GPU Business

Our GPU business is comprised primarily of our GeForce products that support desktop and notebook PCs, plus memory products. Our GPU business is focused on Microsoft Windows and Apple PC platforms. GeForce GPUs power PCs made by or distributed by most PC OEMs in the world for desktop PCs, notebook PCs, and PCs loaded with Windows Media Center and other media extenders such as the Apple TV. GPUs enhance the user experience for playing video games, editing photos, viewing and editing videos and high-definition, or HD, movies. GPUs also enable the rich visual user interfaces of the Windows Vista and Apple OS X operating systems. The combination of the programmable Unified Shader GPU with Microsoft Corporation’s, or Microsoft’s, DirectX 10 high-level shading language is known as DirectX 10 GPUs. Combined with the ability to directly access the GPU via the new Windows Vista applications from Microsoft Office to Web 2.0, applications can now incorporate improved quality through 3D effects.

We believe we are in an era where visual computing is becoming increasingly important to consumers and other end users of our products. Our strategy is to promote our GeForce brand as one of the most important processors through technology leadership, increasing programmability, and great content experience. In fiscal year ~~2009,~~2010, our strategy was to extend our architectural and technology advantage with our GeForce GPUs.

~~The GeForce GTX 280 and 260 GPU products that we launched during~~ During fiscal year ~~2009 represent~~2010, we introduced our next generation CUDA GPU architecture, codenamed “Fermi”. We expect the ~~second-generation of our unified~~Fermi architecture to be the foundation for computational GPUs, and to enable breakthroughs in both graphics and parallel computing. We also launched a development environment for massively parallel computing. Using this tool, which is named NVIDIA Parallel Nsight, and is integrated into Microsoft Visual Studio we expect that developers will be able to use Microsoft Visual Studio and C++ to write applications that leverage Fermi's GPU architecture. ~~Based~~It is also designed to accelerate performance on a ~~comparison between the GeForce GTX 280~~wider array of applications including ray tracing, physics simulation, finite element analysis, high-precision scientific computing, sparse linear algebra, sorting, and the GeForce 8800 Ultra in a variety of benchmarks and resolutions, the GeForce GTX 280 and 260 GPUs deliver 50 percent more gaming performance over the GeForce 8800 Ultra GPU. Other significant product launches during fiscal year 2009 included the GeForce 9600 GT, which provides more than double the performance of our GeForce 8600 GTS product; the GeForce 9800 GX2, which provides a new dual GPU board featuring Quad Scalable Link Interface, or SLI, technology; and the GeForce 9800 GTX, which is a flexible GPU that supports both two-way and three-way SLI technology.search algorithms.

WeDuring fiscal year 2010, we also delivered our first 40nm GPUs to customers. Because of limited 40nm wafer foundry capacity, in addition to supplier challenges related to 40nm process manufacturing yields, we were forced to allocate our available 40nm product supply among our customers.

In addition, we launched Optimus™ technology, a combination of software and hardware innovations for notebooks, which turns on and off the ~~GeForce GTX 295 and GeForce GTX 285 which were designed~~GPU based on ~~Compute Unified Device Architecture, or CUDA, technology. The GeForce GTX 295 is among~~application needs without any user intervention thus providing the ~~world’s fastest dual~~advanced performance of discrete graphics while at the same time still delivering prolonged battery life. Our OEM customers have currently announced the availability of eight notebook models with 50 systems to be scheduled for availability by summer 2010. We believe Optimus has the potential to expand the overall market share for discrete GPUs by increasing the GPU solutions featuring the power of two GeForce GTX 200 GPUs on a single card. The GeForce GTX 285 is among the world’s most powerful single GPU solution and works efficiently in complex DirectX 10 environments with extreme HD resolutions. We also shipped notebook products from the GeForce 100M Series, which includes the GeForce G105M and the GeForce G110M to meet the performance demands of today’s visual computing applications. The GeForce G105M is over 55 percent faster than our previous productattach rate in the ~~mainstream segment, while the GeForce G110M is 35 percent faster than our previous mainstream GPU.~~

In fiscal year 2009, we completed our acquisition of Ageia Technologies, Inc., or Ageia, an industry leader in gaming physics technology. Ageia's PhysX software is widely adopted in several PhysX-based games that are shipping or in development on Sony Playstation 3, Microsoft Xbox 360, Nintendo Wii, and gaming PCs. We believe that the combination of the GPU and physics engine brands result in an enhanced visual experience for the gaming world. Subsequent to our acquisition of Ageia, we launched the GeForce 9800 GTX+, GeForce 9800 GT, and GeForce 9500 GT GPUs, which provide support for our PhysX physics engine and CUDA parallel processing across a wide range of price segments. Electronic Arts, THQ and 2K Games, a publishing label of Take-Two Interactive Software, have licensed PhysX technology as a development platform which will be available for use by each of the companies’ studios worldwide.

Our share of the standalone desktop GPU category decreased from 64% to 63% in fiscal year 2009, according to the December 2007 and December 2008 PC Graphics Report from Mercury Research, respectively. Our share of the standalone notebook ~~category decreased from 75% to 63%, according to the December 2007 and December 2008 PC Graphics Report from Mercury Research, respectively.~~segment.

Professional Solutions Business

Our PSB is comprised of our Quadro professional workstation products and other professional graphics products, including our Tesla high-performance computing products. Our Quadro brand products are designed to deliver the highest possible level of graphics performance and application compatibility for the professional industry. ~~The Quadro family consists of the Quadro Plex Visual Computing System, or VCS, Quadro FX, Quadro CX and the Quadro Night Vision Systems, or NVS, professional workstation processors.~~ Quadro products are recognized by many as the standard for professional graphics solutions needed to solve many of the world’s most complex visual computing challenges in the manufacturing, entertainment, medical, science, and aerospace industries. ~~NVIDIA~~ Quadro products are fully certified by several software developers for professional workstation applications and are designed to deliver the graphics performance and precision required by professional applications.

We believe that recent years have experienced an increasing level of global adoption ~~for~~of the computer-aided design approach of product creation. We have achieved a leading position in the professional graphics category by providing innovative GPU technology, software, and tools that integrate the capabilities of our GPU with a broad array of visualization products.

During fiscal year ~~2009,~~2010, we launched ~~several new Quadro solutions. These included~~RealityServer, a combination of GPU hardware and software with the Quadro FX 3600M Professional, which is among the highest performing notebook GPUs, and the Quadro Plex D Series, a dedicated desk side VCS system that, alternatively, can be configured using two Quadro Plex D systems for a 3U configuration that fits a standard 19” rack environment. At the SIGGRAPH 2008 conference, the Quadro Plex D2 system set a new milestone in computer graphics by demonstrating the world’s first real-time fully-interactive ray tracer.ability to stream interactive, photorealistic 3D applications to any web- connected PC, laptop, netbook or smart phone. We also launched ~~five new~~during the year two significant enhancements to our Quadro ~~FX notebook~~product line-up: Quadro Plex SVS, a scalable visual computing platform for professionals who interact with 3D models and analyze large volumes of data, and the OptiX ray tracing engine, part of a suite of application acceleration engines for software developers. This suite also includes engines for managing 3D data and scenes, scaling performance across multiple GPUs and real-time modeling of hyper-realistic physical and environmental effects.

In the area of high performance computing, we also announced during fiscal year 2010 that spanned from ultra-high performance to ultra mobility, as well as the Quadro CX, the industry’s first accelerator for Adobe’s Creative Suite 4, or Adobe CS4, content creation software. Adobe CS4 software has added optimization to take advantage of GPU technology. The Quadro CX is specifically designed to enhance the performanceAMBER, one of the ~~Adobe CS4 product line~~popular molecular dynamics codes used by researchers in academia and pharmaceutical companies to ~~give creative professionals the ultimate performance and productivity.~~

~~During fiscal year 2009, we also we launched the Tesla C1060 computing processor and the Tesla S1070 computing system, which is among the first teraflop processors and has a 1U system demonstrating~~research new drugs, had been accelerated by our CUDA architecture for massively parallel processing. AMBER, accelerated by CUDA, now runs up to ~~four teraflops of performance. Tesla is~~50 times faster on a ~~new family of~~ GPU computing products that delivers processing capabilities for high-performance computing applications, and marks our entry into the high-performance computing industry. The Tesla family also consists of the C870 GPU computing processor, the D870 Deskside Supercomputer and the S870 1U Computing Server. We believe we are in an era of GPU computing, where our CUDA parallel processing architecture can accelerate compute-intensive applications by significant multiples over that ofthan on a central processing unit, or CPU.

Hewlett – Packard Company and Super Micro Computer, Inc. began carrying our Tesla computing solution products during fiscal year 2010, joining a global list of OEMs, including Cray Inc., Dell Inc., Hewlett-Packard Lenovo, Silicon Graphics International and Sun Microsystems. We recently collaborated with a leading Chinese geophysical services provider to unveil the launch of a new Tesla-based hardware and seismic software suite that accelerates the performance of complex seismic data computation for oil and gas companies in China. We also collaborated with the investment banking division of a leading European financial institution to replace their CPU ~~alone. NVIDIA CUDA~~cores with a smaller cluster consisting of CPU servers and two Tesla GPU-based S1070 systems, which require significantly less power. Factoring the acceleration in processing times achieved using Tesla GPUs, the division is a general purpose parallel computing architecture that leverages the parallel compute engine in our graphics processing units to solve many complex computational problems in a fraction of the time required on a CPU. There are currently over 25,000 developers around the world using CUDA. In order to program using the CUDA architecture, developers can, today, use C, one of the most widely used high-level programming languages, which can then be run at great performance on a CUDA enabled processor. We expect other languages to be supported in the future, including FORTRAN and C++.almost 200 times less electricity than before.

With CUDA, we are able to speed up general purpose compute-intensive applications like we do for 3D graphics processing. Five new consumer applications were launched that are accelerated by the CUDA architecture on our GPUs – Super LoiloScope Mars, for video editing, ArcSoft SimHD, for DVD image enhancement, Nero Move It and Cyberlink MediaShow Espresso, for video format conversion, and Motion DSP vReveal, for real-time video quality enhancement. Developers are able to speed-up algorithms in areas ranging from nano molecular dynamics to image processing, medical image reconstruction and derivatives modeling for financial risk analysis. Over ~~100~~300 universities around the world now teach parallel programming with CUDA and many PC OEMs now offer high performance computing solutions with Tesla for use by customers around the world, including Motorola Inc., Chevron GECorporation, General Electric Health Care and ~~even~~ General Mills ~~the consumer products company.~~Inc.. Researchers use CUDA to accelerate their time-to-discovery, and popular off-the-shelf software packages are now CUDA accelerated.

MCP Business

Our MCP business, as we have reported it through fiscal year 2010, is comprised primarily of ~~nForce core logic and GeForce~~our ION mGPU products. Our ~~nForce and GeForce mGPU families~~ION family of products ~~address~~addresses the integrated core logic market. Core logic is the computer’s “central nervous system,” controlling and directing high speed data between ~~the central processing unit,~~ or CPU, the GPU, storage, and networks. High quality, long-term reliability, and top performance are key customer demands of core logic suppliers.

During fiscal year 2008, we announced a new technology named Hybrid SLI. This technology combines the multi-GPU technology with a powerful and energy-efficient engine. When GeForce add-in graphics cardsOur ION mGPU products are ~~connected to GeForce mGPUs, Hybrid SLI kicks in, combining their processing power to deliver an improved experience. The technology is application aware so, depending~~focused on ~~the processing demands of each application running on the host PC, the discrete GPU may be completely shut down in order to save power.~~

During fiscal year 2009, we shipped Hybrid SLI DX10 mGPUs – the GeForce 8000 GPU series. The GeForce 8000 GPU series includes GeForce Boost Hybrid SLI technology, which is designed to double performance when paired with a GeForce 8 series desktop GPU. We also extended the reach of SLI technology into the performance category with the launch of our NVIDIA nForce 790i Ultra SLI MCP, a highly rated overclockable platform fortransforming mainstream Intel ~~Corporation, or Intel, processors.~~During fiscal year 2009, we launched the GeForce 9M series of notebook GPUs that enables improved performance in notebooks with Hybrid SLI technology and PhysX technology. We also launched SLI for Intel Broomfield CPU platforms. When paired with the nForce 200 SLI MCP, Intel’s Bloomfield CPU and Tylersburg core logic chipset will deliver NVIDIA three-way SLI technology with up to a 2.8 times performance boost over single graphics card platforms.

In fiscal year 2009, we launched the GeForce 9400M mGPU along with Apple Inc., or Apple, for their new lineup of Mac notebooks. The GeForce 9400M integrates three complex chips – the northbridge, the input-output network processor, and the GeForce GPUPCs into a ~~single chip~~premium experience typically found in higher priced laptops and ~~as a result, significantly improves performance over Intel integrated graphics. Apple’s MacBook~~desktops. Our strategy is to combine the ION mGPU found in new desktop and ~~MacBook Air~~ notebook computers come standard with the GeForce 9400M. Apple’s MacBook Pro notebook computer comes standard with the hybrid combination of two GeForce GPUs - a GeForce 9400M for maximum battery life and a GeForce 9600M GT for high performance mode. We also launched the GeForce 9400 and 9300 mGPUs for Intel desktop PCs. These new mGPUs set a new price/performance standard for integrated graphics by combining the power of three different chips into one highly compact and efficient GPU.

~~Additionally, in the fourth quarter of fiscal year 2009, we announced the NVIDIA Ion Platform, which combines the GeForce 9400 GPU~~PCs with the Intel Celeron, Core 2 Duo or Atom ~~CPU. The combination~~CPUs. These combinations create a platform that enables ~~netbooks, small~~a premium PC experience in a lower cost and smaller form factor, thus enabling netbooks and all-in-one PCs to play rich media content and popular games in ~~high definition.~~HD.

~~Our MCP strategy is~~At Computex 2009, our ION platform was awarded the Best Choice award. We announced 21 ION-related design wins at Computex 2009, and have announced more design wins since then. Additionally, along with Adobe Systems Incorporated, or Adobe, we announced GPU acceleration for the Flash player, bringing Internet video to ~~bring the benefits~~a new class of ~~GeForce GPUs to the most price sensitive categories while creating exciting platform architectures like SLI, Hybrid SLI,~~low-power PCs and Enthusiast System Architecture, or ESA. ESA is a standard for system information protocol that links a PC system’s various critical components – such as fan, power supply, smart chassis, GPUs, and motherboards. It enables a unified architecture for applications and users to control and optimize the performance of their system. SLI, Hybrid SLI, and ESA are examples of how we create architectures that advance the capabilities of the PC.Internet devices.

During fiscal year 2010, we began redirecting our development strategy in our MCP business in response to our on-going dispute with Intel Corporation. In February 2009, Intel filed suit against us, related to a chipset license agreement that we entered into with Intel in 2004. In March 2009, we asserted counterclaims against Intel pursuant to which we seek an order declaring that Intel breached the chipset license agreement as well as the implied covenant of good faith and fair dealing underlying the license agreements, and seeking, among other things, termination of Intel’s cross license to our technology. Notwithstanding our belief that the chipset license agreement extends to a component of the new Intel processor architecture referred to as Direct Media Interface, or DMI, we currently have no intention of building a DMI-based chipset while this dispute remains unresolved. As a result, we began redirecting our MCP development resources to other programs. Please refer to Note 13 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further information regarding this litigation

Consumer Products Business

Our CPB is comprised of our Tegra ~~and GoForce~~ mobile ~~brands and~~ products that support ~~netbooks,~~smartphones, smartbooks, tablets, personal media players, or PMPs, ~~PDAs, cellular phones~~internet television, automotive navigation, and other ~~handheld~~similar devices. ~~This business~~CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics devices.

~~We believe~~Our mobile strategy is to create a system-on-a-chip that mobile devices like phones, music players, and portable navigation devices will increasingly become multi-function, multi-tasking, PCs. As such, we anticipate the architecture of these devices will increasingly become more consumer PC-like and be capable of delivering all theenables entertainment and web experiences that end users currently enjoy on a ~~PC, but in a form-factor that fits nicely in their hands. Our mobile strategy is to create a computer-on-a-chip that enables this experience.~~PC. NVIDIA Tegra ~~and GoForce~~ mobile products implement design techniques, both inside the chips and at the system level, which result in high performance and long battery life. These technologies enhance visual display capabilities, improve connectivity, and minimize chip and system-level power consumption. ~~NVIDIA Tegra and GoForce products can be found primarily in multimedia cellular phones and other handheld devices.~~

During fiscal year ~~2009,~~2010, we ~~launched~~demonstrated the ~~NVIDIA~~ Tegra ~~APX 2500 computer-on-a-chip. The NVIDIA~~600 Series, our first generation system-on-a-chip that enables an always-on, always-connected HD smartbook that offers playback of advanced multimedia content such as 720p HD video, while at the same time consuming minimal power and allowing users to go days between battery charges. Also during fiscal year 2010, our Tegra ~~APX 2500 is a computer-on-a-chip designed to meet~~product was included in Microsoft’s Zune HD and the ~~growing multimedia demands~~Samsung M1, both of ~~today's mobile phone and entertainment user In February 2009,~~which were being sold in the marketplace.

During the recent Consumer Electronics Show in January 2010, we announced our next-generation of Tegra processing technology. Tegra is the ~~NVIDIA~~processor for the mobile web, specifically designed for the high-resolution needs of tablets. Tegra ~~APX 2600 computer-on-a-chip~~combines browsing, streaming 1080p video and ~~that we have worked closely~~Flash 10.1 acceleration with Google, Inc., or Google, and the Open Handset Alliance to unleash Android, an open mobile phone software stack, with the NVIDIA Tegra series of ‘computer-on-a-chip’ processors. The NVIDIA Tegra APX 2600 and 2500 enable a ~~compelling~~3D user interface and ~~high-definition video playback for a low-power, visually rich experience,~~days of battery life. We have multiple next-generation Tegra design wins in tablets, smartbooks and ~~we expect that~~smartphones, with the first of these ~~products will be key~~expected to ~~building next-generation Microsoft Windows Mobile, Windows CE, and Android-based devices, including smartphones, PNDs, and PMPs.~~

~~Additionally, we also launched~~ship during the NVIDIA Tegra 600 and 650 products, which are small, advanced, highly-integrated visual computer-on-a-chip products. These products, which represent a single-chip heterogeneous computer architecture designed for low-power mobile computing devices, feature enhanced multimedia functionality—including high definition, or HD, 1080p video and advanced 3D technology—and deliver many times the power efficiency of competing products on a broad range of connected devices.

~~Additionally, in the fourth~~second quarter of fiscal year ~~2009,~~2011. Additionally, we ~~also introduced GeForce~~have announced that Volkswagen and Audi will use next-generation Tegra starting in fiscal year 2012.In addition, we announced 3D Vision Surround for GeForce, a high-definition 3D stereo solution for the ~~home.~~home at the recent Consumer Electronics Show in January 2010. 3D Vision is a combination of ~~high-tech~~ wireless glasses, a high-power infrared emitter and ~~advanced~~ software that transforms ~~hundreds of~~ PC games into full stereoscopic ~~3D.~~3D experiences. Over 420 games now support NVIDIA 3D Vision.

Our Strategy

We design our products to enable our PC OEMs, ODMs, system builders, motherboard and add-in board manufacturers, and cellular phone and consumer electronics OEMs to build products that deliver state-of-the-art features, performance, compatibility and power efficiency while maintaining competitive pricing and profitability. We believe that by developing 3D graphics, HD, and video and media communications solutions that provide superior performance and address the key requirements of each of the product categories we serve, we will accelerate the adoption of HD digital media platforms and devices throughout these segments. We combine scalable architectural technology with mass market economies-of-scale to deliver a complete family of products that span from professional workstations, to consumer PCs to ~~multimedia-rich cellular phones.~~tablets, smartbooks and smartphones.

Our objective is to be the leading supplier of ~~performance~~programmable, high-performance GPUs ~~MCPs~~ and ~~computer-on-a-chip products that support netbooks, PNDs, PDAs, PMPs, cellular phones and other handheld devices.~~ultra-low power mobile system-on-a-chip products. Our current focus is on the desktop PC, professional workstation, notebook PC, high-performance computing, and application processor ~~multimedia-rich cellular phone and video game console~~ product lines, and we plan to expand into other product lines. Our strategy to achieve this objective includes the following key elements:

Build Award-Winning, Architecturally-Compatible 3D Graphics, HD Video, Media Communications and Ultra-Low Power Product Families for the PC, Handheld and Digital Entertainment Platforms. Our strategy is to achieve market segment leadership in these platforms by providing award-winning performance at every price point. By developing 3D graphics, HD video and media communications solutions that provide superior performance and address the key requirements of these platforms, we believe that we will accelerate the adoption of 3D graphics and rich digital media.

Target Leading OEMs, ODMs and System Builders. Our strategy is to enable our leading PC, handheld and consumer electronics OEMs, ODMs and major system builder customers to differentiate their products in a highly competitive marketplace by using our products. We believe that design wins with these industry leaders provide market validation of our products, increase brand awareness and enhance our ability to penetrate additional leading customer accounts. In addition, we believe that close relationships with OEMs, ODMs and major system builders will allow us to better anticipate and address customer needs with future generations of our products.

Sustain Technology and Product Leadership in 3D Graphics and HD Video, and Media Communications and Ultra-Low Power. We are focused on using our advanced engineering capabilities to accelerate the quality and performance of 3D graphics, HD video, media communications and ultra-low power processing in PCs and handheld devices. A fundamental aspect of our strategy is to actively recruit the best 3D graphics and HD video, networking and communications engineers in the industry, and we believe that we have assembled an exceptionally experienced and talented engineering team. Our research and development strategy is to focus on concurrently developing multiple generations of GPUs, including GPUs for high-performance computing, ~~MCPs~~ and mobile and consumer products ~~that support netbooks, PNDs, PMPs, PDAs, cellular phones and other handheld devices~~ using independent design teams. As we have in the past, we intend to use this strategy to achieve new levels of graphics, networking and communications features and performance and ultra-low power designs, enabling our customers to achieve superior performance in their products.

Increase Market Share. We believe that substantial market share will be important to achieving success. We intend to achieve a leading share of the market in areas in which we don't have a leading market share, and maintain a leading share of the market in areas in which we do have the lead, by devoting substantial resources to building families of products for a wide range of applications that offer significant improvement in performance over existing products.

Use Our Expertise in Digital Multimedia. We believe the synergy created by the combination of 3D graphics, HD video and the Internet will fundamentally change the way people work, learn, communicate and play. We believe that our expertise in HD graphics and system architecture positions us to help drive this transformation. We are using our expertise in the processing and transmission of high-bandwidth digital media to develop products designed to address the requirements of high-bandwidth concurrent multimedia.

Use ~~our~~Our Intellectual Property and Resources to Enter into License and Development Contracts. From time to time, we expect to enter into license arrangements that will require significant customization of our intellectual property components. For license arrangements that require significant customization of our intellectual property components, we generally recognize this license revenue using the percentage-of-completion method of accounting over the period that services are performed. For example, ~~in fiscal year 2006,~~ we have entered into ~~an agreement with Sony Computer Entertainment, Inc., or SCE,~~agreements to jointly develop a custom ~~GPU~~GPUs for ~~SCE’s PlayStation3. Our collaboration with SCE includes license fees~~gaming consoles and ~~royalties for the PlayStation3 and all derivatives, including next-generation digital consumer electronics devices. In addition, we are licensing~~have licensed software development ~~tools for creating shaders and advanced graphics capabilities to SCE.~~tools.

Revolutionize computing with CUDA and Tesla. Tesla is a family of GPU computing products that delivers processing capabilities for high-performance computing applications, and marks our entry into the high-performance computing industry. NVIDIA CUDA is a general purpose parallel computing architecture that leverages the parallel compute engine in NVIDIA GPUs to solve many complex computational problems in a fraction of the time required on a CPU. ~~We believe we are in an era of GPU computing, where our~~Our CUDA parallel processing architecture can accelerate compute-intensive applications by significant multiples over that of a CPU alone. We are working with developers around the world ~~to adopt~~who have adopted and ~~write~~written application programs for the CUDA architecture using ~~C, one of the most widely used~~various high-level programming languages, which can then be run at great execution speeds on a CUDA enabled ~~processor. We expect other languages to be supported in the future, including FORTRAN and C++.~~GPU. With CUDA, we are able to speed up general purpose compute-intensive applications like we do for 3D graphics processing. Developers are able to speed-up algorithms in areas ranging from nano molecular dynamics to image processing, medical image reconstruction and derivatives modeling for financial risk analysis. We are also working with universities around the world who now teach parallel programming with CUDA and we are also working with many PC OEMs who now offer high performance computing solutions with Tesla for use by their customers around the world. Researchers also use CUDA to accelerate their time-to-discovery, and popular off-the-shelf software packages are now CUDA accelerated.

Sales and Marketing

Our worldwide sales and marketing strategy is a key part of our objective to become the leading supplier of ~~performance~~programmable, high-performance GPUs ~~MCPs,~~ and ~~applications processors that support netbooks, PNDs, PMPs, PDAs, cellular phones and other handheld devices.~~ultra-low power mobile system-on-a-chip products. Our sales and marketing teams work closely with each industry’s respective OEMs, ODMs, system builders, motherboard manufacturers, add-in board manufacturers and industry trendsetters, collectively referred to as our Channel, to define product features, performance, price and timing of new products. Members of our sales team have a high level of technical expertise and product and industry knowledge to support the competitive and complex design win process. We also employ a highly skilled team of application engineers to assist our Channel in designing, testing and qualifying system designs that incorporate our products. We believe that the depth and quality of our design support are keys to improving our Channel’s time-to-market, maintaining a high level of customer satisfaction within our Channel and fostering relationships that encourage customers to use the next generation of our products.

In the ~~GPU and MCP~~ segments we serve that purchase our GPUs, the sales process involves achieving key design wins with leading OEMs and major system builders and supporting the product design into high volume production with key ODMs, motherboard manufacturers and add-in board manufacturers. These design wins in turn influence the retail and system builder channel that is serviced by add-in board and motherboard manufacturers. Our distribution strategy is to work with a number of leading independent contract equipment manufacturers, or CEMs, ODMs, motherboard manufacturers, add-in board manufacturers and distributors, each of which have relationships with a broad range of major OEMs and/or strong brand name recognition in the retail channel. In the CPB segment we serve, the sales process primarily involves achieving key design wins directly with the leading handheld OEMs and supporting the product design into high-volume production. Currently, we sell a significant portion of our processors directly to distributors, CEMs, ODMs, motherboard manufacturers and add-in board manufacturers, which then sell boards and systems with our products to leading OEMs, retail outlets and to a large number of system builders.

