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Nvidia plays hand

18 Mar

When Sony released the PlayStation 4 late last month, Nvidia’s signature graphics chips weren’t on the parts list. Nvidia Chief Executive Officer Jen-Hsun Huang figures that the players he’s after have already left the living room.

Huang has come up with a handheld gaming device from Nvidia itself. The executive, who co-founded the chipmaker in 1993, has pushed it toward smartphones and tablets as those products demand better graphics for games and videos. Now he’s looking to seed a future centered on mobile-game platforms like Google’s Android, which is free to license, rather than consoles from Sony, Nintendo Co. or Microsoft Corp.

“This is going to be the best way to enjoy games in the future,” Huang, 50, said in a recent interview. “We felt that there’s an opportunity for someone to make the open ecosystem more enjoyable.”

Nvidia’s Shield, unveiled at the Consumer Electronics Show in January, resembles a console’s controller with a pop-up screen, and works for games like “Angry Birds” made for portable devices. It can connect to a TV, projecting play onto a big screen without consoles like the Wii U, Xbox 360 or PlayStation 3. It can also link wirelessly to some PCs, giving players access to pricier titles like “Call of Duty.”

The company in Santa Clara was a pioneer of specialized chips that improved computing graphics and brought lifelike images to screens.

Graphics wars

Over time, the market narrowed to a fight between Nvidia and ATI Technologies, now a part of Advanced Micro Devices. The rivals leapfrogged each other in performance and market share in both personal computers and game consoles. While Nvidia’s current design is rated the best by reviewer sites, consoles coming to market this year had their technical specifications laid out as much as a year ago.

By latching onto the most widely used system in mobile phones, Nvidia is wooing gamers seeking more mobility and flexibility. The company is looking to spur development of more intensive Android games that require graphics power from chips like Nvidia’s to create realistic environments.

It’s a gamble for Nvidia, which gets more than 60 percent of sales from graphics processors it makes for other companies’ PCs, consoles and tablets. The Shield, set to debut in the coming quarter, will compete with a new generation of consoles from Nintendo, Sony and Microsoft.

Move to mobile

U.S. sales data suggest players are embracing mobile platforms like Android at the expense of traditional gear. Revenue from games downloaded to computers and mobile devices rose 16 percent last year to $5.9 billion, according to researcher NPD Group. Revenue from packaged titles, most of which retail for about $60, fell 21 percent to $8.9 billion.

Huang sees opportunity for Nvidia, which has found a way to keep revenue growing as the markets for PCs and the graphics chips used in the machines decline. Nvidia sales grew 7.1 percent last year, in part because Huang branched out into mobile devices. The company’s shares, which fell 12 percent in 2012, have been trading in the $12 to $13 range since the Shield was introduced.

The company is confident enough that it plans a new architect-designed campus across from its current headquarters.

At Sunnyvale’s AMD, which will have its products in all three new consoles, revenue declined 17 percent in 2012, while its shares dropped 56 percent.

“Nvidia gets that there’s value to be derived from the ability to play games on the big-screen TV at home, on a PC and then on a mobile or portable device,” said Lewis Ward, an analyst at researcher IDC. “The cross-platform approach to gaming is something that has potential.”

Handheld crowd

One challenge is to convince Android gamers, who so far have stuck with smartphones, to shell out for a dedicated gaming device. Sales of Sony’s $250 Vita and Nintendo’s $170 3DS, for example, have missed estimates.

While Nvidia hasn’t set a price, a gaming tablet from Los Angeles start-up Wikipad will cost $249 when it hits the market in the next few months. Ouya, a Kickstarter-funded console that has generated buzz with gamers, will cost $99.99 in June. Both play Android titles and, like the Shield, use Nvidia’s Tegra chips.

Another question is what resources game developers will dedicate to Android, which is dominated by $5-and-under casual titles. Showing off Shield’s capabilities requires play to be tailored for controllers with triggers and joysticks.

Ultimately, Huang sees a world of cloud-based gaming networks that handle the heavy computing. The company has begun selling a line of custom-built server machines called Grid that are based on its graphics processors. Those products would allow broadband providers to stream games directly to TVs and handhelds, with no console. While similar services haven’t attracted as many subscribers as were targeted, Nvidia is trying to make it easier to set them up.