Nvidia Shield recall impacts ‘vast majority’ of tablets it sold, CEO says

Jen-Hsun Huang also says even with low sales of the tablet so far, Nvidia’s in the hardware market for the long haul.

Nvidia’s Shield tablet recall includes the “vast majority” of devices the company has sold, CEO Jen-Hsun Huang said.

Nvidia on Friday announced that 8-inch Shield tablets sold between July 2014 and July 2015 have a battery that is susceptible to overheating and could pose a fire hazard. The company said that no other Shield products, including the Shield Android TV set-top box and the Shield gaming portable, are part of the voluntary recall.

Those tablets with batteries codenamed B01 are not affected by the recall, but customers who own devices with Y01 batteries are affected. The US recall affects 83,000 Shield tablets sold in the States, according to the US Consumer Product Safety Commission. Another 5,000 recalled tablets were sold in Canada. That number encompassed most Shield tablets Nvidia has sold, Huang said.

“Ultimately it was a hard lesson in learning about battery suppliers and battery supply chain,” Huang told CNET following Nvidia’s second-quarter earnings report. “I guess at some level I’m glad we learned it at the beginning when our expectations for sales were rather modest and just getting into it.”

Nvidia, which is best known for its line of graphics processors for computers, pitches the Shield tablet as a slate built for gamers. The Santa Clara, California-based company hasn’t revealed how many devices it has sold, but most experts believe the number to be low. Consumers in general aren’t buying as many tablets as they used to, and even Apple’s iPad — the king of the market — has been struggling.

But Huang said even with low sales, Nvidia intends to stay in the device market for the long haul. The investment required to make a tablet is low, he said, and he believes being able to access games online will revolutionize gaming.

“How long are we going to be in this? A long time,” Huang said. “I believe in Shield. I believe this is a very important investment for us. I have big, big, big dreams. But we started out with modest beginnings because we have to learn to walk before we run.”

Nvidia rose to prominence by creating graphic processing units, or GPUs, for computers, and it continues to benefit from high demand for its graphics for PC gaming. But it also has looked for other avenues for growth as overall PC sales slow. It had sought to break into the smartphone and tabletbusiness, but has largely been shut out, and is now looking at gaming devices and cars as its next big opportunity.

Huang said big new games coming later this year — such as “Star Wars” — will boost demand for its GPUs. That helped Nvidia project stronger third-quarter sales than analysts anticipated. The company said it expects to report revenue of $1.18 billion, plus or minus 2 percent. Analysts polled by Thomson Reuters had projected sales of $1.1 billion.

Nvidia shares rose 9.8 percent to $22.45 in after-hours trading.

Sales from Nvidia’s overall GPU business grew 9.2 percent from the previous year, while revenue from the GeForce GPUs for gaming jumped 51 percent. Sales from Tegra, Nvidia’s mobile chip geared at automobiles and mobile devices, slumped 19 percent. The company said Tegra was hurt by the smartphone and tablet market, but the decline was partially offset in the automotive infotainment system market and Shield sales.

Overall, the company reported net income of $26 million, or 5 cents a share, down from $128 million, or 22 cents a share, in the year-ago period. The tablet recall lowered Nvidia’s earnings by 2 cents a share. Excluding that and a 19-cent charge for winding down its Icera modem business, Nvidia’s earnings climbed to 34 cents from 30 cents a year earlier. Analysts had expected earnings of 21 cents a share.

Revenue climbed 4.5 percent to $1.15 billion, above the $1.01 billion projected by analysts.

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