Although as a result of our Channel strategy, a small number of our customers represent the majority of our revenue, their end customers include a large number of OEMs and system builders throughout the world. ~~As a result of our Channel strategy, our sales are focused on a small number of customers.~~ Sales to our largest customer, ~~Hewlett-Packard Company,~~Quanta, accounted for ~~11%~~12% of our total revenue for fiscal year ~~2009.~~2010.

To encourage software title developers and publishers to develop games optimized for platforms utilizing our products, we seek to establish and maintain strong relationships in the software development community. Engineering and marketing personnel interact with and visit key software developers to promote and discuss our products, as well as to ascertain product requirements and solve technical problems. Our developer program makes certain that our products are available to developers prior to volume availability in order to encourage the development of software titles that are optimized for our products.

Backlog

Our sales are primarily made pursuant to standard purchase orders. The quantity of products purchased by our customers as well as our shipment schedules are subject to revisions that reflect changes in both the customers’ requirements and in manufacturing availability. The semiconductor industry is characterized by short lead time orders and quick delivery schedules. In light of industry practice and experience, we believe that only a small portion of our backlog is non-cancelable and that the dollar amount associated with the non-cancelable portion is not significant. ~~Consequently, we do not believe that a backlog as of any particular date is indicative of future results.~~

~~Dependence on PC market~~

We derive and expect to continue to derive the majority of our revenue from the sale or license of products for use in the desktop PC and notebook PC markets, including professional workstations. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, may reduce demand for our products. Changes in demand for our products could be large and sudden. During fiscal year 2009, sales of our desktop GPU products decreased approximately 29% compared to fiscal year 2008. These decreases were primarily due to the Standalone Desktop and Standalone Notebook GPU market segment decline as reported in the PC Graphics December 2008 Report from Mercury Research. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with excess inventories if growth slows or if they incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly suspend substantially all purchases of additional inventory from suppliers like us until their excess inventory has been absorbed, which would have a negative impact on our financial results.

Seasonality

Our industry is largely focused on the consumer products market. Historically, we have seen stronger revenue in the second half of our fiscal year than in the first half of our fiscal year, primarily due to back-to-school and holiday demand. ~~This~~Revenue in the second half of fiscal year 2010 grew by 31% when compared to revenue from the first half of fiscal year 2010. While we anticipate that this historical seasonal trend will resume, there can be no assurance of such trend. For example, this seasonal trend did not occur in fiscal year ~~2009. Revenue~~2009 where revenue in the second half of fiscal year 2009 declined by 33% when compared to revenue from the first half of fiscal year ~~2009. The current~~2009 due to the worldwide recessionary economic environment ~~has created substantial uncertainty in our business. There can be no assurance that~~at the ~~historical seasonal trend will resume in the future.~~time.

Manufacturing

Fabless Manufacturing Strategy

We do not directly manufacture semiconductor wafers used for our products. Instead, we utilize what is known as a fabless manufacturing strategy for all of our product-line operating segments whereby we employ world-class suppliers for all phases of the manufacturing process, including wafer fabrication, assembly, testing and packaging. This strategy uses the expertise of industry-leading suppliers that are certified by the International Organization for Standardization, or ISO, in such areas as fabrication, assembly, quality control and assurance, reliability and testing. In addition, this strategy allows us to avoid many of the significant costs and risks associated with owning and operating manufacturing operations. Our suppliers are also responsible for procurement of most of the raw materials used in the production of our products. As a result, we can focus our resources on product design, additional quality assurance, marketing and customer support.

We utilize industry-leading suppliers, such as Taiwan Semiconductor Manufacturing Corporation, or TSMC and United Microelectronics Corporation, or UMC, ~~Chartered Semiconductor Manufacturing, or Chartered, Semiconductor Manufacturing International Corporation, or SMIC, and Austria Micro Systems, or AMS~~ to produce our semiconductor wafers. We then utilize independent subcontractors, such as Advanced Semiconductor Engineering, or ASE, ~~Amkor Technology, or Amkor,~~ JSI Logistics Ltd., or JSI, King Yuan Electronics Co., Ltd, or KYEC, Siliconware Precision Industries Company Ltd., or SPIL, and STATS ChipPAC Incorporated, or ChipPAC, to perform assembly, testing and packaging of most of our products.

We typically receive semiconductor products from our subcontractors, perform incoming quality assurance and then ship the semiconductors to CEMs, distributors, motherboard and add-in board manufacturer customers from our third-party warehouse in Hong Kong. Generally, these manufacturers assemble and test the boards based on our design kit and test specifications, and then ship the products to retailers, system builders or OEMs as motherboard and add-in board solutions.

~~Product Defect~~

For example, in July 2008, we recorded a $196.0 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other associated costs arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. All of our newly manufactured products and all of our products that are currently shipping in volume have a different material set that we believe is more robust. The previous generation MCP and GPU products that are impacted were included in a number of notebook products that were shipped and sold in significant quantities. Certain notebook configurations of these MCP and GPU products are failing in the field at higher than normal rates. While we have not been able to determine a root cause for these failures, testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing factors. We have worked with our customers to develop and have made available for download a software driver to cause the system fan to begin operation at the powering up of the system and reduce the thermal stress on these chips. We have also recommended to our customers that they consider changing the thermal management of the MCP and GPU products in their notebook system designs. We intend to fully support our customers in their repair and replacement of these impacted MCP and GPU products that fail, and their other efforts to mitigate the consequences of these failures.

We continue to engage in discussions with our supply chain regarding reimbursement to us for some or all of the costs we have incurred and may incur in the future relating to the weak material set. We also continue to seek to access our insurance coverage, which provided us with $8.0 million in related reimbursement during fiscal year 2009. However, there can be no assurance that we will recover any additional reimbursement. We continue to not see any abnormal failure rates in any systems using NVIDIA products other than certain notebook configurations. However, we are continuing to test and otherwise investigate other products. There can be no assurance that we will not discover defects in other MCP or GPU products.

Inventory and Working Capital

Our management focuses considerable attention on managing our inventories and other working-capital-related items. We manage inventories by communicating with our customers and then using our industry experience to forecast demand on a product-by-product basis. We then place manufacturing orders for our products that are based on forecasted demand. The quantity of products actually purchased by our customers as well as shipment schedules are subject to revisions that reflect changes in both the customers’ requirements and in manufacturing availability. We generally maintain substantial inventories of our products because the semiconductor industry is characterized by short lead time orders and quick delivery schedules.

Our existing cash and marketable securities balances increased by 38% at the end of fiscal year 2010 when compared with the end of fiscal year 2009. We believe that ~~our existing cash~~these balances and our anticipated cash flows from operations will be sufficient to meet our operating, acquisition and capital requirements for at least the next twelve months. However, there is no assurance that we will not need to raise additional equity or debt financing within this time frame. Additional financing may not be available on favorable terms or at all and may be dilutive to our then-current stockholders. We also may require additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and development expenditures, which could harm our business.

Research and Development

We believe that the continued introduction of new and enhanced products designed to deliver leading 3D graphics, HD video, audio, ultra-low power ~~communications, storage,~~consumption, and ~~secure networking performance and features~~system-on-chip architectures is essential to our future success. Our research and development strategy is to focus on concurrently developing multiple generations of GPUs, ~~MCPs~~including GPUs for high-performance computing, and ~~our~~mobile and consumer products ~~that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices~~ using independent design teams. Our research and development efforts are performed within specialized groups consisting of software engineering, hardware engineering, very large scale integration design engineering, process engineering, architecture and algorithms. These groups act as a pipeline designed to allow the efficient simultaneous development of multiple generations of products.

A critical component of our product development effort is our partnerships with leaders in the computer aided design, or CAD, industry. We invest significant resources in the development of relationships with industry leaders, ~~including Cadence Design Systems, Inc., and Synopsys, Inc.,~~ often assisting these companies in the product definition of their new products. We believe that forming these relationships and utilizing next-generation development tools to design, simulate and verify our products will help us remain at the forefront of the 3D graphics market and develop products that utilize leading-edge technology on a rapid basis. We believe this approach assists us in meeting the new design schedules of PC OEM and other manufacturers.

~~We substantially increased our engineering and technical resources in fiscal year 2009, and~~As of January 31, 2010, we had ~~3,772~~3,940 full-time employees engaged in research and ~~development as of January 25, 2009, compared to 3,255 employees as of January 27, 2008 and 2,668 employees as of January 28, 2007.~~development. During fiscal years 2010, 2009 ~~2008~~ and ~~2007,~~2008, we incurred research and development ~~expenditures~~expense of $908.9 million, $855.9 million ~~$691.6 million~~ and ~~$553.5~~$691.6 million, respectively.

Competition

The market for ~~GPUs, MCPs, and computer-on-a-chip~~our products ~~that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices~~ is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and distribution channels, software support, conformity to industry standard Application Programming Interfaces, or APIs, manufacturing capabilities, processor pricing, and total system costs. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality and at competitive prices. We expect competition to increase from both existing competitors and new market entrants with products that may be less costly than ours, or may provide better performance or additional features not provided by our products. In addition, it is possible that new competitors or alliances among competitors could emerge and acquire significant market share.

A significant source of competition iscomes from companies that provide or intend to provide ~~GPU, MCP,~~GPUs and ~~computer-on-a-chip products that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices.~~mobile and consumer products. Some of our competitors may have greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or technological changes. Currently, Intel, which has greater resources than we do, is working on a multi-core architecture code-named Larrabee, which may compete with our products in various markets. Intel may also release an enthusiast level discrete GPU based on the Larrabee architecture. Additionally, in fiscal year 2009, Intel also introduced the Intel Atom processor which is designed for lower cost PCs. Intel may also release a second generation of Atom chips by 2010 which is expected to have an improved battery life. The Intel Atom processor may compete with our products that support netbooks, PDAs, cellular phones and other handheld devices.

Our current competitors include the following:

suppliers of discrete MCPs that incorporate a combination of networking, audio, communications and input/output, or I/O, functionality as part of their existing solutions, such as AMD, Broadcom Corporation, or Broadcom, Silicon Integrated Systems, Inc., or SIS, VIA Technologies, Inc., or VIA, and Intel;

·	suppliers of GPUs, including MCPs that incorporate 3D graphics functionality as part of their existing solutions, such as AMD, Intel, Matrox Electronics Systems Ltd., SIS, and VIA; and

suppliers of ~~computer-on-a-chip~~system-on-a-chip products that support netbooks, PNDs, PMPs, PDAs, cellular phones, handheld devices or ~~other handheld~~embedded devices such as AMD, Broadcom, Freescale Semiconductor Inc., Fujitsu Limited, Imagination Technologies Ltd., ARM Holdings plc, Marvell Technology Group Ltd, or Marvell, NEC Corporation, Qualcomm Incorporated, Renesas Technology, Samsung, Seiko-Epson, ST Microelectronics, Texas Instruments Incorporated, and Toshiba America, Inc.; ~~and~~

suppliers of computer-on-a-chip products for handheld and embedded devices that incorporate multimedia processing as part of their existing solutions such as Broadcom, Texas Instruments Inc., Qualcomm Incorporated, Marvell, Freescale Semiconductor Inc., Renesas Technology, Samsung, and ST Microelectronics.

We expect substantial competition from both Intel’s and AMD’s strategy of selling platform solutions, such as the success Intel achieved with its Centrino platform solution. AMD has also announced a platform solution. Additionally, ~~we expect that~~ Intel and AMD ~~will extend this strategy~~have each announced its intention to ~~other segments, including the possibility of successfully integrating~~integrate a central processing unit, or CPU, and a GPU on the same chip or same package, as evidenced by AMD’s announcement of its Fusion processor ~~project.~~project and Intel’s announcement of its multichip packaged solution codenamed Arrandale. If AMD and Intel continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.

If and to the extent we offer products in new markets, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. For example, in the case of our CPB, our Tegra ~~and GoForce~~ products primarily compete in architecture used in ~~multimedia cellular phones~~tablets, smartbooks, smartphones, and other handheld consumer devices. We believe that mobile devices like phones, music players, and portable navigation devices will increasingly become more consumer PC-like and be capable of delivering all the entertainment and web experiences in a handheld device. We cannot accurately predict if we will compete successfully in any of the new markets we may enter. If we are unable to compete in our current or new markets, demand for our products could decrease which could cause our revenue to decline and our financial results to suffer.

Our GPU and MCP products are currently used with both Intel and AMD processors. In February 2009, Intel filed suit against us, related to a patent license agreement that we signed with Intel in 2004. Intel seeks an order from the court declaring that the license does not extend to a new Intel processor architecture and enjoining us from stating that we have licensing rights for this architecture. If Intel successfully obtains such a court order, we could be unable to sell our MCP products for use with these Intel processors and our competitive position would be harmed. In addition, in order to continue to sell MCP products for use with these Intel processors we could be required to negotiate a new license agreement with Intel and we may not be able to do so on reasonable terms, if at all.

Patents and Proprietary Rights

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. Our currently issued patents have expiration dates from ~~April 10, 2009~~March 25, 2010 to ~~October 1, 2028.~~June 18, 2029. We have numerous patents issued, allowed and pending in the United States and in foreign jurisdictions. Our patents and pending patent applications primarily relate to our products and the technology used in connection with our products. We also rely on international treaties, organizations and foreign laws to protect our intellectual property. The laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as the laws of the United States. This makes the possibility of piracy of our technology and products more likely. We continuously assess whether and where to seek formal protection for particular innovations and technologies based on such factors as:

·	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.~~jurisdictions; and

·	the commercial significance of our operations and our competitors’ operations in particular countries and ~~regions;~~regions.

Our pending patent applications and any future applications may not be approved. In addition, any issued patents may not provide us with competitive advantages or may be challenged by third parties. The enforcement of patents by others may harm our ability to conduct our business. Others may independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property. Our failure to effectively protect our intellectual property could harm our business. We have licensed technology from third parties for incorporation in some of our products and for defensive reasons, and expect to continue to enter into such license agreements. These licenses may result in royalty payments to third parties, the cross licensing of technology by us or payment of other consideration. If these arrangements are not concluded on commercially reasonable terms, our business could suffer.

Employees

As of January ~~25, 2009~~31, 2010 we had ~~5,420~~5,706 employees, ~~3,772~~3,940 of whom were engaged in research and development and ~~1,648~~1,766 of whom were engaged in sales, marketing, operations and administrative positions. ~~None of our employees are covered by collective bargaining agreements, and we~~We believe our relationships with our employees are good.

Financial Information by Business Segment and Geographic Data

Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. During the ~~first quarter of~~last several fiscal ~~year 2008,~~years, we ~~reorganized our operating segments. We now report financial information for~~have operated and reported four major product-line operating segments to our CODM: the GPU business, ~~which~~the PSB, the MCP business, and the CPB. However, effective with the first quarter of fiscal year 2011, we will no longer separate our MCP and GPU operating segments as such segmentation will no longer be reflective of the way we manage those businesses. Our GPU business is comprised primarily of our GeForce products that support desktop and notebook personal computers, or PCs, plus memory ~~products; the~~products. Our PSB ~~which~~ is comprised of our ~~NVIDIA~~ Quadro professional workstation products and other professional graphics products, including our NVIDIA Tesla high-performance computing ~~products; the~~products. Our MCP business, ~~which is~~as we have reported it through fiscal year 2010, has been comprised primarily of ~~NVIDIA nForce core logic and~~our ION motherboard ~~GPU products; and our~~GPUs, or mGPU products. Our CPB ~~which~~ is comprised of our Tegra ~~and GoForce~~ mobile ~~brands~~brand and products that support ~~netbooks, PNDs,~~tablets and smartbooks, smartphones, personal media players, or PMPs, ~~PDAs, cellular phones~~internet television, automotive navigation, and other ~~handheld~~similar devices. CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics devices. In addition to these operating segments, we have the “All Other” category that includes human resources, legal, finance, general administration, ~~and~~ corporate marketing expenses, charges related to our stock option purchase, restructuring charges and certain vendor price credits not allocated to specific operating segments all of which ~~total~~totaled $386.1 million, $346.1 million ~~$266.2 million~~ and ~~$239.6~~$266.2 million for fiscal years 2010, 2009 ~~2008~~ and ~~2007,~~2008, respectively, that we do not allocate to our other operating segments as these expenses are not included in the segment operating performance measures evaluated by our CODM. “All Other” also includes the results of operations of other miscellaneous reporting segments that are neither individually reportable, nor aggregated with another operating segment. Revenue in the “All Other” category is primarily derived from sales of components. Certain prior period amounts have been revised to conform to the presentation of our current fiscal year.

Our CODM does not review any information regarding total assets on an operating segment basis. Operating segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for NVIDIA as a whole. The information included in Note 1617 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K, including financial information by business segment and revenue and long-lived assets by geographic region, is hereby incorporated by reference.

Executive Officers of the Registrant

The following sets forth certain information regarding our executive officers, their ages and their positions as of February ~~27, 2009:~~26, 2010:

Name	Age	Position
Jen-Hsun Huang	45 47	President, Chief Executive Officer and Director
David L. White*White	53 54	Executive Vice President and Chief Financial Officer
Ajay K. Puri	54 55	Executive Vice President, Worldwide Sales
David M. Shannon	53 54	Executive Vice President, General Counsel and Secretary
Debora Shoquist	54 55	Executive Vice President, Operations

* On February 27, 2009, we announced that David L. White was appointed as our Executive Vice President and Chief Financial Officer, succeeding Marvin Burkett, whose decision to retire was disclosed in March 2008.

Jen-Hsun Huang co-founded NVIDIA in April 1993 and has served as its President, Chief Executive Officer and a member of the Board of Directors since its inception. From 1985 to 1993, Mr. Huang was employed at LSI Logic Corporation, a computer chip manufacturer, where he held a variety of positions, most recently as Director of Coreware, the business unit responsible for LSI’s “system-on-a-chip” strategy. From 1983 to 1985, Mr. Huang was a microprocessor designer for Advanced Micro Devices, Inc., a semiconductor company. Mr. Huang holds a B.S.E.E. degree from Oregon State University and an M.S.E.E. degree from Stanford University.

David L. White joined NVIDIA in February 2009 as Executive Vice President and Chief Financial Officer. From August 2004 to February 2009, Mr. White served as the Executive Vice President of Finance and Chief Financial Officer of Sanmina-SCI Corporation, a global provider of customized, integrated electronics manufacturing services to original equipment manufacturers in the communications, enterprise computing and medical industries and various other end markets. From 2003 to 2004, Mr. White was Senior Vice President and Chief Financial Officer of Asyst Technologies, Inc., a provider of integrated hardware and software automation solutions that enhance semiconductor and flat-panel display manufacturing productivity. Mr. White served as President and Chief Executive Officer of Candescent Technologies Corporation, a developer of field emission display technology for next-generation thin flat-panel displays, and held various other positions, from 1995 to 2002. Mr. White holds a B.S. degree from Brigham Young University and an M.B.A. from the University of Washington.

Ajay K. Puri joined NVIDIA in December 2005 as Senior Vice President, Worldwide Sales and became Executive Vice President, Worldwide Sales in January 2009. Prior to NVIDIA, he held positions in sales, marketing, and general management over a 22-year career at Sun Microsystems, Inc. Mr. Puri previously held marketing, management consulting, and product development positions at Hewlett-Packard Company, Booz Allen Hamilton Inc., and Texas Instruments Incorporated. Mr. Puri holds an M.B.A. degree from Harvard University, an M.S.E.E. degree from the California Institute of Technology and a B.S.E.E. degree from the University of Minnesota.

David M. Shannon joined NVIDIA in August 2002 as Vice President and General Counsel. Mr. Shannon became Secretary of NVIDIA in April 2005, a Senior Vice President in December 2005 and an Executive Vice President in January 2009. From 1993 to 2002, Mr. Shannon held various counsel positions at Intel, including the most recent position of Vice President and Assistant General Counsel. Mr. Shannon also practiced for eight years in the law firm of Gibson Dunn and Crutcher, focusing on complex commercial and high-technology related litigation. Mr. Shannon holds B.A. and J.D. degrees from Pepperdine University.

Debora Shoquist joined NVIDIA in September 2007 as Senior Vice President of Operations and became Executive Vice President of Operations in January 2009. From 2004 to 2007, Ms. Shoquist served as Senior Vice President of Operations at JDS Uniphase Corporation, a provider of communications test and measurement solutions and optical products for the telecommunications industry. From 2002 to 2004, she served as Senior Vice President and General Manager of the Electro-Optics business at Coherent, Inc., a manufacturer of commercial and scientific laser equipment. Her experience includes her role at Quantum Corporation as the President of the Personal Computer Hard Disk Drive Division. Her experience also includes senior roles at Hewlett-Packard Corporation. She holds a B.S degree in Electrical Engineering from Kansas State University and a B.S. degree in Biology from Santa Clara University.

Available Information

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, or the Exchange Act, are available free of charge on or through our Internet web site, http://www.nvidia.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. Our web site and the information on it or connected to it is not a part of this Form 10-K.

ITEM 1A. RISK FACTORS

In evaluating NVIDIA and our business, the following factors should be considered in addition to the other information in this Annual Report on Form 10-K. Before you buy our common stock, you should know that making such an investment involves some risks including, but not limited to, the risks described below. Additionally, any one of the following risks could seriously harm our business, financial condition and results of operations, which could cause our stock price to decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Business, Industry and ~~Industry~~Partners

We depend on foundries to manufacture our products and these third parties may not be able to satisfy our manufacturing requirements, which would harm our business.

~~Global economic conditions~~ We do not manufacture the silicon wafers used for our products and do not own or operate a wafer fabrication facility. Instead, we are dependent on industry-leading foundries, such as Taiwan Semiconductor Manufacturing Corporation, or TSMC, to manufacture our semiconductor wafers using their fabrication equipment and techniques. A substantial portion of our wafers are supplied by TSMC. The foundries, which have limited capacity, also manufacture products for other semiconductor companies, including some of our competitors. Since we do not have long-term commitment contracts with any of these foundries, they do not have an obligation to provide us with any minimum quantity of product at any time or at any set price, except as may be provided in a specific purchase order. Most of our products are only manufactured by one foundry at a time. In times of high demand, the foundries could choose to prioritize their capacity for other companies, reduce or eliminate deliveries to us, or increase the prices that they charge us. If we are unable to meet customer demand due to reduced or eliminated deliveries or have to increase the prices of our products, we could lose sales to customers, which would negatively impact our revenue and our reputation. For example, revenue during the fourth quarter of fiscal year 2010 was somewhat limited by supply constraints related to 40nm products. These supply constraints were driven by limited 40nm wafer foundry capacity as well as challenges related to 40nm process manufacturing yields. As a result, we have been forced to allocate our available 40nm product supply among our customers. We expect such supply constraints could have a further limiting impact on our revenue for the first quarter of fiscal year 2011.

Because the lead-time needed to establish a strategic relationship with a new manufacturing partner and achieve initial production could be over a year, we do not have an alternative source of supply for our products. In addition, the time and effort to qualify a new foundry would result in additional expense, diversion of resources, and could result in lost sales, any of which would negatively impact our financial results. We believe that long-term market acceptance for our products will depend on reliable relationships with the third-party manufacturers we use to ensure adequate product supply and competitive pricing to respond to customer demand.

If our Third-Party Foundries are not able to transition to new manufacturing process technologies or develop, obtain or successfully implement high quality, leading-edge process technologies our operating results and gross margin could be adversely affected.

We use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we continuously evaluate the benefits of migrating our products to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us remain competitive. Our current product families are manufactured using 0.15 micron, 0.14 micron, 0.13 micron, 0.11 micron, 90 nanometer, 65 nanometer, 55 nanometer and 40 nanometer process technologies. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development, which could negatively impact our operating expenses and gross margin.

We have experienced difficulty in migrating to new manufacturing processes in the past and, consequently, have suffered reduced yields, delays in product deliveries and increased expense levels. We may face similar difficulties, delays and expenses as we continue to transition our new products to smaller geometry processes. Moreover, we are dependent on our third-party manufacturers to invest sufficient funds in new manufacturing processes in order to have ample capacity for all of their customers and to develop the processes in a timely manner. Our product cycles may also depend on our third-party manufacturers migrating to smaller geometry processes successfully and in time for us to meet our customer demands. Some of our competitors own their manufacturing facilities and may be able to move to a new state of the art manufacturing process more quickly or more successfully than our manufacturing partners. If our suppliers fall behind our competitors in manufacturing processes, the development and customer demand for our products and the use of our products could be negatively impacted. If we are forced to use larger geometric processes in manufacturing a product than our competition, our gross margin may be reduced. The inability by us or our third-party manufacturers to effectively and efficiently transition to new manufacturing process technologies may adversely ~~impacted~~affect our ~~customers~~operating results and ~~suppliers and harmed~~ our ~~business.~~gross margin.

We cannot be certain that our third-party foundries will be able to develop, obtain or successfully implement high quality, leading-edge process technologies needed to manufacturer our products profitably or on a timely basis or that our competitors (including those that own their own manufacturing facilities) will not develop such high quality, leading-edge process technologies earlier. If our third party-foundries experience manufacturing inefficiencies, we may fail to achieve acceptable yields or experience product delivery delays. If our third-party foundries fall behind our competitors (including those that own their own manufacturing facilities), the development and customer demand for our products and the use of our products could be negatively impacted. Additionally, we cannot be certain that our third-party foundries will manufacturer our products at a price that is competitive to what our competitors pay. If our third-party foundries do not charge us a competitive price, our operating results and gross margin will be negatively impacted.

Failure to achieve expected manufacturing yields for our products could negatively impact our financial results and damage our reputation.

Manufacturing yields for our products are a function of product design, which is developed largely by us, and process technology, which typically is proprietary to the manufacturer. Low yields may result from either product design or process technology failure. We do not know a yield problem exists until our design is manufactured. When a yield issue is identified, the product is analyzed and tested to determine the cause. As a result, yield problems may not be identified until well into the production process. Resolution of yield problems requires cooperation by, and communication between, us and the manufacturer. Because of our potentially limited access to wafer foundry capacity, decreases in manufacturing yields could result in an increase in our costs and force us to allocate our available product supply among our customers. Lower than expected yields could potentially harm customer relationships, our reputation and our financial results.

Global economic conditions may adversely affect our business and financial results.

Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about current global economic conditions poses a continuing risk to our business as consumers and businesses have postponed spending in response to tighter credit, negative financial news and/or declines in income or asset values, which have reduced the demand for our products. Other factors that could depress demand for our products in the future include conditions in the residential real estate and mortgage markets, expectations for inflation, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer and business spending behavior. These and other economic factors have reduced demand for our products and could further harm our business, financial condition and operating results.

