash flow and financial results.

Translation: If the people who filed these lawsuits win, we’re screwed.

That sort of implies that this whole graphics chips mess is a lot bigger than they are admitting to publicly. It’s hard to tell as the 10Q really dances around the issue to a great degree. But perhaps now is a good time for them to start repairing the damage that this circus has caused by manning up and dealing with it? It may be cheaper for them in the long run.

Imagine for a second that you’re Nvidia. You’ve had issues with your chips which have led to lawsuits. Now it gets worse for you as you release your Q4 and full year numbers:

For the fourth quarter of fiscal 2009, revenue was $481.1 million compared to $1.2 billion for the fourth quarter of fiscal 2008, a decrease of 60 percent. For the twelve months ended January 25, 2009, revenue was $3.4 billion compared to $4.1 billion for the twelve months ended January 27, 2008, a decrease of 16 percent.

I’ll let you read the the gory details in the press release. But the bottom line is that Nvidia is in some amount of trouble. They did try to look at the bright side though:

“The environment is clearly difficult and uncertain. Our first priority is to set an operating expense level that balances cash conservation while allowing us to continue to invest in initiatives that are of great importance to the market and in which we believe we have industry leadership. We have initiatives in all areas to reduce operating expenses,” said Jen-Hsun Huang, president and CEO of NVIDIA. “Although fiscal 2009 was extremely difficult, it was one of our best years of innovation. We made many important advances in graphics processing with PhysX and 3D Vision, GPU computing with CUDA and Tesla, and mobile computing with ION and Tegra. I am pleased with the excellent achievements we made in each of these important areas.”

Okay, when a company that lost money says that “it was one of our best years of innovation,” it’s like a movie studio saying that a movie that didn’t make any money is “critically acclaimed.”  It’s simply spin and nothing more.

Needless to say, investors are heading to the exits as the stock is down 12% as I type this.

This press release popped up today announcing the Quadro FX 5800 Video Card which they say is “the most powerful professional graphics card in graphics history.” If you excuse the marketing BS, they may have a point:

The Quadro FX 5800 graphics card offers unprecedented performance and scalability to rapidly visualize and interpret massive datasets that until now were unattainable on a workstation graphics board. Offering up to 240 CUDA(TM) programmable parallel cores and the industries first 4GB of graphics memory, the Quadro FX 5800 graphics card is ideally suited for oil and gas exploration, medical imaging, styling and design, and scientific visualization.

Screw all of that. This card is powerful enough to run Crysis and get decent performance. If it does that, it should be a hit with gamers everywhere.

Nvidia’s employees are likely mass e-mailing their resumes at the moment as this announcement from the graphics chip company has the bad news that 360 people or 6.5% of their workforce is about to be cut:

“Our action today is difficult, but necessary considering current business realities. Despite our reduction, we will continue to invest in selective high-growth opportunities like our revolutionary CUDA parallel computing technology and our Tegra mobile single-chip computer,” said Jen-Hsun Huang, president and CEO of NVIDIA. “We are taking fast action to enhance our competitive position and restore our financial performance. All of us at NVIDIA are determined to emerge from these challenges an even stronger company.”

So if you are an employee working on a Cuda or Tegra related project, you are probably safe. If you’re not, sucks to be you. Of course, all of this assumes that their current legal troubles that are related to their graphics chip defect issues don’t sink them first.

Surprise! A lawsuit has been filed over Nvidia’s defective graphics chips. According to Infoworld:

“The lawsuit [Warning: PDF] charged that Nvidia CEO Jen-Hsun Huang and CFO Marvin Burkett knew as early as November 2007 about a flaw that exists in the packaging used with some of the company’s graphics chips that caused them to fail at unusually high rates.”

The lawsuit also alleges that Nvidia has violated U.S. Securities laws as well. Nvidia publicly acknowledged the flaw on July 2, when it announced plans to take a one-time charge of up to $200 million to cover warranty costs related to the problem. That announcement caused Nvidia’s stock price to fall by 31%  to $12.98 and reduced the company’s market capitalization by $3 billion. The lawsuit seeks class-action status against Nvidia and unspecified damages.

Sucks to be Nvidia, but I have to admit that Nvidia had it coming given the way they handled this whole mess.