26

 

Our digital media processors are assembled and tested by Siliconware Precision Industries Company Ltd., Amkor Technology, ChipPAC Incorporated and Advanced Semiconductor Engineering. We do not have long-term agreements with any of these subcontractors. As a result of our dependence on third-party subcontractors for assembly, testing and packaging of our products, we do not directly control product delivery schedules or product quality. Any product shortages or quality assurance problems could increase the costs of manufacture, assembly or testing of our products and could harm our business. Due to the amount of time typically required to qualify assemblers and testers, we could experience significant delays in the shipment of our products if we are required to find alternative third parties to assemble or test our products or components. Any delays in delivery of our products could harm our business.

We rely on third-party vendors to supply us tools for the development of our new products and we may be unable to obtain the tools necessary to develop these products .

Microsoft announced that it had entered into an agreement with one of our competitors to develop technology for future Xbox products and services. The impact that this announcement may have on our future revenue from the sale of Xbox processors to Microsoft is uncertain.

On August 14, 2003, Microsoft announced that it had entered into an agreement with one of our competitors to develop technology for future Xbox products and services. The impact that this announcement may have on our future revenue from the sale of Xbox processors to Microsoft is uncertain, but we do not anticipate that it will have a significant impact upon us for at least 18 – 24 months. Revenue from the sale of Xbox processors to Microsoft during fiscal 2002, fiscal 2003 and fiscal 2004 accounted for 9%, 23% and 15%, respectively, of our total revenue.

	29

 

We may not be able to realize the potential financial or strategic benefits of business acquisitions and that could hurt our ability to grow our business and sell our products.

In the past we have acquired and invested in other businesses that offered products, services and technologies that we believed would help expand or enhance our products and services or help expand our distribution channels. For any previous or future acquisition or investment, the following risks could impair our ability to grow our business and develop new products and, ultimately, could impair our ability to sell our products:

·    difficulty in combining the technology, operations or workforce of the acquired business;

·    disruption of our ongoing businesses;

·    difficulty in realizing the potential financial or strategic benefits of the transaction;

·    difficulty in maintaining uniform standards, controls, procedures and policies; and

·    possible impairment of relationships with employees and customers as a result of any integration of new businesses and management personnel.

Provisions in our certificate of incorporation, our bylaws and our agreement with Microsoft could delay or prevent a change in control.

Our certificate of incorporation and bylaws contain provisions that could make it more difficult for a third party to acquire a majority of our outstanding voting stock. These provisions include the following:

·    the ability of the board of directors to create and issue preferred stock without prior stockholder approval;

·    the prohibition of stockholder action by written consent;

·    a classified board of directors; and

·    advance notice requirements for director nominations and stockholder proposals.

On March 5, 2000, we entered into an agreement with Microsoft in which we agreed to develop and sell graphics chips and to license certain technology to Microsoft and its licensees for use in the Xbox. In the event that an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft has first and last rights of refusal to purchase the stock. The provision could also delay or prevent a change in control of NVIDIA.

Risks Related to Our Competition

	30

 

 

·  suppliers of MCPs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Intel, Silicon Integrated Systems and VIA;

·  suppliers of desktop standalone GPUs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Creative Technology, Matrox Electronics Systems Ltd. and XGI Technology, Inc.,;

·  suppliers of notebook standalone GPUs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Silicon Motion. and the joint venture of a division of SONICblue Incorporated (formerly S3 Incorporated) and VIA; and

If and to the extent we offer products outside of the personal computer, consumer electronics and handheld segments, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. We cannot accurately predict if we will compete successfully in any new markets we may enter.

Our ability to achieve design wins also depends in part on our ability to identify and ensure compliance with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers, including Intel and Microsoft. This would require us to invest significant time and resources to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, our ability to achieve design wins could suffer.

Risks Related to Market Conditions

·    unexpected changes in, or impositions of, legislative or regulatory requirements;

·    delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers and restrictions;

·    longer payment cycles;

·    imposition of additional taxes and penalties;

·    the burdens of complying with a variety of foreign laws; and

·    other factors beyond our control, including terrorism and war, which may delay the shipment of our products.

 

	31

 

 

Our success will depend in part upon continued broad adoption of our digital media processors for 3D graphics in PC and consumer electronics applications. The market for digital media processors has been characterized by unpredictable and sometimes rapid shifts in the popularity of products, often caused by the publication of competitive industry benchmark results, changes in dynamic random memory devices pricing and other changes in the total system cost of add-in boards, as well as by severe price competition and by frequent new technology and product introductions. Only a small number of products have achieved broad market acceptance and such market acceptance, if achieved, is difficult to sustain due to intense competition. Since the PC segment is our core business, our business would suff er if for any reason our current or future digital media processors do not continue to achieve widespread acceptance in the PC segment. If we are unable to complete the timely development of products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the PC segment, our business would be harmed.

	32

 

Hostilities involving the United States and/or terrorist attacks could harm our business.

Political instability in Taiwan and in The People’s Republic of China could harm our business.