The ~~current~~ financial turmoil ~~affecting~~that affected the banking system and financial markets and the increased possibility that financial institutions may consolidate or go out of business ~~have~~ resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets. There could be a number of follow-on effects from the credit crisis on our business, including insolvency of key suppliers resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases of our products and/or customer, including channel partner, insolvencies; and failure of financial institutions, which may negatively impact our treasury operations. Other income and expense could also vary materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments; impairment charges related to debt securities as well as equity and other investments; interest rates; and cash, cash equivalent and marketable securities balances. For example, during fiscal year 2009, we recorded impairment charges of $5.6 million related to our money market investment in the Reserve International Liquidity Fund, Ltd., or the International Reserve Fund. The current volatilityVolatility in the financial markets and overall economic uncertainty increases the risk that the actual amounts realized in the future on our financial instruments could differ significantly from the fair values currently assigned to them.

Our business is cyclical in nature and ~~is currently experiencing a~~has experienced severe ~~downturn, which has harmed~~downturns that have, and may ~~continue to harm~~in the future, materially adversely affect our business and financial results.

Our business is directly affected by market conditions in the highly cyclical semiconductor ~~industry, which is currently experiencing a severe downturn.~~industry. The semiconductor industry has been adversely affected by many factors, including the ~~current~~recent global downturn, ongoing efforts by our customers to reduce their spending, diminished product demand, increased inventory levels, lower average selling prices, uncertainty regarding long-term growth rates and underlying financial health and increased competition. These factors, could, among other things, limit our ability to maintain or increase our sales or recognize revenue and in turn adversely affect our business, operating results and financial condition. If our actions to reduce our operating expenses to sufficiently offset these factors during this downturn are unsuccessful, our operating results will suffer.

Our failure to estimate customer demand properly could adversely affect our financial results.

We manufacture our products based on forecasts of customer demand in order to have shorter shipment lead times and quicker delivery schedules for our customers. As a result, we may build inventories for anticipated periods of growth which do not occur or may build inventory anticipating demand for a product that does not materialize. In forecasting demand, we make multiple assumptions any of which may prove to be incorrect. Situations that may result in excess or obsolete inventory include:

·	changes in business and economic conditions, including downturns in the semiconductor industry and/or overall economy;

·	changes in consumer confidence caused by changes in market conditions, including changes in the credit market, expectations for inflation, and energy prices;

·	if there were a sudden and significant decrease in demand for our products;

·	if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements;

·	if we fail to estimate customer demand properly for our older products as our newer products are introduced; or

·	if our competition were to take unexpected competitive pricing actions.

Any inability to sell products to which we have devoted resources could harm our business. In addition, cancellation or deferral of customer purchase orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. Additionally, because we often sell a substantial portion of our products in the last month of each quarter, we may not be able to reduce our inventory purchase commitments in a timely manner in response to customer cancellations or deferrals. We could be subject to excess or obsolete inventories and be required to take corresponding inventory write-downs and/or a reduction in average selling prices if growth slows or does not materialize, or if we incorrectly forecast product demand, which could negatively impact our financial results.

Conversely, if we underestimate our customers’ demand for our products, our third party manufacturing partners may not have adequate lead-time or capacity to increase production for us meaning that we may not be able to obtain sufficient inventory to fill our customers’ orders on a timely basis. Even if we are able to increase production levels to meet customer demand, we may not be able to do so in a cost effective or timely manner. Inability to fulfill our customers’ orders on a timely basis, or at all, could damage our customer relationships, result in lost revenue, cause a loss in market share, impact our customer relationships or damage our reputation, any of which could adversely impact our business.

Because our gross margin for any period depends on a number of factors, our failure to forecast changes in any of these factors could adversely affect our gross margin.

We are focused on improving our gross margin. Our gross margin for any period depends on a number of factors, including:

·	the mix of our products sold;

·	average selling prices;

·	introduction of new products;

·	product transitions;

·	sales discounts;

·	unexpected pricing actions by our competitors;

·	the cost of product components; and

·	the yield of wafers produced by the foundries that manufacture our products.

If we do not correctly forecast the impact of any of the relevant factors on our business, there may not be any actions we can take or we may not be able to take any possible actions in time to counteract any negative impact on our gross margin. In addition, if we are unable to meet our gross margin target for any period or the target set by analysts, the trading price of our common stock may decline.

Our revenue may fluctuate while our operating expenses are relatively fixed, which makes our results difficult to predict and could cause our results to fall short of expectations.

Demand for many of our revenue components ~~fluctuate~~fluctuates and ~~are~~is difficult to predict, and our operating expenses are relatively fixed and largely independent of revenue. Therefore, it is difficult for us to accurately forecast revenue and profits or losses in any particular period. Our operating expenses, which are comprised of research and development expenses, sales, general and administrative expenses and restructuring ~~and other~~ charges represented ~~36%~~38%, ~~25%~~36% and ~~28%~~25% of our total revenue for fiscal years 2010, 2009 ~~2008~~ and ~~2007,~~2008, respectively. Since we often recognize a substantial portion of our revenue in the last month of each quarter, we may not be able to adjust our operating expenses in a timely manner in response to any unanticipated revenue shortfalls in any quarter as was the case in the fourth quarter of fiscal year 2009. Our operating expenses, which are comprised of research and development expenses and sales, general and administrative expenses and restructuring and other charges, represented 66% of our total revenue for the fourth quarter of fiscal year 2009.quarter. Further, some of our operating expenses, like stock-based compensation expense can only be adjusted over a longer period of time and cannot be reduced during a quarter. If we are unable to reduce operating expenses quickly in response to any revenue shortfalls, our financial results will be negatively impacted.

In September 2008, we announced a workforce reduction to allow for continued investment in strategic growth areas, which was completed in the third quarter of fiscal year 2009. As a result, we eliminated approximately 360 positions worldwide, or about 6.5% of our global workforce. During fiscal year 2009, expenses associated with the workforce reduction, which were comprised primarily of severance and benefits payments to these employees, totaled $8.0 million. We anticipate that the expected decrease in operating expenses from this action will be offset by continued investment in strategic growth areas. In addition, in response to the current economic environment, we have commenced several cost reduction measures which are designed to reduce our operating expenses and will continue to focus on reducing our operating expenses during fiscal year 2010. Please refer to the discussion in Note 19 to the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for the potential impact of the tender offer on operating expenses during the first quarter of fiscal year 2010.

Any one or more of the risks discussed in this Annual Report on Form 10-K or other factors could prevent us from achieving our expected future revenue or net income. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. Similarly, the results of any quarterly or full fiscal year period are not necessarily indicative of results to be expected for a subsequent quarter or a full fiscal year. As a result, it is possible that in some quarters our operating results could be below the expectations of securities analysts or investors, which could cause the trading price of our common stock to decline. We believe that our quarterly and annual results of operations may continue to be affected by a variety of factors that could harm our revenue, gross profit and results of operations.

~~Our failure to estimate customer demand properly could adversely affect our financial results.~~

~~We manufacture our products based on forecasts of customer demand in order to have shorter shipment lead times and quicker delivery schedules for our customers. As a result,~~If we may build inventories for anticipated periods of growth which do not occur or may build inventory anticipating demand for a product that does not materialize. The current negative worldwide economic conditions and market instability makes it increasingly difficult for us, our customers and our suppliers to accurately forecast future product demand trends. In forecasting demand, we make multiple assumptions any of which may prove to be incorrect. Situations that may result in excess or obsolete inventory include:

·	~~if there were a sudden and significant decrease in demand for our products;~~

·	~~if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements;~~

·	~~if we fail to estimate customer demand properly for our older products as our newer products are introduced; or~~

·	~~if our competition were to take unexpected competitive pricing actions.~~

~~Any inability~~are unable to sell our MCP products to which we have devoted resources could harm our business. In addition, cancellation or deferral of customer purchase orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. Additionally, because we often sell a substantial portion of our products in the last month of each quarter,for use with certain Intel processors, we may not be able to ~~reduce~~successfully compete and our ~~inventory purchase commitments~~business would be negatively impacted.

Our MCP products are currently used with both Intel and AMD processors. Our revenue from MCP products represented 26% of our total revenue for fiscal year 2010. In February 2009, Intel filed suit against us related to a patent license agreement that we signed with Intel in 2004. Intel seeks an order from the court declaring that the license does not extend to a ~~timely manner in response to customer cancellations or deferrals. We~~new Intel processor architecture and enjoining us from stating that we have licensing rights for this architecture. If Intel successfully obtains such a court order, we could be ~~subject~~unable to ~~excess or obsolete inventories~~sell our MCP products for use with these Intel processors and our competitive position and financial results would be adversely impacted. In addition, in order to continue to sell MCP products for use with these Intel processors we could be required to ~~take corresponding inventory write-downs and/or~~negotiate a ~~reduction in average selling prices if growth slows or does not materialize, or if we incorrectly forecast product demand, which could negatively impact our financial results.~~

Conversely, if we underestimate our customers’ demand for our products, our third party manufacturing partners may not have adequate lead-time or capacity to increase production for us meaning that we may not be able to obtain sufficient inventory to fill our customers’ orders on a timely basis. Even if we are able to increase production levels to meet customer demand,new license agreement with Intel and we may not be able to do so ~~in a cost effective or timely manner. Inability to fulfill our customers’ orders~~ on ~~a timely basis, or~~reasonable terms, if at all, could damage our customer relationships, result in lost revenue, cause a loss in market share, impact our customer relationships or damage our reputation, any of which could adversely impact our business.all.

~~Because~~ In March 2009, we asserted counterclaims against Intel pursuant to which we seek an order declaring that we have the right to sell certain chipset products with Intel’s processors under the chipset license agreement, and enjoining Intel from interfering with our ~~gross margin~~licensing rights. We are also seeking a finding that Intel has materially breached its obligations under the chipset license agreement, and are requesting various remedies for ~~any period depends on~~that breach, including termination of Intel’s cross licensing rights. Notwithstanding our belief that the chipset license agreement extends to a ~~number~~component of ~~factors, our failure~~the new Intel processor architecture referred to ~~forecast changes in any~~as Direct Media Interface, or DMI, we currently have no intentions of ~~these factors could adversely affect our gross margin.~~building a DMI-based chipset while this dispute remains unresolved.

~~We are focused on improving our gross margin. Our gross margin for any period depends on a number of factors, including:~~

·	~~the mix of our products sold;~~

·	~~average selling prices;~~

·	~~introduction of new products;~~

·	~~product transitions;~~

·	~~sales discounts;~~

·	~~unexpected pricing actions by our competitors;~~

·	~~the cost of product components; and~~

·	~~the yield of wafers produced by the foundries that manufacture our products.~~

During the fourth quarter of fiscal year 2009, our gross margin declined to 29.4% as compared to 45.7% during the fourth quarter of fiscal year 2008 and decreased from 41.0% from the third quarter of fiscal year 2009. If we do not correctly forecast the impact of any of the relevant factors on our business, there may not be any actions we can take or we may not be able to take any possible actions in time to counteract any negative impact on our gross margin. Additionally, during fiscal year 2009, the revenue and gross margins from our sale of desktop products decreased primarily due to a decline in the Standalone Desktop market segment as reported in the December 2008 PC Graphics Report from Mercury Research. This decline was driven by a combination of market migration from desktop PCs towards notebook PCs and an overall market shift in the mix of products towards lower priced products. If the overall shift in the demand from the consumer continues to shift towards lower priced products, it will have an adverse impact on our gross margin. In addition, if we are unable to meet our gross margin target for any period or the target set by analysts, the trading price of our common stock may decline.

~~We are dependent on the personal computer market and its rate of growth in the future may have a negative impact on our business.~~

We derive and expect to continue to derive the majority of our revenue from the sale or license of products for use in the desktop personal computer, or PC, and notebook PC markets, including professional workstations. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, may reduce demand for our products. These changes in demand could be large and sudden. During fiscal year 2009, sales of our desktop GPU products decreased by approximately 29% compared to fiscal year 2008. These decreases were primarily due to the Standalone Desktop GPU market segment decline as reported in the PC Graphics December 2008 Report from Mercury Research. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with excess inventories if growth slows or if they incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly suspend substantially all purchases of additional inventory from suppliers like us until their excess inventory has been absorbed, which would have a negative impact on our financial results.

If we are unable to compete in the markets for our products, our financial results could be adversely impacted.

The market for ~~GPUs, MCPs, and computer-on-a-chip~~our products ~~that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices is intensely competitive and~~ is characterized by rapid technological change, new product introductions, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and distribution channels, software support, conformity to industry standard Application Programming Interface, or APIs, manufacturing capabilities, price of processors, and total system costs. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of ~~quality.~~quality and at competitive prices. We expect competition to increase from both existing competitors and new market entrants with products that may be less costly than ours, or may provide better performance or additional features not provided by our products. In addition, it is possible that new competitors or alliances among competitors could emerge and acquire significant market share. We believe other factors impacting our ability to compete are:

·	product performance;

·	product bundling by competitors with multiple product lines;

·	breadth and frequency of product offerings;

·	access to customers and distribution channels;

·	backward-forward software support;

·	conformity to industry standard application programming interfaces; and

·	manufacturing capabilities.

A significant source of competition is from companies that provide or intend to provide ~~GPU, MCP,~~GPUs and ~~computer-on-a-chip products that support netbooks, PNDs, PMPs, PDAs, cellular phones or other handheld devices.~~mobile and consumer products. Some of our competitors may have greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or technological changes. Currently, Intel Corporation, or Intel, which has greater resources than we do, is working on a multi-core architecture code-named Larrabee, which may compete with our products in various markets. Intel may also release an enthusiast level discrete GPU based on the Larrabee architecture. Additionally, in fiscal year 2009, Intel also introduced the Intel Atom processor which is designed for lower cost PCs. Intel may also release a second generation of Atom chips by 2010 which is expected to have an improved battery life. The Intel Atom processor may compete with our products that support netbooks, PDAs, cellular phones and other handheld devices.

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Our current competitors include the following:

·	suppliers of GPUs, including MCPs that incorporate 3D graphics functionality as part of their existing solutions, such as AMD, Intel, Matrox Electronics Systems Ltd., SIS, and VIA; and

If and to the extent we offer products in new markets, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. For example, in the case of our CPB, our Tegra ~~and GoForce~~ products primarily compete in ~~architecture used in multimedia cellular phones~~tablets, smartbooks, smartphones and other handheld ~~devices. We believe that mobile devices like phones, music players, and portable navigation devices will increasingly become more~~ consumer ~~PC-like and be capable of delivering all the entertainment and web experiences in a handheld device.~~devices. We cannot accurately predict if we will compete successfully in any of the new markets we may enter. If we are unable to compete in our current or new markets, demand for our products could decrease which could cause our revenue to decline and our financial results to ~~suffer.~~suffer.

~~Our GPU~~We are dependent on the personal computer market and ~~MCP products are currently used with both Intel~~its rate of growth in the future may have a negative impact on our business.

We derive and ~~AMD processors. In February 2009, Intel filed suit against us, related~~expect to ~~a patent license agreement that we signed with Intel in 2004. Intel seeks an order~~continue to derive the majority of our revenue from the ~~court declaring that the~~sale or license does not extend to a new Intel processor architecture and enjoining us from stating that we have licensing rights for this architecture. If Intel successfully obtains such a court order, we could be unable to sell our MCPof products for use ~~with these Intel processors~~in the desktop personal computer, or PC, and notebook PC markets, including professional workstations. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, may reduce demand for our ~~competitive position would be harmed. In addition,~~products. These changes in ~~order to continue to sell MCP products for use with these Intel processors we~~demand could be ~~required~~large and sudden. During fiscal year 2010, sales of our desktop GPU products increased by approximately 1% compared to ~~negotiate~~fiscal year 2009. The increase in the sale of desktop GPU products was primarily driven by unit volume growth in the high-end and mainstream segments as market demand appeared to begin to recover from recessionary conditions that began in the prior year. However, sales of our notebook GPU products decreased by approximately 31% compared to fiscal year 2009. This decline was driven primarily by a ~~new license agreement~~combination of the decline in unit demand and in average selling prices, or ASPs, due to increased competition in the marketplace. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with ~~Intel and we~~excess inventories if growth slows or if they incorrectly forecast product transitions. In these cases, PC manufacturers may ~~not be able to do so~~abruptly suspend substantially all purchases of additional inventory from suppliers like us until their excess inventory has been absorbed, which would have a negative impact on ~~reasonable terms, if at all.~~our financial results.

As Intel and AMD continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.

Our business results could be adversely affected if the identification and development of new products or entry into or development of a new market is delayed or unsuccessful.

In order to maintain or improve our financial results, we will need to continue to identify and develop new products as well as identify and enter new markets. As our GPUs and other processors develop and competition increases, we anticipate that product life cycles at the high end will remain short and average selling prices will decline. In particular, average selling prices and gross margins for our GPUs and other processors could decline as each product matures and as unit volume increases. As a result, we will need to introduce new products and enhancements to existing products to maintain or improve overall average selling prices, our gross margin and our financial results. We believe the success of our new product introductions will depend on many factors outlined elsewhere in these risk factors as well as the following:

·	market demand for new products and enhancements to existing products;

·	timely completion and introduction of new product designs and new opportunities for existing products;

·	seamless transitions from an older product to a new product;

·	differentiation of our new products from those of our competitors;

·	delays in volume shipments of our products;

·	market acceptance of our products instead of our customers' products; and

·	availability of adequate quantity and configurations of various types of memory products.

In the past, we have experienced delays in the development and adoption of new products and have been unable to successfully manage product transitions from older to newer products resulting in obsolete inventory.

To be successful, we must also enter new markets or develop new uses for our future or existing products. We cannot accurately predict if our current or existing products or technologies will be successful in the new opportunities or markets that we identify for them or that we will compete successfully in any new markets we may enter. For example, we have developed products and other technology in order for certain general-purpose computing operations to be performed on a GPU rather than a CPU. This general purpose computing, which is often referred to as GP computing, was a new use for the GPU which had been entirely used for graphics rendering. During fiscal year 2008, we introduced our NVIDIA Tesla family of products, which was our entry into the high-performance computing industry, a new market for us. During fiscal year 2010, we introduced our next generation CUDA GPU architecture, codenamed “Fermi,” which we expect to be the foundation for computational GPUs and enable breakthroughs in both graphics and parallel computing. Some of our competitors, including Intel, are now developing their own solutions for the discrete graphics and computing markets. Our failure to successfully develop, introduce or achieve market acceptance for new GPUs, other products or other technologies or to enter into new markets or identify new uses for existing or future products, could result in rapidly declining average selling prices, reduced demand for our products or loss of market share any of which could cause our revenue, gross margin and overall financial results to suffer.

If we are unable to achieve design wins, our products may not be adopted by our target markets or customers either of which could negatively impact our financial results.

The success of our business depends to a significant extent on our ability to develop new competitive products for our target markets and customers. We believe achieving design wins, which entails having our existing and future products chosen for hardware components or subassemblies designed by OEMs, ODMs, add-in board and motherboard manufacturers, is an integral part of our future success. Our OEM, ODM, and add-in board and motherboard manufacturers’ customers typically introduce new system configurations as often as twice per year, typically based on spring and fall design cycles or in connection with trade shows. Accordingly, when our customers are making their design decisions, our existing products must have competitive performance levels or we must timely introduce new products in order to be included in our customers’ new system configurations. This requires that we:

·	anticipate the features and functionality that customers and consumers will demand;

·	incorporate those features and functionalities into products that meet the exacting design requirements of our customers;

·	price our products competitively; and

·	introduce products to the market within our customers’ limited design cycles.

If OEMs, ODMs, and add-in board and motherboard manufacturers do not include our products in their systems, they will typically not use our products in their systems until at least the next design configuration. Therefore, we endeavor to develop close relationships with our OEMs and ODMs, in an attempt to better anticipate and address customer needs in new products so that we will achieve design wins.

Our ability to achieve design wins also depends in part on our ability to identify and be compliant with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers like AMD, Intel and Microsoft Corporation, or Microsoft. If our products are not in compliance with prevailing industry standards, we may not be designed into our customers’ product designs. However, to be compliant with changes to industry standards, we may have to invest significant time and resources to redesign our products which could negatively impact our gross margin or operating results. If we are unable to achieve new design wins for existing or new customers, we may lose market share and our operating results would be negatively impacted.

If our products do not continue to be adopted by our target markets or if the demand for new and innovative products in our target markets decreases, our business and operating results would suffer.

Our success depends in part upon continued broad adoption of our processors for 3D graphics and multimedia in desktop PC, notebook PC, workstation, high-performance computing, netbooks, smartbooks, tablets, smartphones, and video game console applications. The market for 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 pricing of dynamic random-access memory devices 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. Broad market acceptance is difficult to achieve and such market acceptance, if achieved, is difficult to sustain due to intense competition and frequent new technology and product introductions. Our GPU and MCP businesses together comprised approximately 79%, 75% and 79% of our revenue for fiscal years 2010, 2009 and 2008, respectively. As such, our financial results would suffer if for any reason our current or future GPUs or MCPs do not continue to achieve widespread adoption by the PC market. If we are unable to complete the timely development of new products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the desktop PC, notebook PC, workstation, high-performance computing, netbook, smartbooks, tablets, smartphones, and video game console markets, we may experience a decrease in revenue which could negatively impact our operating results.

Additionally, there can be no assurance that the industry will continue to demand new products with improved standards, features or performance. If our customers, OEMs, ODMs, add-in-card and motherboard manufacturers, system builders and consumer electronics companies, do not continue to design products that require more advanced or efficient processors and/or the market does not continue to demand new products with increased performance, features, functionality or standards, sales of our products could decline and the markets for our products could shrink. Decreased sales of our products for these markets could negatively impact our revenue and our financial results.

If our products contain significant defects our financial results could be negatively impacted, our reputation could be damaged and we could lose market share.

Our products are complex and may contain defects or experience failures due to any number of issues in design, fabrication, packaging, materials and/or use within a system. If any of our products or technologies contains a defect, compatibility issue or other error, we may have to invest additional research and development efforts to find and correct the issue. Such efforts could divert our engineers’ attention from the development of new products and technologies and could increase our operating costs and reduce our gross margin. In addition, an error or defect in new products or releases or related software drivers after commencement of commercial shipments could result in failure to achieve market acceptance or loss of design wins. Also, we may be required to reimburse customers, including our customers’ costs to repair or replace products in the field. A product recall or a significant number of product returns could be expensive, damage our reputation, could result in the shifting of business to our competitors and could result in litigation against us. Costs associated with correcting defects, errors, bugs or other issues could be significant and could materially harm our financial results. For example, ~~in July 2008,~~during fiscal year 2010, we recorded ~~a $196.0~~an additional net warranty charge of $95.8 million ~~charge~~ against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other ~~associated~~ costs arising from a weak die/packaging material set in certain versions of our previous generation ~~media and communications processor, or~~ MCP and GPU products used in notebook systems. This charge included an additional accrual of $164.4 million for related estimated costs, offset by reimbursements from insurance carriers of $68.6 million that we recorded against cost of revenue during fiscal year 2010. During fiscal year 2009, we recorded a net warranty charge of $189.3 million charge against cost of revenue for the purpose of supporting the product repair costs of our affected customers around the world. This charge included an accrual of $196.0 million for related estimated costs, offset by reimbursements from insurance carriers of $6.7 million that we recorded against cost of revenue during fiscal year 2009. 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. Please refer to the risk entitled “We are subject to litigation arising from alleged defects in our previous generation MCP and GPU products, which if determined adversely to us, could harm our business” for the risk associated with this litigation.

We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results.

If new competitors, technological advances by existing competitors, our entry into new markets, or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses would increase. Our engineering and technical resources include 3,940 full-time employees as of January 31, 2010 and 3,772 employees as of January 25, 2009, respectively. Research and development expenditures were $908.9 million, $855.9 million and $691.6 million, for fiscal years 2010, 2009 and 2008, respectively. Research and development expenses included stock-based compensation expense of $151.8 million, $98.0 million and $76.6 million for fiscal years 2010, 2009 and 2008, respectively. If we are required to invest significantly greater resources than anticipated in research and development efforts without a corresponding increase in revenue, our operating results could decline. Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development and these investments may be independent of our level of revenue which could negatively impact our financial results. In order to remain competitive, we anticipate that we will continue to devote substantial resources to research and development, and we expect these expenses to increase in absolute dollars in the foreseeable future due to the increased complexity and the greater number of products under development.

We are dependent on third parties for assembly, testing and packaging of our products, which reduces our control over the delivery schedule, product quantity or product quality.

Our products are assembled, tested and packaged by independent subcontractors, such as Advanced Semiconductor Engineering, Inc., Amkor Technology, JSI Logistics, Ltd., King Yuan Electronics Co., Siliconware Precision Industries Co. Ltd., and ChipPAC. As a result, we do not directly control our product delivery schedules, product quantity, or product quality. All of these subcontractors assemble, test and package products for other companies, including some of our competitors. Since we do not have long-term agreements with our subcontractors, when demand for subcontractors to assemble, test or package products is high, our subcontractors may decide to prioritize the orders of other customers over our orders. Since the time required to qualify a different subcontractor to assemble, test or package our products can be lengthy, if we have to find a replacement subcontractor we could experience significant delays in shipments of our products, product shortages, a decrease in the quality of our products, or an increase in product cost. Any product shortages or quality assurance problems could increase the costs of manufacture, assembly or testing of our products, which could cause our gross margin and revenue to decline.

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

We rely on third-party software development tools to assist us in the design, simulation and verification of new products or product enhancements. To bring new products or product enhancements to market in a timely manner, or at all, we need software development tools that are sophisticated enough or technologically advanced enough to complete our design, simulations and verifications. In the past, we have experienced delays in the introduction of products as a result of the inability of then available software development tools to fully simulate the complex features and functionalities of our products. In the future, the design requirements necessary to meet consumer demands for more features and greater functionality from our products may exceed the capabilities of available software development tools. Unavailability of software development tools may result in our missing design cycles or losing design wins, either of which could result in a loss of market share or negatively impact our operating results.

Because of the importance of software development tools to the development and enhancement of our products, a critical component of our product development efforts is our partnerships with leaders in the computer-aided design industry, including Cadence Design Systems, Inc. and Synopsys, Inc. We have invested significant resources to develop relationships with these industry leaders and have often assisted them in the definition of their new products. We believe that forming these relationships and utilizing next-generation development tools to design, simulate and verify our products will help us remain at the forefront of the 3D graphics, communications and networking segments and develop products that utilize leading-edge technology on a rapid basis. If these relationships are not successful, we may be unable to develop new products or product enhancements in a timely manner, which could result in a loss of market share, a decrease in revenue or negatively impact our operating results.

