Graphics chipmaker Nvidia announces major layoffs

Nvidia, a leading maker of graphics chips, added to its recent woes by announcing Thursday afternoon that it will lay off about 6.5 percent of the company's workforce, or close to 360 people.

Nvidia expects $7 million to $10 million in severance and other layoff-related costs for the third quarter of 2009, and the layoffs to be completed by the end of the third quarter, or 26 October.

Nvidia said that after evaluating projects based on potential growth, the less promising projects were cut, along with their staff. The company did not disclose which projects were cancelled. Another reason for the round of layoffs, the first since the company was founded by CEO Jen-Hsung Huang in 1993, was the economy. He called it a ''difficult, but necessary'' decision.

Despite the success of NVision 08, the company's first conference that headlined in San Jose last month, Huang had mentioned Nvidia's struggles in its second quarter earnings statement. ''Our Q2 financial performance was disappointing. The desktop PC market around the world weakened during the quarter,'' he said. ''And our miscalculation of competitive price position further pressured our desktop GPU business.''

The layoffs were due ''in part because of market conditions,'' said Nvidia spokeswoman Calisa Cole. ''However, we remain very focused on our strategic goals.'' Wall Street responded enthusiastically to the news of the layoffs by sending Nvidia stock soaring, up 8.9 per cent in daily trading, from $10 to $10.89.

Nvidia is best known as a graphics chip supplier for gaming enthusiasts. Its business, however, extends to graphics chips sold to a wide variety of customers for handling intense video jobs, such as designing airplanes or creating animations.

Over the past couple of years, Nvidia has worked to push its silicon even deeper into corporate accounts by opening up some programming interfaces on the graphics chips. This has allowed oil and gas firms, manufacturers and biotech firms, among others, to run certain applications on the graphics processors.

In the past, those applications were typically run on more mainstream chips from Intel and Advanced Micro Devices (AMD). While this could one-day result in a large, new business for Nvidia, the company has been distracted by these efforts, according to some analysts. As a result, AMD, which acquired Nvidia's major rival ATI Technologies, has managed to make gains.

Even worse in the near term, Nvidia announced in August that a product defect would cause it to take a $196 million charge. That news, coupled with a 5 percent drop in second quarter revenue to $893 million, has concerned the company's investors.