Because of our reliance on TSMC and UMC, our business may be harmed by political instability in Taiwan, including the worsening of the strained relations between The People’s Republic of China and Taiwan, or if relations between the U.S. and The People’s Republic of China are strained due to foreign relations events. Furthermore, any substantial disruption in our suppliers’ operations, either as a result of a natural disaster, political unrest, economic instability, acts of terrorism or war, equipment failure or other cause, could harm our business.

Our stock price may continue to experience significant short-term fluctuations.

We are exposed to fluctuations in the market values of our portfolio investments and in interest rates.

Risks Related to Intellectual Property, Litigation and Government Action

	33

 

Our ability to compete will be harmed if we are unable to adequately protect our intellectual property.

We rely primarily on a combination of patents, trademarks, trade secrets, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property in the United States and internationally. We have numerous patents issued and pending in the United States and in foreign countries. Our patents and pending patent applications relate to technology used by us in connection with our products, including our digital media processors. We also rely on international treaties and organizations and foreign laws to protect our intellectual property. We continuously assess whether and where to seek formal protection for particular innovations and technologies based on such factors as: the commercial significance of our operations and our competitors’ operations in particular countries and regions; the location in which our products are manufactured; our strategic technology or product directions in different countries; and the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions.

Litigation against us or our customers concerning infringement would likely result in significant expense to us and divert the efforts of our technical and management personnel.

We are currently subject to claims of patent infringement, and we may be subject to patent infringement claims or suits brought by other parties in the future. These claims and any future lawsuits could divert our resources and result in the payment of substantial damages.

Future actions by the IRS or SEC or other governmental or regulatory agencies could harm our business.

 

As of January 25, 2004, the Internal Revenue Service, or IRS, closed our federal income tax return exam for our fiscal years ended January 28, 2001 and January 27, 2002. The results of our exam were submitted to the Joint Committee on Taxation, or the Joint Committee, for review.

We are subject to changes in financial accounting standards, which may affect our reported financial results or the way we conduct business.

The Financial Accounting Standards Board and various federal legislative proposals have proposed changes to Accounting Principles Generally Accepted in the United States, or U.S. GAAP, that may require us to recognize compensation expense for our employee stock options. We currently us the intrinsic value method to measure compensation expense for stock-based awards to our employees. Under this method, we generally do no recognize compensation expense for an employee stock option when the exercise price of the stock option is equal to the fair market value on the date of grant. If any change to U.S. GAAP is adopted that requires us to recognize compensation expense for our employee stock options, our reported results of operations may be adversely affected.

The information required by this item is set forth in our consolidated financial statements and notes thereto included in this Annual Report.

Not applicable.

Controls and Procedures

(i) Evaluation of Disclosure Controls and Procedures. As of January 25, 2004, or the Evaluation Date, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not a bsolute, assurance of achieving their control objectives. Subject to these limitations, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when recorded.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected. These inherent limitations include the realities that judg ments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

(ii) Changes in Internal Controls. There were no changes in our internal controls over financial reporting during the fiscal quarter ended January 25, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

	35

 

	36

			Page
(a)	1.	Consolidated Financial Statements
		Independent Auditors’ Report	38
		Consolidated Balance Sheets as of January 25, 2004 and January 26, 2003	39
		Consolidated Statements of Income for the years ended January 25, 2004, January 26, 2003 and January 27, 2002	40
		Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended January 25, 2004, January 26, 2003 and January 27, 2002	41
		Consolidated Statements of Cash Flows for the years ended January 25, 2004, January 26, 2003 and January 27, 2002	42
		Notes to Consolidated Financial Statements	43
(a)	2.	Financial Statement Schedules
		Schedule II Valuation and Qualifying Accounts	66
(a)	3.	Exhibits
		The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as a part of this annual report.
(b)	4.	Reports on Form 8-K
	(i)	On November 6, 2003, NVIDIA filed a report on Form 8-K, dated November 6, 2003, furnishing under "Item 12. Disclosure of Results of Operations and Financial Condition" its financial information for the three and nine months ended October 26, 2003.

	37

	38

		January 25,			January 26,
			2004			2003
ASSETS
Current assets:
Cash and cash equivalents		$	214,422		$	346,994
Marketable securities			389,621			681,419
Accounts receivable, less allowances of $11,731 and $17,468 in 2004 and 2003, respectively			196,631			154,501
Inventories			234,238			145,046
Prepaid expenses and other current assets			14,539			12,393
Deferred income taxes			3,261			11,249
Total current assets			1,052,712			1,351,602
Property and equipment, net			190,029			135,152
Deposits and other assets			7,731			10,473
Deferred income taxes			--			43,317
Goodwill			108,909			54,227
Intangible assets, net			39,963			22,244
		$	1,399,344		$	1,617,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	185,342		$	141,129
Accrued liabilities			144,755			228,467
Current portion of note and capital lease obligations			4,015			5,676
Interest payable on convertible debenture			--			4,176
Total current liabilities			334,112			379,448
Deferred income tax liabilities			8,609			--
Capital lease obligations, less current portion			856			4,880
Long-term convertible debenture			--			300,000
Long-term liabilities			4,582			--
Commitments and contingent liabilities – see Note 13
Stockholders’ equity:
Common stock, $.001 par value; 1,000,000,000 shares authorized; 164,145,787 and 157,790,022 shares issued and outstanding in 2004 and 2003, respectively			164			158
Additional paid-in capital			583,481			531,030
Deferred compensation			(5,468	)		--
Accumulated other comprehensive income, net			850			3,760
Retained earnings			472,158			397,739
Total stockholders' equity			1,051,185			932,687
		$	1,399,344		$	1,617,015