We sell our products to a small number of customers and our business could suffer if we lose any of these customers.

We have a limited number of customers and our sales are highly concentrated. We recorded approximately 12% of total revenue from one customer, approximately 11% of total revenue from one customer and approximately 10% of our total revenue from another customer for fiscal year 2010, 2009 and 2008, respectively. Although a small number of our other customers represent the majority of our revenue, their end customers include a large number of OEMs, and system integrators throughout the world who, in many cases, specify the graphics supplier. Our sales process involves achieving key design wins with leading PC, OEMs and major system builders and supporting the product design into high volume production with key contract equipment manufacturers, or CEMs, ODMs, add-in board and motherboard manufacturers. These design wins in turn influence the retail and system builder channel that is serviced by CEMs, ODMs, add-in board and motherboard manufacturers. Our distribution strategy is to work with a small number of leading independent CEMs, ODMs, add-in board and motherboard manufacturers, and distributors, each of which has relationships with a broad range of system builders and leading PC OEMs. If we were to lose sales to our PC OEMs, CEMs, ODMs, add-in board manufacturers and motherboard manufacturers and were unable to replace the lost sales with sales to different customers, if they were to significantly reduce the number of products they order from us, or if we were unable to collect accounts receivable from them, our revenue may not reach or exceed the expected level in any period, which could harm our financial condition and our results of operations.

Any difficulties in collecting accounts receivable, including from foreign customers, could harm our operating results and financial condition.

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers’ businesses, and to downturns in the industry and the worldwide economy. We recorded approximately 20% of our accounts receivable balance from two customers at January 31, 2010 and approximately 38% of our accounts receivable balance from three customers at January 25, 2009.

Difficulties in collecting accounts receivable could materially and adversely affect our financial condition and results of operations. These difficulties are heightened during periods when economic conditions worsen. We continue to work directly with more foreign customers and it may be difficult to collect accounts receivable from them. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. If the financial condition of our customers were to deteriorate, resulting in an impairment in their ability to make payments, additional allowances may be required, we may be required to defer revenue recognition on sales to affected customers, and we may be required to pay higher credit insurance premiums, any of which could adversely affect our operating results. In the future, we may have to record additional reserves or write-offs and/or defer revenue on certain sales transactions which could negatively impact our financial results.

We obtain credit insurance over the purchasing credit extended to certain customers. As a result of the tightening of the credit markets, we may not be able to acquire credit insurance on the credit we extend to these customers or in amounts that we deem sufficient. While we have procedures to monitor and limit exposure to credit risk on our accounts receivable, there can be no assurance such procedures will effectively limit our credit risk or avoid losses, which could harm our financial condition or operating results.

We are subject to risks associated with international operations which may harm our business.

We conduct our business worldwide. Our semiconductor wafers are manufactured, assembled, tested and packaged by third-parties located outside of the United ~~States.~~States and other Americas. We generated ~~87%~~84%, ~~89%~~87% and ~~86%~~89% of our revenue for fiscal years 2010, 2009 ~~2008~~ and ~~2007,~~2008, respectively, from sales to customers outside the United States and other Americas. As of January ~~25, 2009,~~31, 2010, we had offices in fifteen countries outside of the United States. The manufacture, assembly, test and packaging of our products outside of the United States, operation of offices outside of the United States, and sales to customers internationally subjects us to a number of risks, including:

·	international economic and political conditions, such as political tensions between countries in which we do business;

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

·	complying with a variety of foreign laws;

·	differing legal standards with respect to protection of intellectual property and employment practices;

·	cultural differences in the conduct of business;

·	inadequate local infrastructure that could result in business disruptions;

·	exporting or importing issues related to export or import restrictions, tariffs, quotas and other trade barriers and restrictions;

·	financial risks such as longer payment cycles, difficulty in collecting accounts receivable and fluctuations in currency exchange rates;

·	imposition of additional taxes and penalties; and

·	other factors beyond our control such as terrorism, civil unrest, war and diseases such as severe acute respiratory syndrome and the Avian flu.

If sales to any of our customers outside of the United States and other Americas are delayed or cancelled because of any of the above factors, our revenue may be negatively impacted.

Our international operations in Australia, China, Finland, France, Germany, Hong Kong, India, Japan, Korea, Russia, Singapore, Sweden, Switzerland, Taiwan, and the United Kingdom are subject to many of the above listed risks. Difficulties with our international operations, including finding appropriate staffing and office space, may divert management’s attention and other resources any of which could negatively impact our operating results.

The economic conditions in our primary overseas markets, particularly in Asia, may negatively impact the demand for our products abroad. All of our international sales to date have been denominated in United States dollars. Accordingly, an increase in the value of the United States dollar relative to foreign currencies could make our products less competitive in international markets or require us to assume the risk of denominating certain sales in foreign currencies. We anticipate that these factors will impact our business to a greater degree as we further expand our international business activities.

IfConditions outside the control of our ~~products do not continue to~~independent subcontractors and manufacturers may impact their business operations and thereby adversely interrupt our manufacturing and sales processes.

The economic, market, social, and political situations in countries where certain independent subcontractors and manufacturers are located are unpredictable, can be ~~adopted by the desktop PC, notebook PC, workstation, high-performance computing, netbook, personal media player, or PMP, personal digital assistant, or PDA, cellular handheld device,~~volatile, and ~~video game console markets or if the demand for new and innovative products in these markets decreases,~~can have a significant impact on our business because we may be unable to obtain or distribute product in a timely manner. Market and political conditions, including currency fluctuation, terrorism, political strife, war, labor disruption, and other factors, including natural or man-made disasters, adverse changes in tax laws, tariff, import or export quotas, power and water shortages, or interruption in air transportation, in areas where our independent subcontractors and manufacturers are located could also have a severe negative impact on our operating ~~results would suffer.~~

~~Our success depends in part upon continued broad adoption~~capabilities. For example, because we rely heavily on TSMC to produce a significant portion of our processors for 3D graphics and multimedia in desktop PC, notebook PC, workstation, high-performance computing, netbooks, PMPs, PDAs, cellular handheld devices, and video game console applications. The market for 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 pricing of dynamic random-access memory devices 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. Broad market acceptance is difficult to achieve and such market acceptance, if achieved, is difficult to sustain due to intense competition and frequent new technology and product introductions. Our GPU and MCP businesses together comprised approximately 75%, 79% and 77% of our revenue during fiscal years 2009, 2008 and 2007, respectively. As such, our financial results would suffer if for any reason our current or future GPUs or MCPs do not continue to achieve widespread adoption by the PC market. If we are unable to complete the timely development of new products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the desktop PC, notebook PC, workstation, high-performance computing, netbook, PMP, PDA, cellular phone, and video game console markets, we may experience a decrease in revenue which could negatively impact our operating results.

~~Our business results could be adversely affected if the identification and development of new products or entry into or development of a new market is delayed or unsuccessful.~~

·	~~market demand for new products and enhancements to existing products;~~

·	~~timely completion and introduction of new product designs and new opportunities for existing products;~~

·	~~seamless transitions from an older product to a new product;~~

·	~~differentiation of our new products from those of our competitors;~~

·	~~delays in volume shipments of our products;~~

·	~~market acceptance of our products instead of our customers' products; and~~

·	~~availability of adequate quantity and configurations of various types of memory products.~~

To be successful, we must also enter new markets or develop new uses for our future or existing products. We cannot accurately predict if our current or existing products or technologies will be successful in the new opportunities or markets that we identify for them or that we will compete successfully in any new markets we may enter. For example, we have developed products and other technology in order for certain general-purpose computing operations to be performed on a GPU rather than a CPU. This general purpose computing, which is often referred to as GP computing, was a new use for the GPU which had been entirely used for graphics rendering. During fiscal year 2008, we introduced our NVIDIA Tesla family of products, which was our entry into the high-performance computing industry, a new market for us. We also offer our CUDA software development solution, which is a C language programming environment for GPUs, that allows parallel computing on the GPU by using standard C language to create programs that process large quantities of data in parallel. Some of our competitors, including Intel, are now developing their own solutions for the discrete graphics and computing markets. Our failure to successfully develop, introduce or achieve market acceptance for new GPUs, other productssilicon wafers, earthquakes, typhoons or other ~~technologies or to enter into new markets or identify new uses for existing or future products,~~natural disasters in Taiwan and Asia could ~~result in rapidly declining average selling prices, reduced demand for~~limit our ~~products or loss of market share any of which could cause our revenue, gross margin~~wafer supply and ~~overall financial results to suffer.~~

~~If we are unable to achieve design wins, our products may not be adopted by our target markets or customers either of which could negatively impact our financial results.~~

~~The success of~~thereby harm our business, ~~depends to a significant extent on our ability to develop new competitive products for our target markets~~financial condition, and customers. We believe achieving design wins, which entails having our existing and future products chosen for hardware components or subassemblies designed by OEMs, ODMs, add-in board and motherboard manufacturers, is an integral part of our future success. Our OEM, ODM, and add-in board and motherboard manufacturers’ customers typically introduce new system configurations as often as twice per year, typically based on spring and fall design cycles or in connection with trade shows. Accordingly, when our customers are making their design decisions, our existing products must have competitive performance levels or we must timely introduce new products in order to be included in our customers’ new system configurations. This requires that we:operational results.

·	~~anticipate the features and functionality that customers and consumers will demand;~~

·	~~incorporate those features and functionalities into products that meet the exacting design requirements of our customers;~~

·	~~price our products competitively; and~~

·	~~introduce products to the market within our customers’ limited design cycles.~~

~~We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results.~~

If new competitors, technological advances by existing competitors, our entry into new markets, or other competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts, our operating expenses would increase. We had 3,772 full-time employees engaged in research and development as of January 25, 2009, compared to 3,255 employees as of January 27, 2008 and 2,668 employees as of January 28, 2007, respectively. Research and development expenditures were $855.9 million, $691.6 million and $553.5 million, for fiscal years 2009, 2008 and 2007, respectively. Research and development expenses included stock-based compensation expense of $98.0 million, $76.6 million and $70.1 million for fiscal years 2009, 2008 and 2007, respectively. If we are required to invest significantly greater resources than anticipated in research and development efforts without a corresponding increase in revenue, our operating results could further decline. Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development and these investments may be independent of our level of revenue which could negatively impact our financial results. In order to remain competitive, we anticipate that we will continue to devote substantial resources to research and development.

We are dependent on key employees and the loss of any of these employees could negatively impact our business.

Our future success and ability to compete is substantially dependent on our ability to identify, hire, train and retain highly qualified key personnel. The market for key employees in the ~~semiconductor~~technology industry can be competitive. None of our key employees is bound by an employment agreement, meaning our relationships with all of our key employees are at will. The loss of the services of any of our other key employees without an adequate replacement or our inability to hire new employees as needed could delay our product development efforts, harm our ability to sell our products or otherwise negatively impact our business.

In September 2008, we reduced our global workforce by approximately 6.5% as part of our efforts to allow continued investment in strategic growth areas. This reduction in our workforce may impair our ability to recruit and retain qualified employees of our workforce as a result of a perceived risk of future workforce reductions. Employees, whether or not directly affected by the reduction, may also seek future employment with our business partners, customers or competitors. In addition, we rely on stock-based awards as one means for recruiting, motivating and retaining highly skilled talent. If the value of such stock awards does not appreciate as measured by the performance of the price of our common stock or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain, and motivate employees could be weakened, which could harm our results of operations. The significant decline in the trading price of our common stock has resulted in the exercise price of a significant portion of our outstanding options to significantly exceed the current trading price of our common stock, thus lessening the effectiveness of these stock-based awards. We may not continue to successfully attract and retain key personnel which would harm our business.

We may not be able to realize the potential financial or strategic benefits of business acquisitions or strategic investments, which could hurt our ability to grow our business, develop new products or sell our products.

We have acquired and invested in other businesses that offered products, services and technologies that we believe will help expand or enhance our existing products and business. We may enter into future acquisitions of, or investments in, businesses, in order to complement or expand our current businesses or enter into a new business market. Negotiations associated with an acquisition or strategic investment could divert management’s attention and other company resources. Any of the following risks associated with past or future acquisitions or investments could impair our ability to grow our business, develop new products, our ability to sell our products, and ultimately could have a negative impact on our growth or our financial results:

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

·	difficulty in operating in a new or multiple new locations;

·	disruption of our ongoing businesses or the ongoing business of the company we invest in or acquire;

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

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

·	disruption of or delays in ongoing research and development efforts;

·	diversion of capital and other resources;

·	assumption of liabilities;

·	diversion of resources and unanticipated expenses resulting from litigation arising from potential or actual business acquisitions or investments;

·	difficulties in entering into new markets in which we have limited or no experience and where competitors in such markets have stronger positions; and

·	impairment of relationships with employees and customers, or the loss of any of our key employees or customers our target’s key employees or customers, as a result of our acquisition or investment.

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In addition, the consideration for any future acquisition could be paid in cash, shares of our common stock, the issuance of convertible debt securities or a combination of cash, convertible debt and common stock. If we make an investment in cash or use cash to pay for all or a portion of an acquisition, our cash reserves would be reduced which could negatively impact the growth of our business or our ability to develop new products. However, if we pay the consideration with shares of common stock, or convertible debentures, the holdings of our existing stockholders would be diluted. The significant decline in the trading price of our common stock would make the dilution to our stockholders more extreme and could negatively impact our ability to pay the consideration with shares of common stock or convertible debentures. We cannot forecast the number, timing or size of future strategic investments or acquisitions, or the effect that any such investments or acquisitions might have on our operations or financial results.

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

~~We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No. 115,~~ ~~Accounting for Certain Investments in Debt and Equity Securities~~. All of ~~the~~our cash equivalents and marketable securities are treated as “available-for-sale” ~~under SFAS No. 115.~~securities. Investments in both fixed rate instruments and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or if the decline in fair value of our publicly traded debt or equity investments is judged to be other-than-temporary. We may suffer losses in principal if we are forced to sell securities that decline in securities market value due to changes in interest rates. Future declines in the market values of our cash, cash equivalents and marketable securities could have a material adverse effect on our financial condition and operating results. However, because any debt securities we hold are classified as “available-for-sale,” no gains or losses are realized in our Consolidated Statements of Operations due to changes in interest rates unless such securities are sold prior to maturity or unless declines in value are determined to be other-than-temporary.

At January 31, 2010 and January 25, 2009, ~~and January 27, 2008,~~ we had ~~$1.26~~$1.73 billion and ~~$1.81~~$1.26 billion, respectively, in cash, cash equivalents and marketable securities. Given the global nature of our business, we have invested both domestically and internationally. All of our investments are denominated in United States dollars. We invest in a variety of financial instruments, consisting principally of cash and cash equivalents, asset-backed securities, commercial paper, mortgage-backed securities issued by Government-sponsored enterprises, equity securities, money market funds and debt securities of corporations, municipalities and the United States government and its agencies. As of January ~~25, 2009,~~31, 2010, we did not have any investments in auction-rate preferred securities. As of January ~~25, 2009,~~31, 2010, our investments in government agencies and government sponsored enterprises represented approximately ~~71%~~62% of our total ~~investment portfolio,~~cash equivalents and marketable securities, while the financial sector accounted for approximately ~~17%~~22% of our total ~~investment portfolio.~~cash equivalents and marketable securities.

The ~~current volatility in~~financial turmoil that affected the banking system and financial markets and ~~overall economic uncertainty increases~~ the ~~risk~~increased possibility that ~~the actual amounts realized~~financial institutions might consolidate or go out of business resulted in a tightening in the ~~future~~credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets. There could be a number of follow-on effects from the credit crisis on our business, including insolvency of key suppliers resulting in product delays; inability of customers, including channel partners, to obtain credit to finance purchases of our products and/or customer, including channel partner, insolvencies; and failure of financial ~~instruments could differ significantly from the fair values currently assigned to them.~~institutions, which may negatively impact our treasury operations. Other income and expense could also vary materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments; impairment charges related to debt securities as well as equity and other investments; interest rates; and cash, cash equivalent and marketable securities balances. ~~For instance, we recorded other than temporary impairment charges~~Volatility in the financial markets and economic uncertainty increases the risk that the actual amounts realized in the future on our financial instruments could differ significantly from the fair values currently assigned to them. As of ~~$9.9 million during fiscal year 2009. These charges include $5.6 million related to what we believe is an other than temporary impairment~~January 31, 2010, our investments in government agencies and government sponsored enterprises represented approximately 62% of our total investment inportfolio, while the ~~money market funds held~~financial sector accounted for approximately 22% of our total investment portfolio. Of the financial sector investments, over half are guaranteed by the ~~Reserve International Liquidity Fund, Ltd.,~~U.S. government. Substantially all of our investments are with A/A2 or ~~International Reserve Fund; $2.5 million related to a decline in~~better rated securities. If the fair value of ~~publicly traded equity securities and $1.8 million related~~our investments in these sectors was to ~~debt securities held~~decline by ~~us that were issued~~2%-5%, fair market values for these investments would decrease by companies that have filed for bankruptcy as of January 25, 2009. Please refer to Note 17 of these Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further details. Subsequent to year-end, on January 30, 2009, we received $84.4 million from the International Reserve Fund. This was our portion of a payout of approximately 65% of the total assets of the Fund. Each shareholder’s percentage of this distribution was determined by dividing the shareholder’s total unfunded redeemed shares by the aggregate unfunded redeemed shares of the Fund, which was then used to calculate the shareholder’s pro rata portion of this distribution. We expect to receive the proceeds of our remaining investment in the International Reserve Fund, excluding the $5.6 million that we have recorded as an other than temporary impairment, by no later than October 2009, when all of the underlying securities held by the International Reserve Fund are scheduled to have matured. However, redemptions from the International Reserve Fund are currently subject to pending litigation, which could cause further delay in receipt of our funds. In addition, we may determine that further impairment of our investment in the International Reserve Fund may be necessary.

~~Risks Related to Our Partners and Customers~~

~~We depend on foundries to manufacture our products and these third parties may not be able to satisfy our manufacturing requirements, which would harm our business.~~

We do not manufacture the silicon wafers used for our products and do not own or operate a wafer fabrication facility. Instead, we are dependent on industry-leading foundries, such as Taiwan Semiconductor Manufacturing Corporation, or TSMC, to manufacture our semiconductor wafers using their state-of-the-art fabrication equipment and techniques. The foundries, which have limited capacity, also manufacture products for other semiconductor companies, including some of our competitors. Since we do not have long-term commitment contracts with any of these foundries, they do not have an obligation to provide us with any minimum quantity of product at any time or at any set price, except as may be provided in a specific purchase order. Most of our products are only manufactured by one foundry at a time. In times of high demand, the foundries could choose to prioritize their capacity for other companies, reduce or eliminate deliveries to us, or increase the prices that they charge us. If we are unable to meet customer demand due to reduced or eliminated deliveries or have to increase the prices of our products, we could lose sales to customers, which would negatively impact our revenue and our reputation.

Because the lead-time needed to establish a strategic relationship with a new manufacturing partner could be several quarters, we do not have an alternative source of supply for our products. In addition, the time and effort to qualify a new foundry could result in additional expense, diversion of resources, or lost sales, any of which would negatively impact our financial results. We believe that long-term market acceptance for our products will depend on reliable relationships with the third-party manufacturers we use to ensure adequate product supply and competitive pricing to respond to customer demand.

~~Failure to achieve expected manufacturing yields for our products could negatively impact our financial results and damage our reputation.~~

~~We are dependent on third parties for assembly, testing and packaging of our products, which reduces our control over the delivery schedule, product quantity or product quality.~~

~~Failure to transition to new manufacturing process technologies could adversely affect our operating results and gross margin.~~

We use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we continuously evaluate the benefits of migrating our products to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us remain competitive. Our current product families are manufactured using 0.15 micron, 0.14 micron, 0.13 micron, 0.11 micron, 90 nanometer, 65 nanometer and 55 nanometer process technologies. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development, which could negatively impact our operating expenses and gross margin.$27-$67 million.

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We have experienced difficulty in migrating to new manufacturing processes in the past and, consequently, have suffered reduced yields, delays in product deliveries and increased expense levels. We may face similar difficulties, delays and expenses as we continue to transition our new products to smaller geometry processes. Moreover, we are dependent on our third-party manufacturers to invest sufficient funds in new manufacturing techniques in order to have ample capacity for all of their customers and to develop the techniques in a timely manner. Our product cycles may also depend on our third-party manufacturers migrating to smaller geometry processes successfully and in time for us to meet our customer demands. Some of our competitors own their manufacturing facilities and may be able to move to a new state of the art manufacturing process more quickly or more successfully than our manufacturing partners. For example, Intel has released a 45 nanometer chip for desktop computers which it is manufacturing in its foundries. In addition, in October 2008, AMD and the Advanced Technology Investment Company, a technology investment company backed by the government of Abu Dhabi, announced the establishment of a U.S. headquartered semiconductor manufacturing company that will manufacture AMD’s advance processors. If our suppliers fall behind our competitors in manufacturing processes, the development and customer demand for our products and the use of our products could be negatively impacted. If we are forced to use larger geometric processes in manufacturing a product than our competition, our gross margin may be reduced. The inability by us or our third-party manufacturers to effectively and efficiently transition to new manufacturing process technologies may adversely affect our operating results and our gross margin.

~~We sell our products to a small number of customers and our business could suffer if we lose any of these customers.~~

We have a limited number of customers and our sales are highly concentrated. For fiscal years 2009, 2008 and 2007, aggregate sales to customers in excess of 10% of our total revenue accounted for approximately 11% of total revenue from one customer and approximately 10% and 12% of our total revenue from another customer, respectively. Although a small number of our other customers represent the majority of our revenue, their end customers include a large number of original equipment manufacturers, or OEMs, and system integrators throughout the world who, in many cases, specify the graphics supplier. Our sales process involves achieving key design wins with leading PC, OEMs and major system builders and supporting the product design into high volume production with key contract equipment manufacturers, or CEMs, original design manufacturers, or ODMs, add-in board and motherboard manufacturers. These design wins in turn influence the retail and system builder channel that is serviced by CEMs, ODMs, add-in board and motherboard manufacturers. Our distribution strategy is to work with a small number of leading independent CEMs, ODMs, add-in board and motherboard manufacturers, and distributors, each of which has relationships with a broad range of system builders and leading PC OEMs. If we were to lose sales to our PC OEMs, CEMs, ODMs, add-in board manufacturers and motherboard manufacturers and were unable to replace the lost sales with sales to different customers, if they were to significantly reduce the number of products they order from us, or if we were unable to collect accounts receivable from them, our revenue may not reach or exceed the expected level in any period, which could harm our financial condition and our results of operations.

~~Any difficulties in collecting accounts receivable, including from foreign customers, could harm our operating results and financial condition.~~

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers' businesses, and to downturns in the industry and the worldwide economy. Accounts receivable from significant customers, those representing 10% or more of total accounts receivable aggregated approximately 38% of our accounts receivable balance from three customers at January 25, 2009 and approximately 12% of our accounts receivable balance from one customer at January 27, 2008.

Risks Related to Regulatory, Legal, Our Common Stock and Other Matters

We are subject to litigation arising from alleged defects in our previous generation MCP and GPU products, which if determined adversely to us, could harm our business.

During ~~the second~~ fiscal ~~quarter of 2009,~~year 2010, we recorded ~~a $196.0~~an additional net warranty charge of $95.8 million ~~charge~~ against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other ~~associated~~ costs arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. This charge included an additional accrual of $164.4 million for related estimated costs, offset by reimbursements from insurance carriers of $68.6 million that we recorded against cost of revenue during fiscal year 2010. During fiscal year 2009, we recorded a net warranty charge of $189.3 million against cost of revenue for the purpose of supporting the product repair costs of our affected customers around the world. This charge included an accrual of $196.0 million for related estimated costs, offset by reimbursements from insurance carriers of $6.7 million that we recorded against cost of revenue during fiscal year 2009. Although the number of units that we estimate will be impacted by this issue remains consistent with our initial estimates in July 2008, the overall cost of remediation and repair of impacted systems has been higher than originally anticipated. The weak die/packaging material combination is not used in any of our products that are currently in production.

The previous generation MCP and GPU products that are impacted were included in a number of notebook products that were shipped and sold in significant quantities. Certain notebook configurations of these MCP and GPU products are failing in the field at higher than normal rates. While we have not been able to determine with certainty a root cause for these failures, testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing factors. We have worked with our customers to develop and have made available for download a software driver to cause the system fan to begin operation at the powering up of the system and reduce the thermal stress on these chips. We have also recommended to our customers that they consider changing the thermal management of the products in their notebook system designs. We intend to fully support our customers in their repair and replacement of these impacted products that fail, and their other efforts to mitigate the consequences of these failures.

We continue to ~~engage in discussions with~~seek access to our ~~supply chain~~insurance coverage regarding reimbursement to us for some or all of the costs we have incurred and may incur in the future relating to the weak material set. We ~~also continue to seek to access our insurance coverage, which provided us with $8~~received $70.5 million and $8.0 million in ~~related reimbursement~~reimbursements from insurance providers during fiscal ~~year 2009.~~years 2010 and 2009, respectively. However, there can be no assurance that we will recover any additional reimbursement. We continue to not see any abnormal failure rates in any systems using NVIDIA products other than certain notebook configurations. However, we are continuing to test and otherwise investigate other products. There can be no assurance that we will not discover defects in other ~~MCP or GPU~~ products.

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.

~~The ongoing civil actions or any new actions relating to the market for GPUs could adversely affect our business.~~

In November 2006, we received a subpoena from the San Francisco Office of the Antitrust Division of the United States Department of Justice, or DOJ, in connection with the DOJ's investigation into potential antitrust violations related to GPUs and cards. In October 2008, the DOJ formally notified us that the DOJ investigation had been closed. No specific allegations were made against NVIDIA during the investigation.

Several putative civil complaints were filed against us by direct and indirect purchasers of GPUs, asserting federal antitrust claims based on alleged price fixing, market allocation, and other alleged anti-competitive agreements between us and ATI Technologies, ULC., or ATI, and Advanced Micro Devices, Inc., or AMD, as a result of its acquisition of ATI. The indirect purchasers’ consolidated amended complaint also asserts a variety of state law antitrust, unfair competition and consumer protection claims on the same allegations, as well as a common law claim for unjust enrichment.