	39

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
			2004			2003			2002
Revenue		$	1,822,945		$	1,909,447		$	1,369,471
Cost of revenue			1,294,067			1,327,271			850,233
Cost of revenue related to stock option exchange (1)			--			6,164			--
Gross profit			528,878			576,012			519,238
Operating expenses:
Research and development			269,972			224,873			154,752
Sales, general and administrative			165,249			151,485			98,944
In-process research and development			3,500			--			--
Stock option exchange (1)			--			55,668			--
Amortization of goodwill			--			--			10,093
Acquisition related charges			--			--			10,030
Discontinued use of property			--			--			3,687
Total operating expenses			438,721			432,026			277,506
Income from operations			90,157			143,986			241,732
Interest income			18,561			23,246			27,713
Interest expense			(12,010	)		(16,467	)		(16,173	)
Other income (expense), net			3,033			(208	)		(523	)
Convertible debenture redemption expense			(13,068	)		--			--
Income before income tax expense			86,673			150,557			252,749
Income tax expense			12,254			59,758			75,825
Net income		$	74,419		$	90,799		$	176,924
Basic net income per share		$	0.46		$	0.59		$	1.24
Diluted net income per share		$	0.43		$	0.54		$	1.03
Shares used in basic per share computation			160,924			153,513			143,015
Shares used in diluted per share computation			172,707			168,393			171,074

	40

		Common Stock		Additional	Deferred	Accumulated Other		Total Stock-	Total
		Shares	Amount	Paid in Capital	Compens-ation	Comprehensive Income	Retained Earnings	holders’ Equity	Comprehensive Income
Balances, January 28, 2001		136,915,234	$137	$276,960	$(6)	$--	$130,016	$407,107
Issuance of common stock from stock plans		12,637,896	13	90,830	--	--	--	90,843
Tax benefit from stock plans		--	--	88,932	--	--	--	88,932
Amortization of deferred compensation		--	--	--	6	--	--	6
Issuance cost		--	--	(101)	--	--	--	(101)
Unrealized gain		--	--	--	--	528	--	528	528
Tax effect of unrealized gain		--	--	--	--	(213)	--	(213)	(213)
Cumulative translation adjustments		--	--	--	--	(207)	--	(207)	(207)
Net income		--	--	--	--	--	176,924	176,924	176,924
Balances, January 27, 2002		149,553,130	150	456,621	--	108	306,940	763,819	177,032
Issuance of common stock from stock plans		4,421,823	4	25,483	--	--	--	25,487
Stock option exchange offer		3,815,069	4	39,902	--	--	--	39,906
Tax benefit from stock plans		--	--	9,180	--	--	--	9,180
Deferred compensation		--	--	--	(156)	--	--	(156)
Unrealized gain		--	--	--	--	5,742	--	5,742	5,742
Tax effect of unrealized gain		--	--	--	--	(2,297)	--	(2,297)	(2,297)
Cumulative translation adjustments		--	--	--	--	207	--	207	207
Net income		--	--	--	--	--	90,799	90,799	90,799
Balances, January 26, 2003		157,790,022	158	531,186	(156)	3,760	397,739	932,687	94,451
Issuance of common stock from stock plans		6,355,765	6	37,667	--	--	--	37,673
Tax benefit from stock plans		--	--	8,488	--	--	--	8,488
Deferred compensation		--	--	6,140	(5,984)	--	--	156
Amortization of deferred compensation		--	--	--	672	--	--	672
Unrealized loss, net of related tax effect		--	--	--	--	(4,850)	--	(4,850)	(4,850)
Tax effect of unrealized loss						1,940	--	1,940	1,940
Reclassification adjustment for net gains included in net income		--	--	--	--	--	--	--	(3,159)
Tax effect of reclassification adjustment for net gains included in net income		--	--	--	--	--	--	--	632
Net income		--	--	--	--	--	74,419	74,419	74,419
Balances, January 25, 2004		164,145,787	$164	$583,481	$(5,468)	$850	$472,158	$1,051,185	$68,982