In September 2008, we executed a settlement agreement, or the Agreement, in connection with the claims of the certified class of direct purchaser plaintiffs. The Agreement is subject to court approval and, if approved, would dispose of all claims and appeals raised by the certified class in the complaints against NVIDIA. In addition, in September 2008, we reached a settlement agreement with the remaining individual indirect purchaser plaintiffs that provides for a dismissal of all claims and appeals related to the complaints raised by the individual indirect purchaser plaintiffs. This settlement is not subject to the approval of the court. While we expect the courts to approve the settlement agreement with the direct purchasers, there can be no assurance that it will approved. If the settlement agreement is not approved we may be required to pay damages or penalties or have other remedies imposed on us that could harm our business. In addition, additional parties may bring claims against us relating to the potential antitrust violations related to GPUs and cards. If additional claims are brought against us, 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.

The matters relating to the Board of Director’s review of our historical stock option granting practices and the restatement of our consolidated financial statements have resulted in litigation, which could harm our financial results.

In August 2006, we announced that the Audit Committee of our Board, with the assistance of outside legal counsel, was conducting a review of our stock option practices covering the time from our initial public offering in 1999, our fiscal year 2000, through June 2006. The Audit Committee reached the conclusion that incorrect measurement dates were used for financial accounting purposes for stock option grants in certain prior periods. As a result, we recorded additional non-cash stock-based compensation expense, and related tax effects, related to stock option grants. Ten derivative complaints were filed in state and federal court pertaining to allegations relating to stock option grants. In September 2008, we entered into Memoranda of Understanding regarding the settlement of the stockholder derivative lawsuits. In November 2008, the definitive settlement agreements were concurrently filed in the Chancery Court of Delaware and the United States District Court Northern District of California and are subject to approval by both such courts. The settlement agreements do not contain any admission of wrongdoing or fault on the part of NVIDIA, our board of directors or executive officers. While we expect the courts to approve the settlement agreements, there can be no assurance that they will approved. If the settlement agreements are not approved we may be required to pay damages or penalties or have other remedies imposed on us that could harm our business.

We are a party to other litigation, including patent litigation, which, if determined adversely to us, could adversely affect our cash flow and financial results.

We are a party to other litigation as both a defendant and as a plaintiff. For example, we are engaged in litigation with Intel Corporation, Rambus Corporation and with various parties related to our acquisition of 3dfx in 2001. Please refer to Note 1213 of the Notes to the Consolidated Financial Statements ~~in Part IV, Item 15 of this Form 10-K~~ for further detail on these lawsuits. There can be no assurance that any litigation to which we are a party will be resolved in our favor. Any claim that is successfully decided against us may cause us to pay substantial damages, including punitive damages, and other related fees. Regardless of whether lawsuits are resolved in our favor or if we are the plaintiff or the defendant in the litigation, any lawsuits to which we are a party will likely be expensive and time consuming to defend or resolve. Such lawsuits could also harm our relationships with existing customers and result in the diversion of management’s time and attention away from business operations, which could harm our business. Costs of defense and any damages resulting from litigation, a ruling against us, or a settlement of the litigation could adversely affect our cash flow and financial results.

Changes in U.S. tax legislation regarding our foreign earnings could materially impact our business.

Currently, a majority of our revenue is generated from customers located outside the United States, and a significant portion of our assets, including employees, are located outside the United States. United States income taxes and foreign withholding taxes have not been provided on undistributed earnings for certain non-United States subsidiaries, because such earnings are intended to be indefinitely reinvested in the operations of those subsidiaries. In May 2009, President Obama’s administration provided details of previously announced international tax proposals that if enacted into law would have substantially reduced our ability to defer U.S. taxes on such indefinitely reinvested non-US earnings including repealing the deferral of U.S. taxation of foreign earnings, eliminating utilization of or substantially reducing our ability to claim foreign tax credits, and eliminating various tax deductions until foreign earnings are repatriated to the United States. In October 2009, the Obama administration announced it no longer intended to pursue such proposals outside of a broader initiative to overhaul the corporate tax system, expected in 2010. However, in February 2010, the Obama administration released its fiscal year 2011 budget with proposed modifications to international tax laws that would again substantially reduce our ability to defer U.S. taxes on indefinitely reinvested non-U.S. earnings, eliminate or substantially reduce our ability to claim foreign tax credits, and eliminate certain tax deductions until foreign earnings are repatriated to the United States. If any of these or similar proposals are constituted into legislation in the current or future year(s), they could have a negative impact on our financial position and results of operations.

Litigation to defend against alleged infringement of intellectual property rights or to enforce our intellectual property rights and the outcome of such litigation could result in substantial costs to us.

We expect that as the number of issued hardware and software patents increases and as competition intensifies, the volume of intellectual property infringement claims and lawsuits may increase. We may in the future become involved in lawsuits or other legal proceedings alleging patent infringement or other intellectual property rights violations by us or by our customers that we have agreed to indemnify them for certain claims of infringement.

An unfavorable ruling in any such intellectual property related litigation could include significant damages, invalidation of a patent or family of patents, indemnification of customers, payment of lost profits, or, when it has been sought, injunctive relief.

In addition, in the future, we may need to commence litigation or other legal proceedings in order to:

·	assert claims of infringement of our intellectual property;

·	enforce our patents;

·	protect our trade secrets or know-how; or

·	determine the enforceability, scope and validity of the propriety rights of others.

If we have to initiate litigation in order to protect our intellectual property, our operating expenses may increase which could negatively impact our operating results. Our failure to effectively protect our intellectual property could harm our business.

If infringement claims are made against us or our products are found to infringe a third parties’ patent or intellectual property, we or one of our indemnified customers may have to seek a license to the third parties’ patent or other intellectual property rights. However, we may not be able to obtain licenses at all or on terms acceptable to us particularly from our competitors. If we or one of our indemnified customers is unable to obtain a license from a third party for technology that we use or that is used in one of our products, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture and sale of one or more of our products. We may also have to make royalty or other payments, or cross license our technology. If these arrangements are not concluded on commercially reasonable terms, our business could be negatively impacted. Furthermore, the indemnification of a customer may increase our operating expenses which could negatively impact our operating results.

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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, allowed and pending in the United States and in foreign jurisdictions. Our patents and pending patent applications primarily relate to our products and the technology used in connection with our products. We also rely on international treaties, organizations and foreign laws to protect our intellectual property. The laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as the laws of the United States. This makes the possibility of piracy of our technology and products more likely. 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.

Government investigations and inquiries from regulatory agencies could lead to enforcement actions, fines or other penalties and could result in litigation against us.

In the past, we have been subject to government investigations and inquiries from regulatory agencies such as the ~~DOJ~~Department of Justice and the SEC. We may be subject to government investigations and receive additional inquiries from regulatory agencies in the future, which may lead to enforcement actions, fines or other penalties.

In addition, litigation has often been brought against a company in connection with the announcement of a government investigation or inquiry from a regulatory agency. For example, following the announcement of the DOJ investigation, several putative civil complaints were filed against us. In addition, following our Audit Committee’s investigation and the SEC’s investigation concerning our historical stock option granting practices, ten derivative complaints were filed in state and federal court pertaining to allegations relating to stock option grants. Please refer to Note 12 of the Notes to Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further information regarding these lawsuits. 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 litigation, a ruling against us, or a settlement of the litigation could adversely affect our cash flow and financial results.

We are subject to the risks of owning real property.

InDuring fiscal year 2009, we ~~used approximately $183.8 million of our cash to purchase~~purchased real property in Santa Clara, California that includes approximately 25 acres of land and ten commercial buildings. We also own real property in China and India. We have limited experience in the ownership and management of real property and are subject to the risks of owning real property, including:

·	the possibility of environmental contamination and the costs associated with ~~fixing~~mitigating any environmental problems;

·	adverse changes in the value of these properties, due to interest rate changes, changes in the ~~neighborhood~~market in which the property is located, or other factors;

·	the risk of loss if we decide to sell and are not able to recover all capitalized costs;

·	increased cash commitments for the possible construction of a campus;

·	the possible need for structural improvements in order to comply with zoning, seismic and other legal or regulatory requirements;

·	increased operating expenses for the buildings or the property or both;

·	possible disputes with third parties, such as neighboring owners or others, related to the buildings or the property or both; and

·	the risk of financial loss in excess of amounts covered by insurance, or uninsured risks, such as the loss caused by damage to the buildings as a result of earthquakes, floods and or other natural disasters.

2724

Expensing employee equity compensation adversely affects our operating results and could also adversely affect our competitive position.

Since inception, we have used equity through our ~~stock option~~equity incentive plans and our employee stock purchase program as a fundamental component of our compensation packages. We believe that these programs directly motivate our employees and, through the use of vesting, encourage our employees to remain with us.

~~In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), or SFAS No. 123(R), Share-based Payment,~~ ~~which requires the measurement and recognition of compensation expense for all stock-based compensation payments. SFAS No. 123(R) requires that we~~We record compensation expense for stock options, restricted stock units and our employee stock purchase plan using the fair value of those ~~awards.~~awards in accordance with generally accepted accounting principles in United States of America, or U.S. GAAP. Stock-based compensation expense ~~resulting from our compliance with SFAS No. 123(R),~~ was $107.1 million, $162.7 million, $133.4 million ~~and $116.7 million~~ for fiscal years 2010, 2009 and 2008, ~~and 2007,~~ respectively, related to on-going vesting of equity awards, which negatively impacted our operating results. Additionally, ~~on February 11,~~in March 2009, we ~~announced that our Board of Directors approved~~completed a cash tender offer ~~for~~to purchase certain employee stock options. ~~The tender offer commenced on February 11, 2009 and expired at 12:00 midnight (Pacific Time) on March 11, 2009. As~~A total of ~~January 25, 2009, there were approximately 33.1~~28.5 million ~~options eligible to participate in the tender offer. If all these~~ options were tendered ~~and accepted in~~under the offer ~~the~~for an aggregate cash purchase price of $78.1 million, in exchange for ~~these options would be approximately $92.0 million.~~the cancellation of the eligible options. As a result of the tender offer, we ~~may incur~~incurred a ~~non-recurring~~ charge of ~~up to approximately $150.0~~$140.2 million if all of the unvested eligible options are tendered. This charge would be reflected in our financial results for the first fiscal quarter of fiscal year 2010 and represents stock-based compensation expense, consisting of the remaining unamortized ~~stock-based~~stock based compensation expense associated with the unvested portion of the ~~eligible~~ options tendered in the offer, stock-based compensation expense resulting from amounts paid in excess of the fair value of the underlying options, ~~if any,~~ plus associated payroll taxes and professional fees. We are currently tallying information on the number of options tendered under the offer to determine the actual aggregate cash to be paid in exchange for the cancellation of the eligible options and the non-recurring charge to be incurred pertaining to the unvested eligible options that have been tendered. We believe that ~~SFAS No. 123(R)~~expensing employee equity compensation will continue to negatively impact our operating results.

To the extent that ~~SFAS No. 123(R)~~expensing employee equity compensation makes it more expensive to grant stock options and restricted stock units or to continue to have an employee stock purchase program, we may decide to incur increased cash compensation costs. In addition, actions that we may take to reduce stock-based compensation expense that may be more severe than any actions our competitors may implement and may make it difficult to attract retain and motivate employees, which could adversely affect our competitive position as well as our business and operating results.

We may be required to record a charge to earnings if our goodwill or amortizable intangible assets become impaired, which could negatively impact our operating results.

Under ~~accounting principles generally accepted in the United States,~~U.S. GAAP, we review our amortizable intangible assets and goodwill for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. The carrying value of our goodwill or amortizable assets from acquisitions may not be recoverable due to factors such as a decline in stock price and market capitalization, reduced estimates of future cash flows and slower growth rates in our industry or in any of our business units. ~~For example, during the twelve months ended January 25, 2009, our market capitalization declined from approximately $14 billion to approximately $4 billion.~~ Estimates of future cash flows are based on an updated long-term financial outlook of our operations. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates. For example, if one of our business units does not meet its near-term and longer-term forecasts, the goodwill assigned to the business unit could be impaired. We may be required to record a charge to earnings in our financial statements during a period in which an impairment of our goodwill or amortizable intangible assets is determined to exist, which may negatively impact our results of operations.

Our stock price continues to be volatile and investors may suffer losses.

Our stock has at times experienced substantial price volatility as a result of variations between our actual and anticipated financial results, announcements by us and our competitors, or uncertainty about current global economic conditions. The stock market as a whole also has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance.

In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. For example, following our announcement in July 2008 that we would take a charge against cost of revenue to cover anticipated costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products and that we were revising financial guidance for our second fiscal quarter of 2009, the trading price of our common stock declined. In September, October and November 2008, several putative class action lawsuits were filed against us relating to this announcement. Please refer to Note 1213 of the Notes to Consolidated Financial Statements ~~in Part IV, Item 15 of this Form 10-K~~ for further information regarding these lawsuits. Due to changes in the potential volatility of our stock price, we may be the target of securities litigation in the future. 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 litigation, a ruling against us, or a settlement of the litigation could adversely affect our cash flow and financial results.

2825

Our operating results may be adversely affected if we are subject to unexpected tax liabilities.

We are subject to taxation by a number of taxing authorities both in the United States and throughout the world. Tax rates vary among the jurisdictions in which we operate. Significant judgment is required in determining our provision for our income taxes as there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, any of the below could cause our effective tax rate to be materially different than that which is reflected in historical income tax provisions and accruals:

·	the jurisdictions in which profits are determined to be earned and taxed;

·	adjustments to estimated taxes upon finalization of various tax returns;

·	changes in available tax credits;

·	changes in share-based compensation expense;

·	changes in tax laws, the interpretation of tax laws either in the United States or abroad or the issuance of new interpretative accounting guidance related to uncertain transactions and calculations where the tax treatment was previously uncertain; and

·	the resolution of issues arising from tax audits with various tax authorities.

Should additional taxes be assessed as a result of any of the above, our operating results could be adversely affected. In addition, our future effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in tax laws or changes in the interpretation of tax laws.

Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations, and criminal and civil liabilities.

We are subject to various state, federal and international laws and regulations governing the environment, including restricting the presence of certain substances in electronic products and making producers of those products financially responsible for the collection, treatment, recycling and disposal of those products. For example, we are subject to the European Union Directive on Restriction of Hazardous Substances Directive, or RoHS Directive, that restricts the use of a number of substances, including lead, and other hazardous substances in electrical and electronic equipment in the market in the European Union. We could face significant costs and liabilities in connection with the European Union Directive on Waste Electrical and Electronic Equipment, or WEEE. The WEEE directs members of the European Union to enact laws, regulations, and administrative provisions to ensure that producers of electric and electronic equipment are financially responsible for the collection, recycling, treatment and environmentally responsible disposal of certain products sold into the market after August 15, 2005.

It is possible that unanticipated supply shortages, delays or excess non-compliant inventory may occur as a result of the RoHS Directive, WEEE, and other domestic or international environmental regulations. Failure to comply with any applicable environmental regulations could result in a range of consequences including costs, fines, suspension of production, excess inventory, sales limitations, criminal and civil liabilities and could impact our ability to conduct business in the countries or states that have adopted these types of regulations.

While we believe that we have adequate internal control over financial reporting, if we or our independent registered public accounting firm determines that we do not, our reputation may be adversely affected and our stock price may decline.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to audit, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. However, the manner in which companies and their independent public accounting firms apply these requirements and test companies’ internal controls remains subject to some judgment. To date, we have incurred, and we expect to continue to incur, increased expense and to devote additional management resources to Section 404 compliance. Despite our efforts, if we identify a material weakness in our internal controls, there can be no assurance that we will be able to remediate that material weakness in a timely manner, or that we will be able to maintain all of the controls necessary to determine that our internal control over financial reporting is effective. In the event that our chief executive officer, chief financial officer or our independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, investor perceptions of us may be adversely affected and could cause a decline in the market price of our stock.

Changes in financial accounting standards or interpretations of existing standards could affect our reported results of operations.

We prepare our consolidated financial statements in conformity with ~~generally accepted accounting principles in the United States.~~U.S.GAAP. These principles are constantly subject to review and interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions.

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 our Board to create and issue preferred stock without prior stockholder approval;

·	the prohibition of stockholder action by written consent;

·	a classified Board; 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. Under the agreement, if 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 may have first and last rights of refusal to purchase the stock. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters complex is located in Santa Clara, California. During fiscal year 2009, we purchased property that includes approximately 25 acres of land and ten commercial buildings in Santa Clara, California for approximately $194.8 ~~million of which we occupy four buildings, sublease two buildings, and four are unoccupied.~~million. Our original plans for the purchased property included constructing a new campus on the site. We are currently re-evaluating those plans. Additionally, our corporate campus is comprised of ~~seven~~eight other leased buildings with ~~four~~six used primarily as office buildings, one used primarily as warehouse space, and the other ~~two~~remaining used primarily as lab space. We also entered into a lease for data center space in Santa Clara in fiscal year 2009.

Outside of Santa Clara, we lease space in Marina Del Rey, San Jose and San Francisco, California; Austin, ~~and Houston,~~ Texas; Beaverton and Portland, Oregon; Bedford, Massachusetts; Bellevue and Bothell, Washington; Madison, Alabama; Durham, North Carolina; Greenville, South Carolina; Salt Lake City, Utah; St. Louis, Missouri; and Fort Collins and Boulder, Colorado. These facilities are used as design centers and/or sales and administrative offices.

Outside of the United States, we lease space in Hsin Chu City, Taiwan; Tokyo, Japan; Seoul, Korea; Beijing, ~~and Shanghai,~~ China; ~~Wanchai, and~~ Shatin, New Territories, Hong Kong; Mumbai, India; Paris, France; Moscow, Russia; Berlin and Munich, Germany; Helsinki, Finland; Theale and London, United Kingdom; Melbourne, Australia; Singapore; Uppsala, Sweden; and Zurich, Switzerland. These facilities are used primarily to support our customers and operations and as sales and administrative offices. We also lease spaces in Wurselen, Germany; Shenzhen, China; Neihu, Taiwan; and Bangalore and Pune, India, which are used primarily as design centers. Additionally, we own buildings in Hyderabad, India and Shanghai, China which are being used primarily as research and development centers.

We believe that we currently have sufficient facilities to conduct our operations for the next twelve months, although we expect to lease additional facilities throughout the world as our business requires. For additional information regarding obligations under leases, see Note 1213 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K under the subheading “Lease Obligations,” which information is hereby incorporated by reference.

3027

ITEM 3. LEGAL PROCEEDINGS

3dfx

On December 15, 2000, NVIDIA and one of our indirect subsidiaries entered into an Asset Purchase Agreement, or APA, to purchase certain graphics chip assets from 3dfx. The transaction closed on April 18, 2001. That acquisition, and ~~3dfx's~~3dfx’s October 2002 bankruptcy filing, led to four lawsuits against NVIDIA: two brought by ~~3dfx's~~3dfx’s former landlords, one by ~~3dfx's~~3dfx’s bankruptcy trustee and the fourth by a committee of ~~3dfx's~~3dfx’s equity security holders in the bankruptcy estate.

Landlord ~~Lawsuits~~Lawsuits.

In May 2002, we were served with a California state court complaint filed by the landlord of 3dfx’s San Jose, California commercial real estate lease, Carlyle Fortran Trust, or Carlyle. In December 2002, we were served with a California state court complaint filed by the landlord of 3dfx’s Austin, Texas commercial real estate lease, CarrAmerica Realty Corporation, or CarrAmerica. The landlords both asserted claims for, among other things, interference with contract, successor liability and fraudulent transfer. The landlords sought to recover damages in the aggregate amount of approximately $15 million, representing amounts then owed on the 3dfx leases. The cases were later removed to the United States Bankruptcy Court for the Northern District of California when 3dfx filed its bankruptcy petition and consolidated for pretrial purposes with an action brought by the bankruptcy trustee.

In 2005, the U.S. District Court for the Northern District of California withdrew the reference to the Bankruptcy Court for the landlords’ actions, and on November 10, 2005, granted our motion to dismiss both landlords’ complaints. The landlords filed amended complaints in early February 2006, and NVIDIA again filed motions to dismiss those claims. On September 29, 2006, the District Court dismissed the CarrAmerica action in its entirety and without leave to amend. On December 15, 2006, the District Court also dismissed the Carlyle action in its entirety. Both landlords filed timely notices of appeal from those orders.

On July 17, 2008, the United States Court of Appeals for the Ninth Circuit held oral argument on the ~~landlords'~~landlords’ appeals. On November 25, 2008, the Court of Appeals issued its opinion affirming the dismissal of Carlyle’s complaint in its entirety. The Court of Appeals also affirmed the dismissal of most of CarrAmerica’s complaint, but reversed the District Court’s dismissal of CarrAmerica’s claims for interference with contractual relations and fraud. On December 8, 2008, Carlyle filed a Request for Rehearing En Banc, which CarrAmerica joined. That same day, Carlyle also filed a Motion for Clarification of the Court’s Opinion. On January 22, 2009, the Court of Appeals denied the Request for Rehearing En Banc, but clarified its opinion affirming dismissal of the claims by stating that CarrAmerica had standing to pursue claims for interference with contractual relations, fraud, conspiracy and tort of another, and remanding Carlyle’s case with instructions that the District Court evaluate whether the Trustee had abandoned any claims, which Carlyle might have standing to pursue. On April 2, 2009, Carlyle filed a petition for a writ of certiorari in the United States Supreme Court, seeking review of the Court of Appeals decision. We filed an opposition to that petition on June 8, 2009. On October 5, 2009, the US Supreme Court denied Carlyle’s petition.

The District Court held a status conference in the CarrAmerica and Carlyle cases on March 9, 2009. That same day, 3dfx’s bankruptcy Trustee filed in the bankruptcy court a Notice of Trustee’s Intention to Compromise Controversy with Carlyle Fortran Trust. According to that Notice, the Trustee would abandon any claims it has against us for intentional interference with contract, negligent interference with prospective economic advantage, aiding and abetting breach of fiduciary duty, declaratory relief, unfair business practices and tort of another, in exchange for which Carlyle will withdraw irrevocably its Proof of Claim against the 3dfx bankruptcy estate and waive any further right of distribution from the estate. In light of the Trustee’s notice, the District Court ordered the parties to seek a hearing on the Notice on or before April 24, 2009, ordered Carlyle and CarrAmerica to file amended complaints by May 10, 2009, and set a further Case Management Conference for May 18, 2009. The parties subsequently filed a stipulation requesting that the District Court vacate the May 18, 2009 Case Management Conference date and other deadlines until after Bankruptcy Court rendered its decision. At a hearing on May 13, 2009, the Bankruptcy Court ruled that the Trustee had not abandoned any claims against us, and denied the Trustee's Notice of Intention to Compromise Controversy with Carlyle Fortran Trust without prejudice. Carlyle filed a motion in the District Court for leave to file an interlocutory appeal from the order denying the Notice, which was denied on November 12, 2009. On January 13, 2010, the District Court, of its own accord, reconsidered and reversed its decision denying Carlyle’s motion for leave to file an interlocutory appeal, and has set the interlocutory appeal for hearing on April 26, 2010.

On July 7, 2009, the parties attended a Case Management Conference in the District Court for both the CarrAmerica and the Carlyle cases. On July 8, 2009, the District Court issued an order requiring that CarrAmerica file an amended complaint on or before August 10, 2009. CarrAmerica filed its amended complaint on August 10, 2009, alleging claims for interference with contractual relations, fraud, conspiracy, and tort of another. Thereafter, we filed motions directed at dismissing that Fourth Amended Complaint, and CarrAmerica responded by filing a Fifth Amended Complaint. NVIDIA moved to dismiss the Fifth Amended Complaint, but the District Court denied that motion by order dated January 27, 2010. In that same order, however, the Court invited the parties to move for summary judgment and set the motions for hearing on May 3, 2010. NVIDIA intends to prepare and file such a motion. We continue to believe that there is no merit to Carlyle or CarrAmerica’s remaining claims.

Trustee ~~Lawsuit~~Lawsuit.

In March 2003, the Trustee appointed by the Bankruptcy Court to represent 3dfx’s bankruptcy estate served his complaint on NVIDIA. The Trustee’s complaint asserts claims for, among other things, successor liability and fraudulent transfer and seeks additional payments from us. The ~~Trustee's~~Trustee’s fraudulent transfer theory alleged that NVIDIA had failed to pay reasonably equivalent value for ~~3dfx's~~3dfx’s assets, and sought recovery of the difference between the $70 million paid and the alleged fair value, which the Trustee estimated to exceed $50 million. The ~~Trustee's~~Trustee’s successor liability theory alleged NVIDIA was effectively ~~3dfx's~~3dfx’s legal successor and was therefore responsible for all of ~~3dfx's~~3dfx’s unpaid liabilities. This action was consolidated for pretrial purposes with the landlord cases, as noted above.

On October 13, 2005, the Bankruptcy Court heard the Trustee’s motion for summary adjudication, and on December 23, 2005, denied that motion in all material respects and held that NVIDIA may not dispute that the value of the 3dfx transaction was less than $108 million. The Bankruptcy Court denied the Trustee’s request to find that the value of the 3dfx assets conveyed to NVIDIA was at least $108 million.

In early November 2005, after several months of mediation, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, agreed to a Plan of Liquidation of 3dfx, which included a conditional settlement of the Trustee’s claims against us. This conditional settlement was subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy Court. The conditional settlement called for a payment by NVIDIA of approximately $30.6 million to the 3dfx estate. Under the settlement, $5.6 million related to various administrative expenses and Trustee fees, and $25.0 million related to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. Accordingly, during the three month period ended October 30, 2005, we recorded $5.6 million as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx. The Trustee advised that he intended to object to the settlement. The conditional settlement never progressed substantially through the confirmation process.

On December 21, 2006, the Bankruptcy Court scheduled a trial for one portion of the Trustee’s case against NVIDIA. On January 2, 2007, NVIDIA terminated the settlement agreement on grounds that the Bankruptcy Court had failed to proceed toward confirmation of the Creditors’ Committee’s plan. A non-jury trial began on March 21, 2007 on valuation issues in the ~~Trustee's~~Trustee’s constructive fraudulent transfer claims against NVIDIA. Specifically, the Bankruptcy Court tried four questions: (1) what did 3dfx transfer to NVIDIA in the APA?; (2) of what was transferred, what qualifies as ~~"property"~~“property” subject to the Bankruptcy ~~Court's~~Court’s avoidance powers under the Uniform Fraudulent Transfer Act and relevant bankruptcy code provisions?; (3) what is the fair market value of the ~~"property"~~“property” identified in answer to question (2)?; and (4) was the $70 million that NVIDIA paid ~~"reasonably equivalent"~~“reasonably equivalent” to the fair market value of that property? The parties completed post-trial briefing on May 25, 2007.

On April 30, 2008, the Bankruptcy Court issued its Memorandum Decision After Trial, in which it provided a detailed summary of the trial proceedings and the ~~parties'~~parties’ contentions and evidence and concluded that ~~"the~~“the creditors of 3dfx were not injured by the Transaction."” This decision did not entirely dispose of the ~~Trustee's~~Trustee’s action, however, as the ~~Trustee's~~Trustee’s claims for successor liability and intentional fraudulent conveyance were still pending. On June 19, 2008, NVIDIA filed a motion for summary judgment to convert the Memorandum Decision After Trial to a final judgment. That motion was granted in its entirety and judgment was entered in NVIDIA’s favor on September 11, 2008. The Trustee filed a Notice of Appeal from that judgment on September 22, 2008, and on September 25, 2008, NVIDIA exercised its election to have the appeal heard by the United States District Court, where the appeal is pending. The District Court’s hearing on the Trustee’s appeal was held on June 10, 2009 and the appeal remains under submission.

While the conditional settlement reached in November 2005 never progressed through the confirmation process, the Trustee’s case still remains pending on appeal. ~~As such,~~Accordingly, we have not reversed the accrual of $30.6 million -– $5.6 million as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx – that we recorded during the three months ended October 30, 2005, pending resolution of the appeal of the Trustee’s case. ~~We do not believe the resolution of this matter will have a material impact on our results of operations or financial position.~~

~~The Equity Committee Lawsuit~~

The Equity-Committee Lawsuit.

On December 8, 2005, the Trustee filed a Form 8-K on behalf of 3dfx, disclosing the terms of the conditional settlement agreement between NVIDIA and the Creditor’s Committee. Thereafter, certain 3dfx shareholders filed a petition with the Bankruptcy Court to appoint an official committee to represent the claimed interests of 3dfx shareholders. The court granted that petition and appointed an Equity Securities Holders’ Committee, or the Equity Committee. The Equity Committee thereafter sought and obtained an order granting it standing to bring suit against NVIDIA, for the benefit of the bankruptcy estate, to compel NVIDIA to pay the stock consideration then unpaid from the APA, and filed its own competing plan of reorganization/liquidation. The Equity Committee’s plan assumes that 3dfx can raise additional equity capital that would be used to retire all of 3dfx’s debts, and thus to trigger ~~NVIDIA's~~NVIDIA’s obligation to pay six million shares of stock consideration specified in the APA. NVIDIA contends, among other things, that such a commitment is not sufficient and that its obligation to pay the stock consideration had long before been extinguished. On May 1, 2006, the Equity Committee filed its lawsuit for declaratory relief to compel NVIDIA to pay the stock consideration. In addition, the Equity Committee filed a motion seeking Bankruptcy Court approval of investor protections for Harbinger Capital Partners Master Fund I, Ltd., an equity investment fund that conditionally agreed to pay no more than $51.5 million for preferred stock in 3dfx. The hearing on that motion was held on January 18, 2007, and the Bankruptcy Court approved the proposed protections.

After the Bankruptcy Court denied our motion to dismiss on September 6, 2006, the Equity Committee again amended its complaint, and NVIDIA moved to dismiss that amended complaint as well. On December 21, 2006, the Bankruptcy Court granted the motion as to one of the Equity Committee’s claims, and denied it as to the others. However, the Bankruptcy Court also ruled that NVIDIA would only be required to answer the first three causes of action by which the Equity Committee seeks determinations that (1) the APA was not terminated before 3dfx filed for bankruptcy protection, (2) the 3dfx bankruptcy estate still holds some rights in the APA, and (3) the APA is capable of being assumed by the bankruptcy estate.

Because of the trial of the ~~Trustee's~~Trustee’s fraudulent transfer claims against NVIDIA, the Equity ~~Committee's~~Committee’s lawsuit did not progress substantially in 2007. On July 31, 2008, the Equity Committee filed a motion for summary judgment on its first three causes of action. On September 15, 2008, NVIDIA filed a cross-motion for summary judgment. On October 24, 2008, the Court held a hearing on the parties’ cross-motions for summary judgment. On January 6, 2009, the Bankruptcy Court issued a Memorandum Decision granting NVIDIA’s motion and denying the Equity Committee’s motion, and entered an Order to that effect on January 30, 2009. On February 27, 2009, the Bankruptcy Court entered judgment in favor of NVIDIA. The Equity Committee has waived its right to appeal by stipulation entered on February 18, 2009, and the judgment is now final.

~~Proceedings, SEC inquiry and lawsuits related to our historical stock option granting practices~~

In June 2006, the Audit Committee of the Board of NVIDIA ("Audit Committee"), began a review of our stock option practices based on the results of an internal review voluntarily undertaken by management. The Audit Committee, with the assistance of outside legal counsel, completed its review on November 13, 2006 when the Audit Committee reported its findings to our full Board. The review covered option grants to all employees, directors and consultants for all grant dates during the period from our initial public offering in January 1999 through June 2006. Based on the findings of the Audit Committee and our internal review, we identified a number of occasions on which we used an incorrect measurement date for financial accounting and reporting purposes.

We voluntarily contacted the SEC regarding the Audit Committee’s review. In late August 2006, the SEC initiated an inquiry related to our historical stock option grant practices. In October 2006, we met with the SEC and provided it with a review of the status of the Audit Committee’s review. In November 2006, we voluntarily provided the SEC with additional documents. We continued to cooperate with the SEC throughout its inquiry. On October 26, 2007, the SEC formally notified us that the SEC's investigation concerning our historical stock option granting practices had been terminated and that no enforcement action was recommended.

Concurrently with our internal review and the SEC’s inquiry, since September 29, 2006, ten derivative cases have been filed in state and federal courts asserting claims concerning errors related to our historical stock option granting practices and associated accounting for stock-based compensation expense. These complaints have been filed in various courts, including the California Superior Court, Santa Clara County, the United States District Court for the Northern District of California, and the Court of Chancery of the State of Delaware in and for New Castle County. The California Superior Court cases were subsequently consolidated as were the cases pending in the Northern District of California. All of the cases purport to be brought derivatively on behalf of NVIDIA against members of our Board and several of our current and former officers and directors. Plaintiffs in these actions allege claims for, among other things, breach of fiduciary duty, unjust enrichment, insider selling, abuse of control, gross mismanagement, waste, and constructive fraud. The Northern District of California action also alleges violations of federal provisions, including Sections 10(b) and 14(a) of the Securities Exchange Act of 1934. The plaintiffs seek to recover for NVIDIA, among other things, damages in an unspecified amount, rescission, punitive damages, treble damages for insider selling, and fees and costs. Plaintiffs also seek an accounting, a constructive trust and other equitable relief.

On August 5, 2007, our Board authorized the formation of a Special Litigation Committee to investigate, evaluate, and make a determination as to how NVIDIA should proceed with respect to the claims and allegations asserted in the underlying derivative cases brought on behalf of NVIDIA. The Special Litigation Committee has made substantial progress in completing its work, but has not yet issued a report.

Between June 2007 and September 2008 the parties to the actions engaged in settlement discussions, including four mediation sessions before the Honorable Edward Infante (Ret.). On September 22, 2008, we disclosed that we had entered into Memoranda of Understanding regarding the settlement of all derivative actions concerning our historical stock option granting practices. On November 10, 2008, the definitive settlement agreements were concurrently filed in the Chancery Court of Delaware and the United States District Court for the Northern District of California and are subject to approval by both such courts. The settlement agreements do not contain any admission of wrongdoing or fault on the part of NVIDIA, our board of directors or executive officers. The terms of the settlement agreements include, among other things, the agreement by the board of directors to continue and to implement certain corporate governance changes; acknowledgement of the prior amendment of certain options through re-pricings and limitations of the relevant exercise periods; an agreement by Jen-Hsun Huang, our president and chief executive officer, to amend additional options to increase the aggregate exercise price of such options by $3.5 million or to cancel options with an intrinsic value of $3.5 million; an $8.0 million cash payment by our insurance carrier to NVIDIA; and an agreement to not object to attorneys’ fees to be paid by NVIDIA to plaintiffs’ counsel of no more than $7.25 million, if approved by the courts. On January 24, 2009, a Notice of Pendency and Settlement of Shareholder Derivative Actions was mailed to shareholders of record and posted on ~~www.nvidia.com~~. On March 11, 2009, a final settlement hearing was held in the Delaware Chancery Court and, on the same date, the Court entered a Final Order and Judgment, which approved the requested attorneys' fees and dismissed the Delaware action with prejudice. The final approval hearing in the Northern District of California is scheduled for March 17, 2009.

~~Department of Justice Subpoena and Investigation, and Civil Cases~~

On November 29, 2006, we received a subpoena from the San Francisco Office of the Antitrust Division of the United States Department of Justice, or DOJ, in connection with the DOJ's investigation into potential antitrust violations related to GPUs and cards. On October 10, 2008, the DOJ formally notified us that the DOJ investigation has been closed. No specific allegations were made against NVIDIA during the investigation.

As of January 25, 2009, over 50 civil complaints have been filed against us. The majority of the complaints were filed in the Northern District of California, several were filed in the Central District of California, and other cases were filed in several other Federal district courts. On April 18, 2007, the Judicial Panel on Multidistrict Litigation transferred the actions currently pending outside of the Northern District of California to the Northern District of California for coordination of pretrial proceedings before the Honorable William H. Alsup. By agreement of the parties, Judge Alsup will retain jurisdiction over the consolidated cases through trial or other resolution.

In the consolidated proceedings, two groups of plaintiffs (one putatively representing all direct purchasers of GPUs and the other putatively representing all indirect purchasers) filed consolidated, amended class-action complaints. These complaints purport to assert federal antitrust claims based on alleged price fixing, market allocation, and other alleged anti-competitive agreements between us and ATI Technologies, ULC., or ATI, and Advanced Micro Devices, Inc., or AMD, as a result of its acquisition of ATI. The indirect purchasers’ consolidated amended complaint also asserts a variety of state law antitrust, unfair competition and consumer protection claims on the same allegations, as well as a common law claim for unjust enrichment.

Plaintiffs filed their first consolidated complaints on June 14, 2007. On July 16, 2007, we moved to dismiss those complaints. The motions to dismiss were heard by Judge Alsup on September 20, 2007. The court subsequently granted and denied the motions in part, and gave the plaintiffs leave to move to amend the complaints. On November 7, 2007, the court granted plaintiffs’ motion to file amended complaints, ordered defendants to answer the complaints, lifted a previously entered stay on discovery, and set a trial date for January 12, 2009. Plaintiffs filed motions for class certification on April 24, 2008. We filed oppositions to the motions on May 20, 2008. On July 18, 2008, the court ruled on Plaintiffs’ class certification motions. The court denied class certification for the proposed class of indirect purchasers. The court granted in part class certification for the direct purchasers but limited the direct purchaser class to individual purchasers that acquired graphics processing cards products directly from NVIDIA or ATI from their websites between December 4, 2002 and November 7, 2007.

On September 16, 2008, we executed a settlement agreement, or the Agreement, in connection with the claims of the certified class of direct purchaser plaintiffs approved by the court. Pursuant to the Agreement, NVIDIA has paid $850,000 into a $1.7 million fund to be made available for payments to the certified class. We are not obligated under the Agreement to pay plaintiffs’ attorneys’ fees, costs, or make any other payments in connection with the settlement other than the payment of $850,000. The Agreement is subject to court approval and, if approved, would dispose of all claims and appeals raised by the certified class in the complaints against NVIDIA. A final settlement approval hearing is scheduled for March 26, 2009. Because the Court certified a class consisting only of a narrow group of direct purchasers, the Agreement does not resolve any claims that other direct purchasers may assert. In addition, on September 9, 2008, we reached a settlement agreement with the remaining individual indirect purchaser plaintiffs pursuant to which NVIDIA paid $112,500 in exchange for a dismissal of all claims and appeals related to the complaints raised by the individual indirect purchaser plaintiffs. This settlement is not subject to the approval of the court. Pursuant to the settlement, the individual indirect purchaser plaintiffs in the complaints have dismissed their claims and withdrawn their appeal of the class certification ruling. Because the Court did not certify a class of indirect purchasers, this settlement agreement resolves only the claims of those indirect purchasers that were named in the various actions.

Rambus Corporation

On July 10, 2008, Rambus Corporation, or Rambus, filed suit against NVIDIA Corporation, asserting patent infringement of 17 patents claimed to be owned by Rambus. Rambus seeks damages, enhanced damages and injunctive relief. The lawsuit was filed in the Northern District of California in San Jose, California. On July 11, 2008, NVIDIA filed suit against Rambus in the Middle District of North Carolina asserting numerous claims, including antitrust and other claims. NVIDIA seeks damages, enhanced damages and injunctive relief. Rambus has since dropped two patents from its lawsuit in the Northern District of California. The two cases have ~~recently~~ been consolidated into a single ~~action~~proceeding in the Northern District of California. AOn April 13, 2009, the Court issued an order staying motion practice and allowing only document discovery to proceed. On January 27, 2010, the Court entered an order setting a case management conference ~~in the case pending in the Northern District of California is scheduled~~ for March ~~30, 2009.~~12, 2010.

On November 6, 2008, Rambus filed a complaint alleging a violation of 19 U.S.C. Section 1337 based on a claim of patent infringement of nine Rambus patents against NVIDIA and 14 other respondents with the U.S. International Trade Commission, or ITC. Rambus has subsequently withdrawn four of the nine patents at issue. The complaint seeks an exclusion order barring the importation of products that allegedly infringe ~~nine~~the now five Rambus patents. The ITC has instituted the ~~investigation.~~investigation and a hearing was held on October 13-20, 2009. The Administrative Law Judge issued an Initial Determination on January 22, 2009, which found the asserted claims of two patents in one patent family infringed but invalid, and the asserted claims of three patents in a separate patent family, valid, infringed and enforceable. This decision will be reviewed by the ITC. The target date by which the ITC will issue its Final Determination is May 24, 2010.

Rambus has also been subject to other proceedings in the European Union. NVIDIA is not a party to those proceedings. However, as a result of those proceedings, for a period of five years from the date of the European Union resolution, Rambus must now offer a license to memory controller manufacturers, sellers and or companies that integrate memory controllers into other products. The license terms are set forth in a license made available on Rambus' website. NVIDIA can choose to accept those license terms at any time.

NVIDIA intends to pursue its offensive and defensive cases ~~vigorously.~~vigorously in both actions.

Product Defect Litigation and Securities Cases

In September, October and November 2008, several putative consumer class action lawsuits were filed against us, asserting various claims arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook systems. Most of the lawsuits were filed in Federal Court in the Northern District of California, but three were filed in state court in California, in Federal Court in New York, and in Federal Court in Texas. Those three actions have since been removed or transferred to the United States District Court for the Northern District of California, San Jose Division, where all of the actions now are currently pending. The various lawsuits are titled Nakash v. NVIDIA Corp., Feinstein v. NVIDIA Corp., Inicom Networks, Inc. v. NVIDIA Corp. and Dell, Inc. and Hewlett Packard,, Olivos v. NVIDIA Corp., Dell, Inc. and Hewlett Packard,, Sielicki v. NVIDIA Corp. and Dell, Inc., Cormier v. NVIDIA Corp., National Business Officers Association, Inc. v. NVIDIA Corp., and West v. NVIDIA ~~Corp~~.Corp. The First Amended Complaint was filed on October 27, 2008, which no longer asserted claims against Dell, Inc. The various complaints assert claims for, among other things, breach of warranty, violations of the Consumer Legal Remedies Act, Business & Professions Code sections 17200 and 17500 and other consumer protection statutes under the laws of various jurisdictions, unjust enrichment, and strict liability.

The District Court has entered orders deeming all of the above cases related under the relevant local rules. On December 11, 2008, NVIDIA filed a motion to consolidate all of the aforementioned consumer class action cases. ~~The District Court held a case management conference for the above cases on February 23, 2009.~~ On February 26, 2009, the District Court consolidated the cases, as well as two other cases pending against Hewlett-Packard, under the caption “The NVIDIA GPU Litigation” and ordered the plaintiffs to file lead counsel motions by March 2, 2009. On March 2, 2009, several of the parties filed motions for appointment of lead counsel and briefs addressing certain related issues. On April 10, 2009, the District Court appointed Milberg LLP lead counsel. On May 6, 2009, the plaintiffs filed an Amended Consolidated Complaint, alleging claims for violations of California Business and Professions Code Section 17200, Breach of Implied Warranty under California Civil Code Section 1792, Breach of the Implied Warranty of Merchantability under the laws of 27 other states, Breach of Warranty under the Magnuson-Moss Warranty Act, Unjust Enrichment, violations of the New Jersey Consumer Fraud Act, Strict Liability and Negligence, and violation of California’s Consumer Legal Remedies Act. On May 14, 2009, the District Court entered a case schedule order, which set a September 28, 2009 hearing date for an anticipated motion to dismiss, a December 7, 2009 hearing date for anticipated class certification motion, and a July 12, 2010 fact discovery deadline. The District Court subsequently entered an order resetting the hearing date for an anticipated motion to dismiss for October 19, 2009, based on a stipulation of the parties. The Court heard arguments on NVIDIA’s motion to dismiss on October 19, 2009, and took the matter under submission.

On November 19, 2009, the Court issued an order dismissing with prejudice plaintiffs causes of action for Breach of the Implied Warranty under the laws of 27 other states and unjust enrichment, dismissing with leave to amend plaintiffs’ causes of action for Breach of Implied Warranty under California Civil Code Section 1792 and Breach of Warranty under the Magnuson-Moss Warranty Act, and denying NVIDIA’s motion to dismiss as to the other causes of action. The Court gave plaintiffs until December 14, 2009 to file an amended complaint. On December 14, 2009, plaintiffs filed a Second Amended Consolidated Complaint, asserting claims for violations of California Business and Professions Code Section 17200, Breach of Implied Warranty under California Civil Code Section 1792, Breach of Warranty under the Magnuson-Moss Warranty Act, violations of the New Jersey Consumer Fraud Act, Strict Liability and Negligence, and violation of California’s Consumer Legal Remedies Act. The Second Amended Complaint seeks unspecified damages. On January 19, 2010, we filed a motion to dismiss the Breach of Implied Warranty under California Civil Code Section 1792, Breach of Warranty under the Magnuson-Moss Warranty Act, and California’s Consumer Legal Remedies Act claims in the Second Amended Consolidated Complaint. A hearing on ~~appointment of lead counsel~~this motion is currently scheduled for ~~March 23, 2009. The District Court also ordered that a consolidated amended complaint be filed on or before May 6, 2009.~~June 14, 2010.

In September 2008, three putative securities class actions, or the Actions, were filed in the United States District Court for the Northern District of California arising out of our announcements on July 2, 2008, that we would take a charge against cost of revenue to cover anticipated costs and expenses arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products and that we were revising financial guidance for our second quarter of fiscal year 2009. The Actions purport to be brought on behalf of purchasers of NVIDIA stock and assert claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. On October 30, 2008, the Actions were consolidated under the caption In re NVIDIA Corporation Securities Litigation,, Civil Action No. 08-CV-04260-JW (HRL). Lead Plaintiffs and Lead ~~Plaintiffs'~~Plaintiffs’ Counsel were appointed on December 23, 2008. On February 6, 2009, co-Lead Plaintiff filed a Writ of Mandamus with the Ninth Circuit Court of Appeals challenging the designation of co-Lead ~~Plaintiffs'~~Plaintiffs’ Counsel. On February 19, 2009, co-Lead Plaintiff filed with the District Court, a motion to stay the District Court proceedings pending resolution of the Writ of Mandamus by the Ninth Circuit. On February 24, 2009, Judge Ware granted the stay. ~~The Writ is still pending in~~On November 5, 2009, the Court of ~~Appeals. We intend to take all appropriate action with respect to~~Appeals issued an opinion reversing the ~~above cases.~~District Court’s appointment of one of the lead plaintiffs’ counsel, and remanding the matter for further proceedings.

~~Intel Corporation~~On December 8, 2009, the District Court appointed Milberg LLP and Kahn Swick & Foti, LLC as co-lead counsel. On January 22, 2010, Plaintiffs filed a Consolidated Amended Class Action Complaint for Violations of the Federal Securities Laws ("Consolidated Complaint"), asserting claims for violations of Section 10(b) of the Securities Exchange Act, Rule 10b-5, and Section 20(a) of the Securities Exchange Act. The Consolidated Complaint seeks unspecified compensatory damages. We filed a motion to dismiss the Consolidated Complaint. A hearing on this motion is currently scheduled for June 14, 2010.

Intel Corporation

On February 17, 2009, Intel Corporation filed suit against NVIDIA Corporation, seeking declaratory and injunctive relief relating to a licensing agreement that the parties signed in 2004. The lawsuit was filed in Delaware Chancery Court. Intel seeks an order from the Court declaring that the license does not extend to certain ~~future~~ NVIDIA chipset products, and enjoining NVIDIA from stating that it has licensing rights for these products. The lawsuit seeks no damages from NVIDIA. If Intel successfully obtains such a court order, we could be unable to sell our MCP products for use with certain Intel processors and our competitive position would be harmed. ~~NVIDIA’s response to the Intel complaint is currently due on~~

On March 23, ~~2009.~~2009, we filed our answer to Intel's complaint and also asserted counterclaims for declaratory relief, injunctive relief, breach of contract, and breach of the implied covenant of good faith and fair dealing. Our counterclaims seek an order declaring that NVIDIA has the right to sell certain chipset products with Intel's processors under the 2004 licensing agreement, and enjoining Intel from interfering with NVIDIA's licensing rights. In addition, the counterclaims seek a finding that Intel has materially breached its obligations under the 2004 licensing agreement, and requests various remedies for that breach, including termination of Intel's cross licensing rights. On April 16, 2009, Intel filed its answer to our counterclaims.

Discovery is proceeding and trial is scheduled to commence before Vice Chancellor Strine on August 23, 2010. NVIDIA disputes Intel’s ~~positions~~claims and intends to vigorously defend ~~the case.~~these claims, as well as pursue its counterclaims.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of fiscal year ~~2009.~~

2010.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select Market under the symbol NVDA. Public trading of our common stock began on January 22, 1999. Prior to that, there was no public market for our common stock. As of March 10, ~~2009,~~2010, we had approximately~~460~~ 442 registered stockholders, not including those shares held in street or nominee name. The following table sets forth for the periods indicated the high and low sales price for our common stock as quoted on the NASDAQ Global Select Market:

	High		Low
Fiscal year ending January 30, 2011
First Quarter (through March 10, 2010)	$	17.84	$	15.90

Fiscal year ended January 31, 2010
Fourth Quarter	$	18.96	$	11.56
Third Quarter	$	16.58	$	12.58
Second Quarter	$	13.04	$	8.33
First Quarter	$	12.08	$	7.21

Fiscal year ended January 25, 2009
Fourth Quarter	$	9.45	$	5.75
Third Quarter	$	14.12	$	5.97
Second Quarter	$	25.35	$	10.70
First Quarter	$	27.59	$	17.31

High Low
Fiscal year ending January 31, 2010
First Quarter (through March 10, 2009)

$
9.97

$
7.21

Fiscal year ended January 25, 2009
Fourth Quarter

$
9.45

$
5.75

Third Quarter

$
14.12

$
5.97

Second Quarter

$
25.35

$
10.70

First Quarter

$
27.59

$
17.31

Fiscal year ended January 27, 2008

Fourth Quarter

$
38.20

$
22.33

Third Quarter (1)

$
39.67

$
27.00

Second Quarter (1)

$
31.89

$
21.47

First Quarter (1)

$
23.27

$
18.69

~~(1) Reflects a three-for-two stock split effective on September 10, 2007.~~

Dividend Policy

We have never paid and do not expect to pay cash dividends for the foreseeable future.

Issuer Purchases of Equity Securities

~~During fiscal year 2005, we announced that our~~Our Board of Directors ~~or Board, had~~has authorized a stock repurchase program to repurchase shares of our common stock, subject to certain specifications, up to an aggregate maximum amount of $300 million. During fiscal year 2007, the Board further approved an increase of $400 million to the original stock repurchase program. In fiscal year 2008, we announced a stock repurchase program under which we may purchase up to an additional $1.0 billion of our common stock over a three year period through May 2010. On August 12, 2008, we announced that our Board further authorized an additional increase of $1.0 billion to the stock repurchase program. As a result of these increases, we have an ongoing authorization from the Board,us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2010.

The repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase programs, and may be made in one or more larger repurchases, in compliance with the Securities Exchange Act of 1934 ~~or the Exchange Act,~~ Rule 10b-18, subject to market conditions, applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of common stock and the program may be suspended at any time at our discretion. As part of our share repurchase program, we have entered into, and we may continue to enter into, structured share repurchase transactions with financial institutions. These agreements generally require that we make an up-front payment in exchange for the right to receive a fixed number of shares of our common stock upon execution of the agreement, and a potential incremental number of shares of our common stock, within a pre-determined range, at the end of the term of the agreement.

~~During the three months ended January 25, 2009, we~~We did not enter into any structured share repurchase transactions or otherwise purchase any shares of our common ~~stock. During~~stock during fiscal year ~~2009, we entered into structured share repurchase transactions to repurchase 29.3 million shares for $423.6 million, which we recorded on the trade date of the transactions.~~2010. Through ~~fiscal year 2009,~~January 31, 2010, we have repurchased an aggregate of 90.9 million shares under our stock repurchase program for a total cost of $1.46 billion. As of January ~~25, 2009,~~31, 2010, we are authorized, subject to certain specifications, to repurchase shares of our common stock up to an additional amount of $1.24 billion through May 2010.

Additionally, during fiscal year ~~2009,~~2010, we granted approximately ~~17.9~~7.7 million stock options and 7.7 million restricted stock units, or RSUs, under the 2007 Equity Incentive Plan. Please refer to Note 23 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further information regarding stock-based compensation related to our March 2009 stock option purchase and ~~stock options~~related to equity awards granted under our equity incentive ~~program.~~programs.

3633

Stock Performance Graphs

The following graph compares the cumulative total stockholder return for our common stock, the S & P 500 Index and the S & P 500 Semiconductors Index for the five years ended January ~~25, 2009.~~31, 2010. The graph assumes that $100 was invested on January ~~25, 2004~~30, 2005 in our common stock or on January 31, ~~2004~~2005 in each of the S & P 500 Index and the S & P Semiconductors Index. Total return assumes reinvestment of dividends in each of the indices indicated. We have never paid cash dividends on our common stock. Our results are calculated on fiscal year-end basis and each of the S & P 500 Index and the S & P Semiconductors Index are calculated on month-end basis. Total return is based on historical results and is not intended to indicate future performance.