	41

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
			2004			2003			2002
Cash flows from operating activities:
Net income		$	74,419		$	90,799		$	176,924
Adjustments to reconcile net income to net cash provided by operating activities:
In-process research and development			3,500			--			--
Depreciation and amortization			82,016			58,216			43,491
Write-off of convertible debenture issuance costs			5,485			--			--
Deferred income taxes			55,135			29,768			(51,914	)
Stock-based compensation			--			(156	)		364
Amortization of deferred compensation			672			--			6
Issuance of common stock in exchange for stock options			--			39,906			--
Bad debt expense			731			1,917			1,446
Tax benefit from employee stock plans			8,488			9,180			88,932
Changes in operating assets and liabilities:
Accounts receivable			(41,356	)		(9,070	)		(43,806	)
Inventories			(85,126	)		68,831			(123,497	)
Prepaid income taxes			--			38,016			(38,016	)
Prepaid expenses and other current assets			(2,698	)		(4,315	)		277
Deposits and other assets			(3,482	)		63			(13,957	)
Accounts payable			43,506			(72,890	)		141,717
Accrued liabilities			(44,746	)		26,564			108,646
Customer advance / deferred revenue			(46,866	)		(11,797	)		(129,807	)
Net cash provided by operating activities			49,678			265,032			160,806
Cash flows from investing activities:
Purchases of marketable securities			(734,642	)		(639,500	)		(472,917	)
Sales and maturities of marketable securities			1,021,590			422,200			15,320
Purchase of certain assets from various businesses			--			--			(64,109	)
Acquisition of businesses			(71,303	)		(3,901	)		--
Purchases of property and equipment and intangible assets			(127,604	)		(63,123	)		(96,966	)
Release of restricted cash			--			7,000			17,500
Net cash provided by (used in) investing activities			88,041			(277,324	)		(601,172	)
Cash flows from financing activities:
Redemption of convertible debenture			(300,000	)		--			--
Common stock issued under employee stock plans			37,757			25,487			90,476
Sale lease back financing			--			5,734			11,246
Principal payments on capital leases			(8,048	)		(4,935	)		(2,455	)
Issuance costs			--			--			(176	)
Net cash provided by (used in) financing activities			(270,291	)		26,286			99,091
Change in cash and cash equivalents			(132,572	)		13,994			(341,275	)
Cash and cash equivalents at beginning of period			346,994			333,000			674,275
Cash and cash equivalents at end of period		$	214,422		$	346,994		$	333,000
Supplemental disclosures of cash flow information:
Cash paid for interest		$	15,167		$	15,100		$	14,830
Cash paid (refund) for income taxes, net		$	(211	)	$	(35,101	)	$	26,429
Non-cash financing and investing activities:
Assets recorded under capital lease arrangements		$	2,528		$	--		$	--
Unrealized gains/(losses) from marketable securities		$	(4,850	)	$	5,742		$	528
Deferred stock-based compensation		$	6,140		$	--		$	--

	42

	43

	44

	45

	46

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
			2004			2003			2002
		(In thousands, except per share data)
Net income, as reported		$	74,419		$	90,799		$	176,924
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects			537			--			--
Add: Stock option exchange expense included in reported net income, net of related tax effects			--			37,285			--
Deduct: Compensation expense determined under fair value based method for stock options exchanged on October 25, 2002, net of related tax effects			--			(167,714	)		--
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(74,513	)		(37,698	)		(89,274	)
Pro forma net income (loss)		$	443		$	(77,328	)	$	87,650
Basic net income per share – as reported		$	0.46		$	0.59		$	1.24
Basic net income (loss) per share – pro forma		$	0.00		$	(0.50	)	$	0.61
Diluted net income per share – as reported		$	0.43		$	0.54		$	1.03
Diluted net income (loss) per share – pro forma		$	0.00		$	(0.50	)	$	0.51

	Year Ended		Year Ended	Year Ended
	January 25,		January 26,	January 27,
	2004		2003	2002
Weighted average expected life of stock options (in years)	4		4	4
Risk free interest rate	2.4%		3.8%	4.3%
Volatility	80%		88%	83%
Dividend yield	--		--	--

	47

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
			2004			2003			2002
		(In thousands, except per share data)
Numerator:
Numerator for basic and diluted net income per share		$	74,419		$	90,799		$	176,924
Denominator:
Denominator for basic net income per share, weighted average shares			160,924			153,513			143,015
Effect of dilutive securities:
Stock options outstanding			11,783			14,880			28,059
Denominator for diluted net income per share, weighted average shares			172,707			168,393			171,074
Net income per share:
Basic net income per share		$	0.46		$	0.59		$	1.24
Diluted net income per share		$	0.43		$	0.54		$	1.03

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
			2004			2003			2002
		(In thousands)
Stock options outstanding			7,906			5,892			2,504
Convertible subordinated debentures (equivalent common shares upon assumed conversion)			--			6,472			6,472
			7,906			12,364			8,976

	48

	49

		Fair Market Value			Straight-Line Depreciation/Amortization Period
			(In thousands)
Accounts receivable		$	1,505			--
Inventories			4,066			--
Other assets			612			--
Property and equipment			1,460			9 months – 3 years
Deferred income tax assets			1,601			--
In-process research and development			3,500			--
Goodwill			53,695			--
Intangible assets:
Existing technology			13,100			1 – 3 years
Customer relationships			2,100			18 months
Backlog			600			3 months
Non-compete agreement			150			18 months
Total assets acquired			82,389
Current liabilities			(2,115	)		--
Current liabilities recognized in connection with the business combination			(2,591	)		--
Long-term deferred income tax liabilities			(6,380	)		--
Total liabilities assumed			(11,086	)
Net assets acquired		$	71,303