	1/25/2004		1/30/2005		1/29/2006		1/28/2007		1/27/2008		1/25/2009		1/30/2005		1/29/2006		1/28/2007		1/27/2008		1/25/2009		1/31/2010
NVIDIA Corporation	$	100.00	$	99.09	$	200.30	$	272.59	$	324.17	$	100.17	$	100.00	$	202.14	$	275.09	$	327.14	$	101.09	$	201.79
S & P 500	$	100.00	$	106.23	$	117.26	$	134.28	$	131.17	$	80.50	$	100.00	$	110.38	$	126.40	$	123.48	$	75.78	$	100.89
S & P Semiconductors	$	100.00	$	75.16	$	86.90	$	81.82	$	76.25	$	45.17	$	100.00	$	115.62	$	108.87	$	101.45	$	60.82	$	95.47

*$100 invested on ~~January 25, 2004~~1/30/05 in stock or 1/31/05 in index, including reinvestment of dividends. Indexes calculated on month-end basis.

3734

The following graph compares the cumulative total stockholder return for our common stock, the S & P 500 Index and the S & P 500 Semiconductors Index for the period commencing with our initial public offering through the year ended January ~~25, 2009.~~31, 2010. The graph assumes that $100 was invested at our initial public offering on January 21, 1999 in our common stock or on December 31, 1998 in each of the S & P 500 Index and the S & P Semiconductors Index. Total return assumes reinvestment of dividends in each of the indices indicated. We have never paid cash dividends on our common stock. Our results are calculated on fiscal year-end basis and each of the S & P 500 Index and the S & P Semiconductors Index are calculated on month-end basis. Total return is based on historical results and is not intended to indicate future performance.

	1/21/1999		1/31/1999		1/30/2000		1/28/2001		1/27/2002		1/24/2003		1/25/2004		1/30/2005		1/29/2006			1/28/2007			1/27/2008				1/25/2009	1/21/1999		1/31/1999		1/30/2000		1/28/2001		1/27/2002		1/24/2003		1/25/2004		1/30/2005		1/29/2006		1/28/2007		1/27/2008	1/25/2009	1/31/2010
NVIDIA Corporation	$	100.00	$	158.33	$	311.46	$	846.88	$	2,182.33	$	339.00	$	769.67	$	762.67		$	1,541.67		$	2,098.00		$	2,495.00	$ 771.00		$	100.00	$	158.33	$	311.46	$	846.88	$	2,182.33	$	339.00	$	769.67	$	762.67	$	1,541.67	$	2,098.00	$2,495.00	$ 771.00	$1,539.00
S&P 500	$	100.00	$	104.18	$	114.96	$	113.93	$	95.53	$	73.54	$	98.97	$	105.13		$	116.05		$	132.89		$	129.82	$ 79.67		$	100.00	$	104.18	$	114.96	$	113.93	$	95.53	$	73.54	$	98.97	$	105.13	$	116.05	$	132.89	$ 129.82	$ 79.67	$106.07
S&P Semiconductors	$	100.00	$	119.64	$	180.33	$	145.17	$	112.96	$	50.00	$	99.52	$	74.79		$	86.48		$	81.43		$	75.88	$ 45.49		$	100.00	$	119.64	$	180.33	$	145.17	$	112.96	$	50.00	$	99.52	$	74.79	$	86.48	$	81.43	$75.88	$ 45.49	$71.41

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

Revenue Recognition

Product Revenue

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed ~~and~~or determinable, and collection is reasonably assured. For most sales, we use a binding purchase order and in certain cases we use a contractual agreement as evidence of an arrangement. We consider delivery to occur upon shipment provided title and risk of loss have passed to the customer based on the shipping terms. At the point of sale, we assess whether the arrangement fee is fixed and determinable and whether collection is reasonably assured. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of payment.

Our policy on sales to certain distributors, with rights of return, is to defer recognition of revenue and related cost of revenue until the distributors resell the product.

~~We record estimated reductions to revenue for customer programs at the time revenue is recognized.~~ Our customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets. We ~~account for rebates in accordance with Emerging Issues Task Force Issue 01-9, or EITF 01-09,~~ ~~Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)~~ ~~and, as such, we~~ accrue for 100% of the potential rebates and do not apply a breakage factor. We recognize a liability for these rebates at the later of the date at which we record the related revenue or the date at which we offer the rebate. Rebates typically expire six months from the date of the original sale, unless we reasonably believe that the customer intends to claim the rebate. Unclaimed rebates are reversed to ~~revenue upon expiration of the rebate.~~revenue.

Our customer programs also include marketing development funds, or MDFs. We account for MDFs as either a reduction of revenue or an operating ~~expense in accordance with EITF 01-09.~~expense. MDFs represent monies paid to retailers, system builders, original equipment manufacturers, or OEMs, distributors and add-in card partners that are earmarked for market segment development and expansion and typically are designed to support our partners’ activities while also promoting NVIDIA products. Depending on market conditions, we may take actions to increase amounts offered under customer programs, possibly resulting in an incremental reduction of revenue at the time such programs are offered.

We also record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a particular fiscal period exceed historical return rates we may determine that additional sales return allowances are required to properly reflect our estimated exposure for product returns.

License and Development Revenue

For license arrangements that require significant customization of our intellectual property components, we generally recognize this license revenue ~~using the percentage-of-completion method of accounting~~ over the period that services are performed. For all license and service arrangements, ~~accounted for under the percentage-of-completion method,~~ we determine progress to completion based on actual direct labor hours incurred to date as a percentage of the estimated total direct labor hours required to complete the project. We periodically evaluate the actual status of each project to ensure that the estimates to complete each contract remain accurate. A provision for estimated losses on contracts is made in the period in which the loss becomes probable and can be reasonably estimated. Costs incurred in advance of revenue recognized are recorded as deferred costs on uncompleted contracts. If the amount billed exceeds the amount of revenue recognized, the excess amount is recorded as deferred revenue. Revenue recognized in any period is dependent on our progress toward completion of projects in progress. Significant management judgment and discretion are used to estimate total direct labor hours. Any changes in or deviations from these estimates could have a material effect on the amount of revenue we recognize in any period.

7269

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Advertising Expenses

We expense advertising costs in the period in which they are incurred. Advertising expenses for fiscal years 2010, 2009 and 2008 ~~and 2007~~ were $16.3 million, $28.5 million ~~$11.4 million~~ and ~~$14.8~~$11.4 million, respectively.

Rent Expense

We recognize rent expense on a straight-line basis over the lease period and accrue for rent expense incurred, but not paid.

Product Warranties

We generally offer limited warranty to end-users that ranges from one to three years for products in order to repair or replace products for any manufacturing defects or hardware component failures. Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We also accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated.

Stock-based Compensation

~~Effective January 30, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123(R), or SFAS No. 123(R),~~ ~~Share-Based Payment. SFAS No. 123(R) establishes accounting~~ We measure stock-based compensation for ~~stock-based~~equity awards exchanged for employee ~~services. Accordingly, we measure stock-based compensation~~services at grant date, based on the fair value of the awards, and we recognize that compensation as expense using the straight-line attribution method over the requisite employee service period, which is typically the vesting period of each award. ~~We elected to adopt the modified prospective application method provided by SFAS No. 123(R).~~ Our estimates of the fair values of employee stock options are calculated using a binomial model.

Litigation, Investigation and Settlement Costs

From time to time, we are involved in legal actions and/or investigations by regulatory bodies. We are aggressively defending our current litigation matters for which we are responsible. However, there are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions or other third-party claims against us will be resolved without costly litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with ~~accounting principles generally accepted in the United States.~~U.S.GAAP. However, the actual liability in any such litigation or investigations may be materially different from our estimates, which could require us to record additional costs.

Foreign Currency Translation

We use the United States dollar as our functional currency for all of our subsidiaries. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities such as property and equipment, and equity, are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the previously noted balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in “Other income (expense), net” in our Consolidated Financial Statements and to date have not been significant.

The impact of foreign currency transaction loss included in determining net income (loss) for fiscal years 2010, 2009 and 2008 ~~and 2007~~ was $0.9 million, $2.0 million ~~$1.7 million~~ and ~~$0.5~~$1.7 million, respectively.

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NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Income Taxes

~~Statement of Financial Accounting Standards No. 109, or SFAS No. 109,~~ ~~Accounting for Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. In accordance with SFAS No. 109, we~~ We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We ~~also~~ recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.

United States income tax has not been provided on earnings of our ~~non-United States~~non-U.S. subsidiaries to the extent that such earnings are considered to be ~~permanently~~indefinitely reinvested.

Our calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of current and deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the United States, or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential United States and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements, accordingly.

OnAs of January ~~29, 2007,~~31, 2010, we ~~adopted FASB Interpretation No. 48, or FIN 48,~~ ~~Accounting for Uncertainty in Income Taxes,~~ ~~issued in July 2006. FIN 48 applies to all tax positions~~had a valuation allowance of $113.4 million related to state and certain foreign deferred tax assets that management determined are not likely to be realized due, in part, to projections of future taxable income ~~taxes subject~~and potential utilization limitations of tax attributes acquired as a result of stock ownership changes. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax asset as an income tax benefit during the period the realization occurred.

Our deferred tax assets do not include the excess tax benefit related to ~~SFAS No. 109. Under FIN 48~~stock-based compensation that are a component of our federal and state net operating loss and research tax credit carryforwards in the amount of $401.5 million as of January 31, 2010. Consistent with prior years, the excess tax benefit reflected in our net operating loss and research tax credit carryforwards will be accounted for as a credit to stockholders’ equity, if and when realized. In determining if and when excess tax benefits have been realized, we have elected to do a with-and-without approach with respect to such excess tax benefits. We have also elected to ignore the indirect tax effects of stock-based compensation deductions for financial and accounting reporting purposes, and specifically to recognize the full effect of the research tax credit in income from continuing operations.

We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. ~~The cumulative effect of adoption of FIN 48 did not result in a material adjustment to our tax liability for unrecognized income tax benefits.~~ Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax ~~expense did not change as a result of implementing the FIN 48.~~expense. Please refer to Note 1314 of these Notes to the Consolidated Financial Statements for additional information.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income or loss. Other comprehensive income or loss components include unrealized gains or losses on available-for-sale securities, net of tax.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, using the treasury stock method. Under the treasury stock method, the effect of stock options outstanding is not included in the computation of diluted net income (loss) per share for periods when their effect is anti-dilutive.

Cash and Cash Equivalents

We consider all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. As of January ~~25, 2009~~31, 2010 and January ~~27, 2008,~~25, 2009, our cash and cash equivalents were $447.2 million and $417.7 million, ~~and $727.0 million,~~respectively, which ~~includes $14.6~~include $81.4 million and ~~$218.1~~$14.6 million invested in money market funds for fiscal year ~~2009~~2010 and fiscal year ~~2008,~~2009, respectively.

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NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Marketable Securities

~~We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No. 115,~~ ~~Accounting for Certain Investments in Debt and Equity Securities.~~ ~~All of our cash equivalents and marketable securities are treated as “available-for-sale” under SFAS No. 115.~~ Cash equivalents consist of financial instruments which are readily convertible into cash and have original maturities of three months or less at the time of acquisition. Marketable securities consist primarily of highly liquid investments with ~~a maturity~~maturities of greater than three months when purchased. We generally classify our marketable securities at the date of acquisition ~~in the available-for-sale category~~ as ~~our intention is to convert them into cash for operations.~~available-for-sale. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Any unrealized losses which are considered to be other-than-temporary impairments are recorded in the other income (expense) section of our consolidated statements of operations. Realized gains (losses) on the sale of marketable securities are determined using the specific-identification method and recorded in the other income (expense) section of our consolidated statements of operations.

All of our available-for-sale investments are subject to a periodic impairment review. ~~Investments are considered~~We record a charge to ~~be impaired~~earnings when a decline in fair value is significantly below cost basis and judged to be other-than-temporary, ~~when~~or have other indicators of impairments. If the ~~resulting~~ fair value of an available-for-sale debt instrument is ~~significantly below~~less than its amortized cost basis, ~~and/or~~an other-than-temporary impairment is triggered in circumstances where (1) we intend to sell the ~~significant decline has lasted for an extended period of time. The evaluation~~instrument, (2) it is more likely than not that we ~~use~~will be required to ~~determine whether~~sell the instrument before recovery of its amortized cost basis, or (3) a ~~marketable security~~credit loss exists where we do not expect to recover the entire amortized cost basis of the instrument. If we intend to sell or it is ~~impaired is based on~~more likely than not that we will be required to sell the ~~specific facts and circumstances present at the time~~available-for-sale debt instrument before recovery of ~~assessment, which include the consideration of general market conditions, the duration and extent to which fair value is below~~its amortized cost ~~and our intent and ability to hold~~basis, we recognize an ~~investment for a sufficient period of time to allow for recovery~~other-than-temporary impairment in ~~value. We also consider specific adverse conditions related~~earnings equal to the ~~financial health~~entire difference between the debt instruments’ amortized cost basis and its fair value. For available-for-sale debt instruments that are considered other-than-temporarily impaired due to the existence of a credit loss, if we do not intend to sell and business outlook for an investee, including industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in an investee’s credit rating. Investmentsit is not more likely than not that we ~~identify~~will be required to sell the instrument before recovery of its remaining amortized cost basis (amortized cost basis less any current-period credit loss), we separate the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings.

We performed an impairment review of our investment portfolio as of January 31, 2010. Based on our impairment review and having ~~an indicator~~considered the guidance of ~~impairment are subject to further analysis to determine if~~ the ~~investment is~~relevant accounting literature, we did not record any other than ~~temporarily impaired, in which case we write down the investment to its estimated fair value.~~temporary impairment charges during fiscal year 2010. We concluded that our investments were appropriately valued and that no additional other than temporary impairment charges were necessary on our portfolio of available for sale investments as of January 31, 2010.

Fair Value of Financial Instruments

The carrying value of cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities as of January ~~25, 2009~~31, 2010 and January ~~27, 2008.~~25, 2009. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and accounts receivable. Our investment policy requires the purchase of top-tier investment grade securities, the diversification of asset type and includes certain limits on our portfolio duration. All marketable securities are held in our name, managed by several investment managers and held by one major financial institution under a custodial arrangement. Accounts receivable from significant customers, those representing 10% or more of total accounts receivable aggregated approximately 20% of our accounts receivable balance from two customers at January 31, 2010 and approximately 38% of our accounts receivable balance from three customers at January 25, ~~2009 and approximately 12% of our accounts receivable balance from one customer at January 27, 2008.~~2009. We perform ongoing credit evaluations of our customers’ financial condition and maintain an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. Our overall estimated exposure excludes amounts covered by credit insurance and letters of credit.

Accounts Receivable

We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We determine this allowance, which consists of an amount identified for specific customer issues as well as an amount based on overall estimated exposure. Factors impacting the allowance include the level of gross receivables, the financial condition of our customers and the extent to which balances are covered by credit insurance or letters of credit.

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NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Inventories

Inventory cost is computed on an adjusted standard basis, which approximates actual cost on an average or first-in, first-out basis. Inventory costs consist primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory provisions and shipping costs. We write down our inventory for estimated ~~amounts related to~~ lower of cost or market, obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, future product purchase commitments, estimated manufacturing yield levels and market conditions. If actual market conditions are less favorable than those projected by management, or if our future product purchase commitments to our suppliers exceed our forecasted future demand for such products, additional future inventory write-downs may be required that could adversely affect our operating results. ~~If actual market conditions are more favorable, we may have higher gross margins when products are sold. Sales to date of such products have not had a significant impact on our gross margin.~~ Inventory reserves once established are not reversed until the related inventory has been sold or ~~scrapped.~~scrapped, so if actual market conditions are more favorable in the fiscal periods subsequent to that in which we record larger than normal inventory reserves, we may have higher gross margins when products are sold. Sales of such products did not have a significant impact on our gross margin for fiscal year 2010.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets, generally three to five years. The estimated useful lives of our buildings ~~have estimated useful lives of~~are up to twenty-five years. Depreciation expense includes the amortization of assets recorded under capital leases. Leasehold improvements and assets recorded under capital leases are amortized over the shorter of the lease term or the estimated useful life of the asset.

Goodwill

~~We account for goodwill in accordance with Statement of Financial Accounting Standards No. 142, or SFAS No. 142,~~ ~~Goodwill and Other Intangible Assets~~. Goodwill is subject to our annual impairment test during the fourth quarter of our fiscal year, or earlier if indicators of potential impairment exist, using a fair value-based approach. Our impairment review process compares the fair value of the reporting unit in which the goodwill resides to its carrying value. For the purposes of completing our ~~SFAS No. 142~~ impairment test, we perform our analysis on a reporting unit basis. We utilize a two-step approach to testing goodwill for impairment. The first step tests for possible impairment by applying a fair value-based test. In computing fair value of our reporting units, we use estimates of future revenues, costs and cash flows from such units. The second step, if necessary, measures the amount of such impairment by applying fair value-based tests to individual assets and liabilities.

Intangible Assets

Intangible assets primarily represent rights acquired under technology licenses, patents, acquired intellectual property, trademarks and customer relationships. We currently amortize our intangible assets with definitive lives over periods ranging from one to ten years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up or, if that pattern ~~can not~~cannot be reliably determined, using a straight-line amortization method.

Impairment of Long-Lived Assets

~~In accordance with Statement of Financial Accounting Standards No. 144, or SFAS No. 144,~~ ~~Accounting for the Impairment or Disposal of Long-Lived Assets,~~ ~~long-lived~~ Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. Assets and liabilities to be disposed of would be separately presented in the consolidated balance sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.

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NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Accounting for Asset Retirement Obligations

We account for asset retirement ~~obligations in accordance with Statement of Financial Accounting Standards No. 143, or SFAS No. 143,~~ ~~Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for~~ obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. ~~SFAS No. 143~~The accounting guidance applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the ~~assets. SFAS No. 143~~assets and requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. ~~During fiscal years~~As of January 31, 2010 and January 25, 2009, ~~and 2008, we recorded~~our asset retirement obligations to return the leasehold improvements to their original condition upon lease termination at our headquarters facility in Santa Clara, California and certain laboratories at our international ~~locations. As of January 25, 2009~~locations were $10.6 million and ~~January 27, 2008, our net asset retirement obligations were~~ $9.5 million, ~~and $6.5 million,~~ respectively.

Adoption of New Accounting Pronouncements

~~On January 28, 2008,~~Business Combinations

In the first quarter of fiscal year 2010, we adopted ~~Statement of Financial Accounting Standards No. 157, or SFAS No. 157,~~ ~~Fair Value Measurements~~ for all financial assets and liabilities. SFAS No. 157 applies to all financial assets and financial liabilities recognized or disclosed at fair value in the financial statements. SFAS No. 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS No. 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. The adoption of SFAS No. 157 for financial assets and liabilities did not have a significant impact on our consolidated financial statements, and the resulting fair values calculated under SFAS No. 157 after adoption were not significantly different than the fair values that would have been calculated under previous guidance. Please refer to Note 17 of these Notes to the Consolidated Financial Statements for further details on our fair value measurements.

~~Additionally, in February 2008,~~new accounting guidance issued by the Financial Accounting Standards Board, or FASB, ~~issued FASB Staff Position No. FAS 157-2, or FSP No. 157-2,~~ ~~Effective Date of FASB Statement No. 157, to partially defer FASB Statement No. 157, Fair Value Measurements. FSP No. 157-2 defers the effective date of SFAS No. 157~~ for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. We do not believe the adoption of FSP No. 157-2 will have a material impact on our consolidated financial position, results of operations and cash flows.

~~In October 2008, the FASB issued Staff Position No. FAS 157-3, or FSP No. 157-3,~~ ~~Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active~~. FSP No. 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of observable market information when the market is not active, and the use of market quotes when assessing the relevance of observable and unobservable data. FSP No. 157-3 is effective for all periods presented in accordance with SFAS No. 157. The adoption of FSP No. 157-3 did not have a significant impact on our consolidated financial statements, and the resulting fair values calculated under SFAS No. 157 after adoption were not significantly different than the fair values that would have been calculated under previous guidance.

~~On January 28, 2008, we adopted Statement of Financial Accounting Standards No. 159, or SFAS No. 159,~~ ~~The Fair Value Option for Financial Assets and Financial Liabilities.~~ SFAS No. 159 permits companies to choose to measure certain financial instruments and certain other items at fair value using an instrument-by-instrument election. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings.business combinations. Under ~~SFAS No. 159, we did not elect the fair value option for any of our assets and liabilities. The adoption of SFAS No. 159 did not have an impact on our consolidated financial statements.~~

~~In June 2007, the FASB ratified Emerging Issues Task Force Issue No. 07-3, or EITF 07-3,~~ ~~Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities~~. EITF 07-3 requires non-refundable advance payments for goods and services to be used in future research and development activities to be recorded as an asset and the payments to be expensed when the research and development activities are performed. We adopted the provisions of EITF 07-3 beginning with our fiscal quarter ended April 27, 2008. The adoption of EITF 07-3 did not have any impact on our consolidated financial position, results of operations and cash flows.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Continued)~~

~~Recently Issued Accounting Pronouncements~~

~~In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), or SFAS No. 141(R),~~ ~~Business Combinations. Under SFAS No. 141(R),~~this guidance, an entity is required to recognize ~~the~~ assets acquired, liabilities assumed, contractual contingencies and contingent consideration at their fair value on the acquisition date. It further ~~requires~~requires: that acquisition-related costs be recognized separately from the acquisition and expensed as ~~incurred,~~incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition ~~date,~~date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period, ~~impact~~including changes related to acquired tax assets and income tax ~~expense.~~uncertainties from acquisitions that occurred prior to the date of adoption, be recognized as a component of the provision for taxes. In addition, acquired in-process research and development ~~or IPR&D,~~ is measured at fair value, capitalized as an indefinite-life intangible asset and tested for impairment during the development period. Subsequent to the development period the carrying value, if any, of acquired in-process development will be considered a definite-life intangible asset and amortized over its estimated useful life. The new accounting guidance also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination. We ~~are required~~will apply this new accounting guidance to ~~adopt~~any future business combinations.

In the first quarter of fiscal year 2010, we also adopted new accounting guidance issued by the FASB for assets acquired and liabilities assumed in a business combination that arise from contingencies. The new guidance amends the provisions ~~of SFAS No. 141(R) beginning with our fiscal quarter ending April 26, 2009.~~previously issued by the FASB related to the initial recognition and measurement, subsequent measurement and accounting and disclosures for assets and liabilities arising from contingencies in business combinations. The ~~adoption of SFAS No. 141(R) is expected~~new guidance eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement. We will apply this new accounting guidance to ~~change our accounting treatment for~~any future business ~~combinations on a prospective basis beginning in the period it is adopted.~~combinations.

~~In April 2008, the FASB issued FASB Staff Position No. FAS No.142-3, or FSP No. 142-3,~~ ~~Determination of Useful~~ Life of Intangible Assets~~. FSP No. 142-3~~ During the first quarter of fiscal year 2010, we adopted new accounting guidance issued by the FASB for the determination of the useful life of intangible assets. The new guidance amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible ~~asset under Statement of Financial Accounting Standards No. 142, or SFAS No. 142,~~ ~~Goodwill and Other Intangible Assets.~~ ~~FSP No. 142-3~~asset. The new guidance also requires expanded disclosure regarding the determination of intangible asset useful lives. ~~FSP No. 142-3~~The adoption of this accounting guidance did not have a material impact on our consolidated financial position, results of operations or financial condition..

Fair Value of Financial Instruments and Other-Than-Temporary Impairment During the second quarter of fiscal year 2010, we adopted three related sets of accounting guidance issued by the FASB. The accounting guidance sets forth rules related to determining the fair value of financial assets and financial liabilities when the activity levels have significantly decreased in relation to the normal market, guidance related to the determination of other-than-temporary impairments to include the intent and ability of the holder as an indicator in the determination of whether an other-than-temporary impairment exists and interim disclosure requirements for the fair value of financial instruments. The adoption of these three sets of accounting guidance did not have a material impact on our consolidated financial position, results of operations or financial condition..

Subsequent Events

During the second quarter of fiscal year 2010, we adopted new accounting guidance issued by the FASB related to subsequent events. The new requirement establishes the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of this accounting guidance did not have a material impact on our consolidated financial position, results of operations or financial condition.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Accounting Standards Codification

During the third quarter of fiscal year 2010, we adopted the new Accounting Standards Codification, or ASC, issued by the FASB. The ASC has become the source of authoritative U.S. GAAP, recognized by the FASB to be applied by nongovernmental entities. The ASC is not intended to change or alter existing U.S. GAAP. The adoption of the ASC did not have a material impact on our consolidated financial position, results of operations or financial condition..

Recently Issued Accounting Pronouncements

Variable Interest Entities

In June 2009, the FASB issued new accounting guidance which amends the evaluation criteria to identify the primary beneficiary of a variable interest entity, or VIE, and requires ongoing reassessment of whether an enterprise is the primary beneficiary of the VIE. The new guidance significantly changes the consolidation rules for VIEs including the consolidation of common structures, such as joint ventures, equity method investments and collaboration arrangements. The guidance is applicable to all new and existing VIEs. The provisions of this new accounting guidance are effective for interim and annual reporting periods beginning after November 15, 2009. We do not believe the adoption of this new accounting guidance will have a material impact on our consolidated financial position, results of operations or financial condition.

Revenue Recognition

In September 2009, the FASB issued new accounting guidance related to the revenue recognition of multiple element arrangements. The new guidance states that if vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. In addition, the FASB also issued new accounting guidance related to certain revenue arrangements that include software elements. Previously, companies that sold tangible products with “more than incidental” software were required to apply software revenue recognition guidance. This guidance often delayed revenue recognition for the delivery of the tangible product. Under the new guidance, tangible products that have software components that are “essential to the functionality” of the tangible product will be excluded from the software revenue recognition guidance. The new guidance will include factors to help companies determine what is “essential to the functionality.” Software-enabled products will now be subject to other revenue guidance and will likely follow the guidance for multiple deliverable arrangements issued by the FASB in September 2009.

These two new guidance are to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. If a company elects earlier application and the first reporting period of adoption is not the first reporting period in the company’s fiscal year, the guidance must be applied through retrospective application from the beginning of the company’s fiscal year and the company must disclose the effect of the change to those previously reported periods. We do not believe the adoption of this accounting guidance will have a material impact on our consolidated financial position, results of operations or financial condition.