	50

		Fair Market Value			Straight-Line Amortization Period
			(In thousands)			(Years)
Property and equipment		$	2,433			1-2
Trademarks			11,310			5
Goodwill			60,418			--
Total		$	74,161

		January 25, 2004			January 26, 2003
		(In thousands)
3dfx		$	50,326		$	50,326
MediaQ			53,695			--
Other			4,888			3,901
Total goodwill		$	108,909		$	54,227

	51

		January 25, 2004									January 26, 2003
		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
		(In thousands)
Technology licenses		$	15,178		$	(7,161	)	$	8,017		$	7,028		$	(3,972	)	$	3,056
Patents			19,319			(8,992	)		10,327			10,319			(4,478	)		5,841
Acquired intellectual property			27,067			(10,590	)		16,477			11,117			(5,236	)		5,881
Trademarks			11,310			(6,283	)		5,027			11,310			(4,021	)		7,289
Other			250			(135	)		115			250			(73	)		177
Total intangible assets		$	73,124		$	(33,161	)	$	39,963		$	40,024		$	(17,780	)	$	22,244

		January 25, 2004
			Amortized Cost			Unrealized Gain			Unrealized (Loss) (1)			Estimated Fair Value
		(In thousands)
Asset-backed securities		$	65,147		$	214		$	(127	)	$	65,234
Commercial paper			15,592			--			--			15,592
Obligations of the U.S. government & its agencies			198,084			574			(111	)		198,547
U.S. corporate notes, bonds, and obligations			175,678			957			(90	)		176,545
Money market			143,661			--			--			143,661
Total		$	598,162		$	1,745		$	(328	)	$	599,579
Classified as:
Cash equivalents											$	209,958
Marketable securities												389,621
Total											$	599,579

	52

(1)

The fair value of investments with loss positions is $96.9 million at January 25, 2004. We evaluated the nature of these investments, which are primarily obligations of the U.S. government and its agencies and U.S. corporate notes, the duration of the impairments, and the amount of the impairments relative to the underlying portfolio and concluded that such amounts were not "other-than-temporary" as defined by SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities .

		January 26, 2003
			Amortized Cost			Unrealized Gain			Unrealized (Loss)			Estimated Fair Value
		(In thousands)
Asset-backed securities		$	92,286		$	535		$	(635	)	$	92,186
Commercial paper			109,465			--			--			109,465
Obligations of the U.S. government & its agencies			359,003			2,847			(11	)		361,839
U.S. corporate notes, bonds, and obligations			262,914			3,551			(21	)		266,444
Money market			192,754			--			--			192,754
Total		$	1,016,422		$	6,933		$	(667	)	$	1,022,688
Classified as:
Cash equivalents											$	341,269
Marketable securities												681,419
Total											$	1,022,688

		January 25, 2004						January 26, 2003
			Amortized Cost			Estimated Fair Value			Amortized Cost			Estimated Fair Value
		(In thousands)
Less than one year		$	282,762		$	283,123		$	592,025		$	593,714
Due in 1 – 5 years			315,400			316,456			424,397			428,974
Total		$	598,162		$	599,579		$	1,016,422		$	1,022,688

		January 25,			January 26,
			2004			2003
Inventories:		(In thousands)
Raw materials		$	22,131		$	17,510
Work in-process			44,523			13,179
Finished goods			167,584			114,357
Total inventories		$	234,238		$	145,046

	53

		January 25,			January 26,
		2004			2003
Property and Equipment:		(In thousands)
Software		$	116,150		$	48,006
Test equipment			73,287			49,961
Computer equipment			70,173			54,479
Leasehold improvements			58,649			54,416
Construction in process			1,620			4,862
Office furniture and equipment			17,996			17,359
			337,875			229,083
Accumulated depreciation and amortization			(147,846	)		(93,931	)
Property and equipment, net		$	190,029		$	135,152

		January 25,			January 26,
		2004			2003
Accrued Liabilities:		(In thousands)
Accrued customer programs		$	54,875		$	50,018
Customer advances			11,530			58,396
Taxes payable			29,609			82,952
Accrued payroll and related expenses			30,270			20,575
Deferred rent			8,151			5,050
Other			10,320			11,476
Total accrued liabilities		$	144,755		$	228,467

Description		Balance at Beginning of Period			Additions (1)			Deductions (2)			Balance at End of Period
		(In thousands)
Year ended January 25, 2004
Allowance for sales returns		$	13,228		$	23,796		$	(27,603	)	$	9,421
Year ended January 26, 2003
Allowance for sales returns		$	15,586		$	20,147		$	(22,505	)	$	13,228
Year ended January 27, 2002
Allowance for sales returns		$	7,092		$	17,171		$	(8,677	)	$	15,586

	54

	55

	56

	Options Available for Grant	Options Outstanding	Weighted Average Price Per Share
Balances, January 28, 2001	13,080,404	50,549,356	$10.30
Authorized	9,954,182	--	--
Granted	(15,159,700)	15,154,700	38.14
Exercised	--	(12,282,958)	6.87
Cancelled	1,541,369	(1,541,369)	13.90
Balances, January 27, 2002	9,416,255	51,879,729	19.14
Authorized	13,957,063	--	--
Granted	(8,522,650)	8,522,650	28.09
Shares of common stock issued in exchange for stock options	(3,815,069)	--	--
Exercised	--	(3,816,695)	4.62
Cancelled - unvested (1)	18,067,604	(18,067,604)	36.53
Cancelled – vested (2)	2,882,376	(2,882,376)	32.51
Balances, January 26, 2003	31,985,579	35,635,704	12.93
Authorized	8,796,156	--	--
Granted	(12,680,144)	12,675,144	14.77
Exercised	--	(4,688,703)	5.17
Cancelled	855,440	(855,440)	19.26
Balances, January 25, 2004	28,957,031	42,766,705	$14.20

	57

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$0.09 - $0.09	12,000	2.6	$0.09	12,000	$0.09
0.33 – 0.33	166,900	3.6	$0.33	166,900	$0.33
0.66 – 0.79	571,360	3.9	$0.75	571,360	$0.75
1.04 – 1.38	357,291	4.0	$1.31	357,291	$1.31
1.58 – 2.25	4,915,622	4.4	$1.78	4,914,122	$1.78
4 .09 – 5.88	4,644,781	5.6	$4.80	4,185,698	$4.77
7.65 – 11.07	4,744,990	7.0	$9.41	2,431,695	$9.45
11.51 – 17.18	14,880,723	6.1	$14.52	4,265,731	$15.18
17.53 – 26.25	7,838,336	6.7	$20.12	4,130,320	$19.79
26.38 – 39.54	4,003,202	7.1	$32.36	2,392,121	$30.83
42.98 – 53.61	631,000	7.6	$43.36	614,562	$43.17
65.47 – 65.47	500	8.0	$65.47	218	$65.47
$0.09 - $65.47	42,766,705	6.1	$14.20	24,042,018	$12.46

	58

	59

Year ending January:		Operating			Capital
		(In thousands)
2005		$	24,635		$	4,179
2006			24,887			868
2007			25,063			--
2008			25,500			--
2009			25,125			--
2010 and thereafter			81,032			--
Total		$	206,242			5,047
Less amount representing interest at rates ranging from 5% - 10%						(176	)
Present value of minimum lease payments						4,871
Less current portion						4,015
Long term portion					$	856

		January 25,			January 26,
		2004			2003
Classes of Property and Equipment:		(In thousands)
Computer equipment		$	4,331		$	4,347
Test equipment			9,309			6,895
Office equipment and furniture			5,232			5,261
Software and other			634			634
			19,506			17,137
Accumulated amortization			(14,016	)		(8,683	)
Leased property and equipment, net		$	5,490		$	8,454

	60

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
		2004			2003			2002
		(In thousands)
Current:
Federal		$	--		$	--		$	--
State			221			135			134
Foreign			(51,590	)		20,555			38,673
Total current			(51,369	)		20,690			38,807
Deferred:
Federal			19,861			20,569			(43,738	)
State			35,274			9,319			(8,176	)
Foreign			--			--			--
Total deferred			55,135			29,888			(51,914	)
Charge in lieu of taxes attributable to employer stock option plans			8,488			9,180			88,932
Provision for income taxes		$	12,254		$	59,758		$	75,825

	61

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
		2004			2003			2002
		(In thousands)
Domestic		$	(17,816	)	$	20,764		$	39,613
Foreign			104,489			129,793			213,136
		$	86,673		$	150,557		$	252,749

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
		2004			2003			2002
		(In thousands)
Tax expense computed at Federal Statutory Rate		$	30,336		$	52,695		$	88,462
State income taxes (benefit), net of federal tax effect			544			(4,241	)		(531	)
Foreign tax rate differential			(11,671	)		23,222			(7,489	)
Research and experimental credit			(5,230	)		(12,048	)		(4,736	)
In-process research and development			1,225			--			--
Change in estimates			(36,766	)		--			--
Increase in beginning of year valuation allowance			33,599			--			--
Other			217			130			119
Provision for income taxes		$	12,254		$	59,758		$	75,825

		January 25,			January 26,
		2004			2003
Deferred tax assets:		(In thousands)
Net operating loss carryforwards		$	105,503		$	57,988
Accruals and reserves, not currently deductible for tax purposes			10,286			10,243
Property, equipment and intangible assets			19,194			5,733
Research and other tax credit carryforwards			99,806			87,265
Gross deferred tax assets			234,789			161,229
Less valuation allowance			(182,669	)		(106,663	)
Net deferred tax assets			52,120			54,566
Deferred tax liabilities:
Unremitted earnings of foreign subsidiary(ies)			(57,468	)		--
Net deferred tax asset (liability)		$	(5,348	)	$	54,566

	62

	63

		Year Ended			Year Ended			Year Ended
		January 25,			January 26,			January 27,
		2004			2003			2002
Revenue:		(In thousands)
U.S. and Other Americas		$	450,869		$	603,750		$	243,697
Asia Pacific			1,265,329			1,232,942			1,071,726
Europe			106,747			72,755			54,048
Total revenue		$	1,822,945		$	1,909,447		$	1,369,471

		As of			As of
		January 25,			January 26,
		2004			2003
Long-lived assets (including property & equipment, goodwill and intangible assets):		(In thousands)
U.S. and Other Americas		$	335,167		$	208,698
Asia Pacific			1,653			1,365
Europe			2,081			1,560
Total long-lived assets		$	338,901		$	211,623

	64

	Year Ended	Year Ended	Year Ended
	January 25,	January 26,	January 27,
	2004	2003	2002
Revenue:
Customer A	12%	15%	14%
Customer B	15%	23%	9%
Customer C	12%	9%	10%
Customer D	21%	17%	20%

	As of	As of
	January 25,	January 26,
	2004	2003
Accounts Receivable:
Customer A	15%	12%
Customer B	--	--
Customer C	18%	17%
Customer D	21%	18%

		Fiscal 2004 Quarters Ended
		Jan. 25, 2004			Oct. 26, 2003			July 27, 2003			April 27, 2003
		(In thousands, except per share data)
Statement of Operations Data:
Revenue		$	472,119		$	486,069		$	459,774		$	404,983
Cost of revenue		$	333,914		$	351,938		$	329,800		$	278,415
Gross profit		$	138,205		$	134,131		$	129,974		$	126,568
Net income		$	24,166		$	6,356		$	24,150		$	19,747
Basic net income per share		$	0.15		$	0.04		$	0.15		$	0.12
Diluted net income per share		$	0.14		$	0.04		$	0.14		$	0.12

		Fiscal 2003 Quarters Ended
		Jan. 26, 2003			Oct. 27, 2002			July 28, 2002			April 28, 2002
		(In thousands, except per share data)
Statement of Operations Data:
Revenue		$	468,953		$	430,304		$	427,285		$	582,905
Cost of revenue		$	301,442		$	322,106		$	327,983		$	375,740
Cost of revenue related to stock option exchange		$	--		$	6,164		$	--		$	--
Gross profit		$	167,511		$	102,034		$	99,302		$	207,165
Net income (loss)		$	50,936		$	(48,636	)	$	5,254		$	83,245
Basic net income (loss) per share		$	0.32			($0.32	)	$	0.03		$	0.55
Diluted net income (loss) per share		$	0.30			($0.32	)	$	0.03		$	0.47

	65

Description		Balance at Beginning of Period			Additions (3)			Deductions			Balance at End of Period
		(In thousands)
Year ended January 25, 2004
Allowance for sales returns and allowances		$	13,228		$	23,796		$	(27,603) (1	)	$	9,421
Allowance for doubtful accounts		$	4,240		$	731		$	(2,661) (2	)	$	2,310
Year ended January 26, 2003
Allowance for sales returns and allowances		$	15,586		$	20,147		$	(22,505) (1	)	$	13,228
Allowance for doubtful accounts		$	2,493		$	2,413		$	(666) (2	)	$	4,240
Year ended January 27, 2002
Allowance for sales returns and allowances		$	7,092		$	17,171		$	(8,677) (1	)	$	15,586
Allowance for doubtful accounts		$	1,311		$	2,628		$	(1,446) (2	)	$	2,493

	66

Exhibit Number	Description of Document
2.1(1)	Asset Purchase Agreement, dated as of December 15, 2000, by and among NVIDIA Corporation, NVIDIA US Investment Company and 3dfx Interactive, Inc.
3.1(2)	Amended and Restated Certificate of Incorporation.
3.3(3)	Certificate of Amendment of Amended and Restated Certificate of Incorporation.
3.3(4)	Bylaws, as amended.
4.1	Reference is made to Exhibits 3.1 and 3.2.
4.2(5)	Specimen Stock Certificate.
4.3(6)	Second Amended and Restated Investors’ Rights Agreement, dated August 19, 1997 between the Company and the parties indicated thereto and First Amendment to Second Amended and Restated Investors’ Rights Agreement, dated July 22, 1998.
4.4(7)	Second Amendment to Second Amended and Restated Investors’ Rights Agreement, dated April 12, 1999.
10.1(8)	Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers.
10.2(9)	1998 Equity Incentive Plan, as amended.
10.5(10)	1998 Employee Stock Purchase Plan, as amended.
10.6(11)	Form of Employee Stock Purchase Plan Offering, as amended.
10.7(12)	1998 Non-Employee Directors’ Stock Option Plan.
10.11(13)	2000 Nonstatutory Equity Incentive Plan, as amended
10.12(14)	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building A.
10.13(15)	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building B.
10.14(16)	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C.
10.15(17)	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building D.
10.16(18)	Employment Agreement between NVIDIA Corporation and David Shannon, dated July 12, 2002.
10.17(19)	Employment Agreement between NVIDIA Corporation and Marvin Burkett, dated August 12, 2002.
21.1(20)	List of Registrant’s Subsidiaries.
23.1(20)	Consent of KPMG LLP.
24	Power of Attorney (included in signature page)
31.1(20)	Rule 13a-14(a)/15d-14(a) President and Chief Executive Officer Certification
31.2 (20)	Rule 13a-14(a)/15d-14(a) President and Chief Financial Officer Certification
32.1(20)*	Certification of the Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.
32.2(20)*	Certification of the Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.

(1)	Previously filed as Exhibit 2.1 to our Annual Report on Form 10-K405, for the year ended January 28, 2001 filed on April 27, 2001 (No. 000-23985) and incorporated by reference herein.
(2)	Previously filed as Exhibit 4.1 to our Registration Statement on Form S-8 filed on March 23, 1999 (No. 333-74905) and incorporated by reference herein.
(3)	Previously filed as Exhibit 3.4 to our Quarterly Report on Form 10-Q, for the quarter ended July 28, 2002 filed on September 10, 2002 (No. 000-23985) and incorporated by reference herein.
(4)	Previously filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q, for the quarter ended July 29, 2001 filed on September 10, 2001 (No. 000-23985) and incorporated by reference herein.
(5)	Previously filed as Exhibit 4.2 to our Registration Statement on Form S-1/A filed on April 24, 1998 (No. 333-47495), as amended, and incorporated by reference herein.
(6)	Previously filed as Exhibit 4.3 to our Registration Statement on Form S-1/A filed on Nov. 20, 1998 (No. 333-47495), as amended, and incorporated by reference herein.
(7)	Previously filed as Exhibit 4.4 to our Quarterly Report on Form 10-Q, for the quarter ended May 2, 1999 filed on June 15, 1999 (No. 000-23985) and incorporated by reference herein.
(8)	Previously filed as Exhibit 10.1 to our Registration Statement on Form S-1 filed on March 6, 1998 (No. 333-47495), as amended, and incorporated by reference herein.
(9)	Previously filed as Exhibit 10.2 to our Annual Report on Form 10-K, for the year ended January 26, 2003 filed on April 25, 2003 (No. 000-23985) and incorporated by reference herein.
(10)	Previously filed as Exhibit 99.4 to our Registration Statement on Form S-8 filed on December 8, 2000 (No. 333-51520) and incorporated by reference herein.
(11)	Previously filed as Exhibit 99.5 to our Registration Statement on Form S-8 filed on September 23, 2002 (No. 333-100010) and incorporated by reference herein.
(12)	Previously filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q/A, for the quarter ended April 28, 2002 filed on July 3, 2002 (No. 000-23985) and incorporated by reference herein.
(13)	Previously filed as Exhibit 10.11 to our Annual Report on Form 10-K, for the year ended January 26, 2003 filed on April 25, 2003 (No. 000-23985) and incorporated by reference herein.
(14)	Previously filed as Exhibit 10.1 to our Registration Statement on Form S-3/A filed on April 20, 2000 (No. 333-33560), as amended, and incorporated by reference herein.
(15)	Previously filed as Exhibit 10.2 to our Registration Statement on Form S-3/A filed on April 20, 2000 (No. 333-33560), as amended, and incorporated by reference herein.
(16)	Previously filed as Exhibit 10.3 to our Registration Statement on Form S-3/A filed on April 20, 2000 (No. 333-33560), as amended, and incorporated by reference herein.
(17)	Previously filed as Exhibit 10.4 to our Registration Statement on Form S-3/A filed on April 20, 2000 (No. 333-33560), as amended, and incorporated by reference herein.
(18)	Previously filed as Exhibit 10.19 to our Quarterly Report on Form 10-Q, for the quarter ended October 27, 2002 filed on December 10, 2002 (No. 000-23985) and incorporated by reference herein.
(19)	Previously filed as Exhibit 10.20 to our Quarterly Report on Form 10-Q, for the quarter ended October 27, 2002 filed on December 10, 2002 (No. 000-23985) and incorporated by reference herein.
(20)	Filed herewith.

	68

Signature	Title	Date
	President, Chief Executive Officer
/s/ JEN-HSUN HUANG	and Director (Principal Executive Officer)
Jen-Hsun Huang		March 29, 2004
/s/ MARVIN D. BURKETT	Chief Financial Officer (Principal Financial and Accounting Officer)
Marvin D. Burkett		March 29, 2004
/s/ TENCH COXE
Tench Coxe	Director	March 29, 2004
/s/ JAMES C. GAITHER
James C. Gaither	Director	March 29, 2004
/s/ HARVEY C. JONES
Harvey C. Jones	Director	March 29, 2004
/s/ WILLIAM J. MILLER
William J. Miller	Director	March 29, 2004
/s/ A. BROOKE SEAWELL
A. Brooke Seawell	Director	March 29, 2004
/s/ MARK A. STEVENS
Mark A. Stevens	Director	March 29, 2004