Improving Disclosures About Fair Value Measurements

In January 2010, the FASB issued a amendment to the existing disclosure requirements by adding required disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the requirement to provide level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective for fiscal years beginning after December 15, ~~2008. Earlier~~2010. Since this standard impacts disclosure requirements only, its adoption iswill not ~~permitted. We are currently evaluating the potential~~have a material impact ~~the adoption of FSP No. 142-3 will have~~ on our consolidated financial position, results of operations ~~and cash flows.~~or financial condition.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Note 2 – Stock Option Purchase

In the first quarter of fiscal year 2010, we completed a cash tender offer for certain employee stock options. The tender offer applied to outstanding stock options held by employees with an exercise price equal to or greater than $17.50 per share. None of the non-employee members of our Board of Directors or our officers who file reports under Section 16(a) of the Securities Exchange Act of 1934, as amended, were eligible to participate in the tender offer. All eligible options with exercise prices equal to or greater than $17.50 per share but less than $28.00 per share were eligible to receive a cash payment of $3.00 per option in exchange for the cancellation of the eligible option. All eligible options with exercise prices equal to or greater than $28.00 per share were eligible to receive a cash payment of $2.00 per option in exchange for the cancellation of the eligible option.

Our consolidated statement of operations for fiscal year 2010 includes stock-based compensation charges related to the stock option purchase (in thousands):

Cost of revenue	$	11,412
Research and development		90,456
Sales, general and administrative		38,373
Total	$	140,241

A total of 28.5 million options were tendered under the offer for an aggregate cash purchase price of $78.1 million, which was paid in exchange for the cancellation of the eligible options. As a result of the tender offer, we incurred a charge of $140.2 million consisting of $124.1 million related to the remaining unamortized stock based compensation expense associated with the unvested portion of the options tendered in the offer, $11.6 million related to stock-based compensation expense resulting from amounts paid in excess of the fair value of the underlying options, plus $4.5 million related to associated payroll taxes, professional fees and other costs.

Note 23 - Stock-Based Compensation

~~The statement of operations includes~~We measure stock-based compensation expense at the grant date of the related equity awards, based on the fair value of the awards, and recognize the ~~amortization~~expense using the straight-line attribution method over the requisite employee service period adjusted for estimated forfeitures. We estimate the fair value of employee stock options on the date of grant using a binomial model and we use the closing trading price of our common stock on the date of grant as the fair value of awards of restricted stock units, or RSUs. We calculate the fair value of our employee stock purchase plan using the Black-Scholes model.

In addition to the stock-based compensation expense related to our cash tender offer to purchase certain employee stock options as described in Note 2 – Stock Option Purchase, our consolidated statements of operations include stock-based compensation expense, net of amounts capitalized as inventory, as follows:

	Year Ended									Year Ended
	January 25,			January 27,			January 28,			January 31,			January 25,			January 27,
	2009			2008			2007			2010			2009			2008
	(In thousands)									(In thousands)
Cost of revenue		$	11,939		$	10,886		$	8,200		$	12,050		$	11,939		$	10,886
Research and development			98,007			76,617			70,077			61,337			98,007			76,617
Sales, general and administrative			52,760			45,862			38,458			33,704			52,760			45,862
Total		$	162,706		$	133,365		$	116,735		$	107,091		$	162,706		$	133,365

Delaware	94-3177549
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value per share	The NASDAQ Global Select Market

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

		Page
	PART I
Item 1.	Business	43
Item 1A.	Risk Factors	1512
Item 1B.	Unresolved Staff Comments	3027
Item 2.	Properties	3027
Item 3.	Legal Proceedings	3128
Item 4.	Submission of Matters to a Vote of Security Holders	3532
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	36
Item 6.7.	~~Selected Financial Data~~	39
~~Item 7.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4037
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	6158
Item 8.	Financial Statements and Supplementary Data	6259
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6259
Item 9A.	Controls and Procedures	6259
Item 9B.	Other Information	6259
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	6360
Item 11.	Executive Compensation	6361
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6361
Item 13.	Certain Relationships and Related Transactions, and Director Independence	6461
Item 14.	Principal Accounting Fees and Services	6461
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	6562
Signatures		~~112~~110

	Year Ended											Year Ended
	January 25,			January 27,		January 28,		January 29,		January 30,		January 31,			January 25,			January 27,		January 28,		January 29,
	2009 (B)			2008 (C)		2007 (C,D)		2006 (E)		2005		2010 (B,C)			2009 (D)			2008 (E)		2007 (E, F)		2006 (G)
	(In thousands, except per share data)											(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	3,424,859		$	4,097,860	$	3,068,771	$	2,375,687	$	2,010,033	$	3,326,445		$	3,424,859		$	4,097,860	$	3,068,771	$	2,375,687
Income (loss) from operations	$	(70,700	)	$	836,346	$	453,452	$	336,664	$	95,176	$	(98,945	)	$	(70,700	)	$	836,346	$	453,452	$	336,664
Net income (loss)	$	(30,041	)	$	797,645	$	448,834	$	301,176	$	88,615	$	(67,987	)	$	(30,041	)	$	797,645	$	448,834	$	301,176
Basic net income (loss) per share	$	(0.05	)	$	1.45	$	0.85	$	0.59	$	0.18	$	(0.12	)	$	(0.05	)	$	1.45	$	0.85	$	0.59
Diluted net income (loss) per share	$	(0.05	)	$	1.31	$	0.76	$	0.55	$	0.17	$	(0.12	)	$	(0.05	)	$	1.31	$	0.76	$	0.55
Shares used in basic per share computation (A)		548,126			550,108		528,606		509,070		498,186		549,574			548,126			550,108		528,606		509,070
Shares used in diluted per share computation (A)		548,126			606,732		587,256		548,556		527,436		549,574			548,126			606,732		587,256		548,556

	High		Low
Fiscal year ending January 31, 2010
First Quarter (through March 10, 2009)	$	9.97	$	7.21

Fiscal year ended January 25, 2009
Fourth Quarter	$	9.45	$	5.75
Third Quarter	$	14.12	$	5.97
Second Quarter	$	25.35	$	10.70
First Quarter	$	27.59	$	17.31

Fiscal year ended January 27, 2008
Fourth Quarter	$	38.20	$	22.33
Third Quarter (1)	$	39.67	$	27.00
Second Quarter (1)	$	31.89	$	21.47
First Quarter (1)	$	23.27	$	18.69

Weighted average expected life of stock options (in years)	~~3.6 - 5.8~~3.7-5.8
Risk free interest rate	~~1.7%~~1.8% - ~~3.7~~2.9	%
Volatility	~~52%~~45% - ~~105~~72	%
Dividend yield	-

Weighted average expected life of stock options (in years)	~~0.5 - 2.0~~0.5-2.0
Risk free interest rate	~~1.6% - 2.4~~0.2-1.0	%
Volatility	~~62% - 68~~53%-73	%
Dividend yield	-

	Year Ended							Year Ended
	January 25, 2009			January 27, 2008		January 28, 2007		January 31, 2010			January 25, 2009		January 27, 2008
Revenue		100.0	%	100.0	%	100.0	%		100.0	%	100.0		100.0	%
Cost of revenue		65.7		54.4		57.6			64.6		65.7		54.4
Gross profit		34.3		45.6		42.4			35.4		34.3		45.6
Operating expenses:
Research and development		25.0		16.9		18.0			27.3		25.0		16.9
Sales, general and administrative		10.6		8.3		9.6			11.0		10.6		8.3
Restructuring charges and other		0.8		-		-			-		0.8		-
Total operating expenses		36.4		25.2		27.6			38.3		36.4		25.2
Income (loss) from operations		(2.1	)	20.4		14.8			(2.9)		(2.1	)	20.4
Interest and other income, net		0.8		1.6		1.3			0.5		0.8		1.6
Income (loss) before income taxes		(1.3	)	22.0		16.1			(2.4)		(1.3	)	22.0
Income tax expense (benefit)		(0.4	)	2.5		1.5			(0.4)		(0.4	)	2.5
Net income (loss)		(0.9	)%	19.5	%	14.6	%		(2.0)	%	(0.9	)%	19.5	%

	Year Ended
	January 31, 2010			January 25, 2009		January 27, 2008
Revenue:
Customer A		12	%	7	%	5	%
Customer B		9	%	8	%	10	%
Customer C		7	%	11	%	7	%

Contractual Obligations	Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years		All Other		Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years		All Other
	(In thousands)												(In thousands)
Operating leases	$	153,625	$	44,448	$	83,959	$	21,150	$	4,068	$	-	$	144,960	$	46,905	$	63,874	$	15,786	$	18,395	$	-
Capital lease		47,976		4,185		8,751		9,283		25,757		-		43,791		4,311		9,013		9,562		20,905		-
Purchase obligations (1)		290,662		290,662		-		-		-		-		461,988		461,988		-		-		-		-
FIN 48 liability and interest (2)		107,116		-		-		-		-		107,116
Uncertain tax positions, interest and penalties (2)														120,997		-		-		-		-		120,997
Capital purchase obligations		20,328		20,328		-		-		-		-		25,177		25,177		-		-		-		-
Total contractual obligations	$	619,707	$	359,623	$	92,710	$	30,433	$	29,825	$	107,116	$	805,269	$	540,301	$	77,125	$	27,546	$	39,300	$	120,997

			Page
(a)	1.	Consolidated Financial Statements

		Report of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP	6663

		Consolidated Statements of Operations for the years ended January 31, 2010, January 25, 2009 and January 27, 2008 ~~and January 28, 2007~~	6764

		Consolidated Balance Sheets as of January ~~25, 2009~~31, 2010 and January ~~27, 2008~~25, 2009	6865

		Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the years ended January 31, 2010, January 25, 2009 and January 27, 2008 ~~and January 28, 2007~~	6966

		Consolidated Statements of Cash Flows for the years ended January 31, 2010, January 25, 2009 and January 27, 2008 ~~and January 28, 2007~~	7067

		Notes to the Consolidated Financial Statements	7168

(a)	2.	Financial Statement Schedule

		Schedule II Valuation and Qualifying Accounts	~~109~~108

(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 on Form 10-K.	~~113~~109

	January 31, 2010			January 25, 2009
ASSETS
Current assets :
Cash and cash equivalents	$	447,221		$	417,688
Marketable securities		1,281,006			837,702
Accounts receivable, less allowances of $16,330 and $18,399 in 2010 and 2009, respectively		374,963			318,435
Inventories		330,674			537,834
Prepaid expenses and other		38,214			39,794
Deferred income taxes		8,752			16,505
Total current assets		2,480,830			2,167,958
Property and equipment, net		571,858			625,798
Goodwill		369,844			369,844
Intangible assets, net		120,458			147,101
Deposits and other assets		42,928			40,026
Total assets	$	3,585,918		$	3,350,727

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	344,527		$	218,864
Accrued liabilities and other		439,851			559,727
Total current liabilities		784,378			778,591
Other long-term liabilities		111,950			151,850
Capital lease obligations, long term		24,450			25,634
Commitments and contingencies - see Note 13
Stockholders’ equity:
Preferred stock, $.001 par value; 2,000,000 shares authorized; none issued		-			-
Common stock, $.001 par value; 2,000,000,000 shares authorized; 652,391,708 shares issued and 561,465,851 outstanding in 2010; and 629,386,584 shares issued and 538,460,766 outstanding in 2009		653			629
Additional paid-in capital		2,219,401			1,889,257
Treasury stock, at cost (90,925,857 shares in 2010 and 90,925,818 shares in 2009)		(1,463,268	)		(1,463,268	)
Accumulated other comprehensive income		12,172			3,865
Retained earnings		1,896,182			1,964,169
Total stockholders' equity		2,665,140			2,394,652
Total liabilities and stockholders' equity	$	3,585,918		$	3,350,727

	Common Stock Outstanding Amount Shares (1) (1)					Additional Paid-in Capital (1)		Treasury Stock			Accumulated Other Comprehensive Income(Loss)			Retained Earnings		Total Stockholders' Equity
Balances, January 28, 2007		541,497,756		$	583	$	1,295,455	$	(487,120	)	$	1,436		$	1,196,565	$	2,006,919
Comprehensive Income (Loss):
Unrealized gain, net of $2,860 tax effect		-			-		-		-			6,703			-		6,703
Reclassification adjustment for net realized gains included in net income, net of $4 tax effect		-			-		-		-			(105	)		-		(105	)
Net Income		-			-		-					-			797,645		797,645
Total Comprehensive Income (Loss)																	804,243
Issuance of common stock from stock plans		36,238,014			36		225,933		-			-			-		225,969
Stock repurchase		(20,633,182	)		-		-		(552,512	)		-			-		(552,512	)
Tax benefit from stock-based compensation		-			-		220		-			-			-		220
Stock-based compensation related to employees		-			-		133,073		-			-			-		133,073
Balances, January 27, 2008		557,102,588			619		1,654,681		(1,039,632	)		8,034			1,994,210		2,617,912

	Common Stock
	Outstanding Shares (1)		Amount (1)			Additional Paid-in Capital (1)			Deferred Compensation			Treasury Stock			Accumulated Other Comprehensive Income(Loss)			Retained Earnings			Total Stockholders' Equity			Total Comprehensive Income
Balances, January 29, 2006	514,432,368			$	540	$	965,424		$	(3,604	)	$	(212,142	)	$	(1,957	)	$	747,731		$	1,495,992		$	302,682
Issuance of common stock from stock plans	42,571,532				43		221,117			-			-			-			-			221,160
Stock repurchase	(15,506,144	)			-		-			-			(274,978	)		-			-			(274,978	)
Tax deficit from stock-based compensation	-				-		(8,482	)		-			-			-			-			(8,482	)
Reversal of deferred compensation upon adoption of SFAS No. 123(R)	-				-		(3,604	)		3,604			-			-			-			-
Stock-based compensation expense related to acquisitions	-				-		2,914			-			-			-			-			2,914
Stock-based compensation related to employees	-				-		118,790			-			-			-			-			118,790
Unrealized gain, net of $1,223 tax effect	-				-		-			-			-			3,509			-			3,509			3,509
Reclassification adjustment for net realized gains included in net income, net of $78 tax effect	-				-		-			-			-			(116	)		-			(116	)		(116	)
Impact of change in accounting principle, net of ($379) tax effect	-				-		(704	)		-			-			-			-			(704	)
Net Income	-				-		-			-			-			-			448,834			448,834			448,834
Balances, January 28, 2007	541,497,756				583		1,295,455			-			(487,120	)		1,436			1,196,565			2,006,919			452,227
Issuance of common stock from stock plans	36,238,014				36		225,933			-			-			-			-			225,969
Stock repurchase	(20,633,182	)			-		-			-			(552,512	)		-			-			(552,512	)
Tax benefit from stock-based compensation	-				-		220			-			-			-			-			220
Stock-based compensation related to employees	-				-		133,073			-			-			-			-			133,073
Unrealized gain, net of $2,860 tax effect	-				-		-			-			-			6,703			-			6,703			6,703
Reclassification adjustment for net realized gains included in net income, net of $4 tax effect	-				-		-			-			-			(105	)		-			(105 )			(105	)
Net Income	-				-		-			-						-			797,645			797,645			797,645
Balances, January 27, 2008	557,102,588				619		1,654,681			-			(1,039,632	)		8,034			1,994,210			2,617,912			804,243
Issuance of common stock from stock plans	10,685,101				10		73,537			-			-			-			-			73,547
Stock repurchase	(29,326,923	)			-		-			-			(423,636	)		-			-			(423,636	)
Tax deficit from stock-based compensation	-				-		(2,946	)		-			-			-			-			(2,946	)
Stock-based compensation related to employees	-				-		163,985			-			-			-			-			163,985
Unrealized loss, net of $2,054 tax effect	-				-		-			-			-			(3,920	)		-			(3,920	)		(3,920	)
Reclassification adjustment for net realized gains included in net income, net of $135 tax effect	-				-		-			-			-			(249	)		-			(249	)		(249	)
Net Loss	-				-		-			-			-			-			(30,041	)		(30,041 )			(30,041	)
Balances, January 25, 2009	538,460,766			$	629	$	1,889,257		$	-		$	(1,463,268	)	$	3,865		$	1,964,169		$	2,394,652		$	(34,210	)

Comprehensive Income (Loss):
Unrealized gain, net of $2,054 tax effect	-		-	-		-		(3,920	)	-		(3,920	)
Reclassification adjustment for net realized gains included in net income, net of $135 tax effect	-		-	-		-		(249	)	-		(249	)
Net Income (Loss)	-		-	-				-		(30,041	)	(30,041	)
Total Comprehensive Income (Loss)												(34,210	)
Issuance of common stock from stock plans	10,685,101		10	73,537		-		-		-		73,547
Stock repurchase	(29,326,923	)	-	-		(423,636	)	-		-		(423,636	)
Tax benefit from stock-based compensation	-		-	(2,946	)	-		-		-		(2,946	)
Stock-based compensation related to employees	-		-	163,985		-		-		-		163,985
Balances, January 25, 2009	538,460,766		629	1,889,257		(1,463,268	)	3,865		1,964,169		2,394,652

Comprehensive Income (Loss):
Unrealized gain, net of $484 tax effect	-			-		-			-			9,417			-			9,417
Reclassification adjustment for net realized gains included in net income, net of $598 tax effect	-			-		-			-			(1,110	)		-			(1,110	)
Net Income (Loss)	-			-		-			-			-			(67,987	)		(67,987	)
Total Comprehensive Income (Loss)																		(59,680	)
Issuance of common stock from stock plans	23,005,124			24		138,005			-			-			-			138,029
Stock repurchase	(39	)
Tax benefit from stock-based compensation	-			-		29,891			-			-			-			29,891
Stock-based compensation related to employees	-			-		104,588			-			-			-			104,588
Tender offer	-			-		(78,075	)		-			-			-			(78,075	)
Charges related to stock option purchase-tender offer	-			-		135,735			-			-			-			135,735
Balances, January 31, 2010	561,465,851		$	653	$	2,219,401		$	(1,463,268	)	$	12,172		$	1,896,182		$	2,665,140

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price Per Share
Balances, January 29, 2006		46,966,464			131,937,720		$	6.33
Authorized		1,637,075			-			-
Granted and assumed		(18,809,418	)		18,809,418		$	19.73
Exercised		-			(36,878,840	)	$	5.34
Cancelled		2,876,306			(2,876,306	)	$	8.95
Balances, January 28, 2007		32,670,427			110,991,992		$	8.86
Authorized		25,114,550			-			-
Granted		(17,201,305	)		17,201,305		$	27.32
Exercised		-			(34,151,892	)	$	5.74
Cancelled		3,460,332			(3,460,332	)	$	18.45
Balances, January 27, 2008		44,044,004			90,581,073		$	13.18
Authorized		-			-			-
Granted		(17,888,695	)		17,888,695		$	8.03
Exercised		-			(7,670,038	)	$	3.14
Cancelled		3,345,450			(3,345,450	)	$	7.66
Balances, January 25, 2009		29,500,759			97,454,280		$	13.83

	~~Weighted Average Remaining Contractual Term~~	~~Aggregate Intrinsic Value~~ ~~(1)~~
~~Options outstanding~~	~~3.16 years~~	$	~~59.1 million~~
~~Options vested and expected to vest~~ ~~(2)~~	~~3.09 years~~	$	~~59.1 million~~
~~Options exercisable~~	~~2.18 years~~	$	~~59.0 million~~

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price Per Share			Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value (1)
Stock Options:
Balances, January 28, 2007		32,670,427			110,991,992		$	8.86
Authorized		25,114,550			-			-
Granted		(17,201,305	)		17,201,305		$	27.32
Exercised		-			(34,151,892	)	$	5.74
Cancelled		3,460,332			(3,460,332	)	$	18.45
Balances, January 27, 2008		44,044,004			90,581,073		$	13.18
Authorized		-			-			-
Granted		(17,888,695	)		17,888,695		$	8.03
Exercised		-			(7,670,038	)	$	3.14
Cancelled		3,345,450			(3,345,450	)	$	7.66
Balances, January 25, 2009		29,500,759			97,454,280		$	13.83
Authorized		-			-			-
Granted		(7,701,396	)		7,701,396		$	11.51
Exercised		-			(17,099,663	)	$	5.74
Cancelled		1,175,541			(1,175,541	)	$	12.90
Cancellations related to stock options purchase (2)		28,532,050			(28,532,050	)	$	23.35
Balances, January 31, 2010		51,506,954			58,348,422		$	11.30	2.56		$		287,877
Exercisable at January 31, 2010					39,297,611		$	10.44	1.50		$		217,449
Vested and Expected to Vest after January 31, 2010					56,221,636			11.23	2.47		$		280,015

		Options Outstanding					Options Exercisable
Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	0.01 - $5.00		11,047,215	1.3	$	3.49	11,047,215	$	3.49
	5.01 - 7.50		7,920,796	1.7	$	6.14	7,729,362	$	6.11
	7.51 - 10.00		27,082,933	2.9	$	8.86	18,645,057	$	8.46
	10.01 - 15.00		14,067,091	2.8	$	12.15	12,997,641	$	12.13
	15.01 - 20.00		24,566,194	4.2	$	18.63	6,022,747	$	18.75
	20.01 - 50.00		12,744,164	4.5	$	30.56	3,424,924	$	26.79
	50.00 and above		25,887	6.7	$	64.05	25,887	$	67.12
			97,454,280	3.2	$	13.83	59,892,833	$	10.15

	RSUs			Weighted Average Grant-date fair value		Weighted Average Remaining Contractual Life
Restricted Stock Units:
Balances, January 25, 2009		-		$	-
Awarded		7,672,899		$	12.26
Vested (1)		(2,400	)	$	12.40
Forfeited		(181,987	)	$	11.37
Balances, January 31, 2010		7,488,512		$	12.28
Expected to Vest after January 31, 2010		6,401,099		$	12.28	2.34

Accrued Restructuring Charges :	(In thousands)
Balance at January 27, 2008	$	-
Charges		7,956
Balance at January 25, 2009				$	186
Cash payments		(7,440	)		(186	)
Non-cash charges		(330	)
Balance at January 25, 2009	$	186
Balance at January 31, 2010				$	-

	Fair Market Value		Straight-Line Amortization Period		Fair Market Value		Straight-Line Amortization Period
	(In thousands)		(Years)		(In thousands)		(Years)
Property and equipment	$	2,433		1-2	$	2,433		1-2
Trademarks		11,310		5		11,310		5
Goodwill		85,418		--		85,418		-
Total	$	99,161			$	99,161

	Mental Images			Ageia				Ageia
Fair Market Values	(In thousands)						(In thousands)
Cash and cash equivalents	$	988		$	1,744			$	1,744
Marketable securities		-			28				28
Accounts receivable		1,462			911				911
Prepaid and other current assets		214			1,149				1,149
Property and equipment		830			169				169
In-process research and development		4,000			-
Goodwill		59,252			19,198				19,198
Intangible assets:
Existing technology		14,400			13,450				13,450
Customer relationships		6,500			170				170
Patents		5,000			-
Trademark		1,200			900				900
Total assets acquired		93,846			37,719				37,719
Current liabilities		(1,243	)		(6,969	)			(6,969	)
Acquisition related costs		(1,313	)		(1,030	)			(1,030	)
Long-term liabilities		(2,970	)		-
Total liabilities assumed		(5,526	)		(7,999	)			(7,999	)
Purchase price allocation	$	88,320		$	29,720			$	29,720

	~~Mental Images~~	Ageia
	(Straight-line depreciation/amortization period)
Property and equipment	~~2 -5 years~~	1-2 years
Intangible assets:
Existing technology	~~4-5 years~~	4 years
Customer relationships	~~4-5 years~~	5 years
~~Patents~~	~~5 years~~	-
Trademark	5 years		~~5 years~~

	January 25, 2009									January 31, 2010
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)									(In thousands)
Debt securities of United States government agencies	$	313,319	$	4,815	$	(13	)	$	318,121	$	492,628	$	3,606	$	(29	)	$	496,205
Corporate debt securities		252,265		680		(1,771	)		251,174		514,200		4,064		(44	)		518,220
Mortgage backed securities issued by United States government-sponsored enterprises		162,243		361		(1,405	)		161,199		162,693		3,674		(13	)		166,353
Money market funds		139,046		-		-			139,046		94,339		-		-			94,340
Commercial paper		56,995		2		-			56,997
Debt securities issued by United States Treasury		53,407		1,868		-			55,275		316,520		1,318		-			317,838
Asset-backed securities		39,014		71		(227	)		38,858		17		-		-			17
Total	$	1,016,289	$	7,797	$	(3,416	)	$	1,020,670	$	1,580,397	$	12,662	$	(86	)	$	1,592,973
Classified as:
Cash equivalents								$	182,968								$	311,967
Marketable securities									837,702									1,281,006
Total								$	1,020,670								$	1,592,973

	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(In thousands)
Corporate debt securities	$	205,679	$	(18	)	$	312,541	$	(25	)	$	518,220	$	(43	)
Mortgage backed securities issued by United States government-sponsored enterprises		8,921		-			157,432		(13	)		166,353		(13	)
Debt securities of United States government agencies		339,862		(18	)		156,343		(12	)		496,205		(30	)
Total	$	554,462	$	(36	)	$	626,316	$	(50	)	$	1,180,778	$	(86	)

	January 25, 2009			January 27, 2008			Estimated Useful Life
	(In thousands)						(Years)
Property and Equipment:
Land	$	217,866		$	38,442		(A)
Building		29,216			4,104		3-25
Test equipment		234,368			186,774		3
Software and licenses		201,560			246,725		3 - 5
Leasehold improvements		136,008			103,353		(B)
Computer equipment		125,533			137,642		3
Office furniture and equipment		32,224			28,220		5
Capital leases		26,618			-		(C)
Construction in process		5,360			8,258		(D)
		1,008,753			753,518
Accumulated depreciation and amortization		(382,955	)		(393,710	)
Total property and equipment, net	$	625,798		$	359,808

	January 25, 2009		January 27, 2008
Accrued Liabilities:	(In thousands)
Accrued customer programs (1)	$	239,797	$	271,869
Warranty accrual (2)		150,629		5,707
Accrued payroll and related expenses		82,449		122,284
Accrued legal settlement (3)		30,600		30,600
Deferred rent		11,643		11,982
Deferred revenue		3,774		5,856
Other		40,835		26,764
Total accrued liabilities and other	$	559,727	$	475,062

	January 31, 2010		January 25, 2009
Other Long Term Liabilities:	(In thousands)
Deferred income tax liability	$	17,739	$	75,252
Income tax payable		53,397		49,248
Asset retirement obligations		10,638		9,515
Other		30,176		17,835
Total other long-term liabilities	$	111,950	$	151,850

	Future Minimum Lease Obligations		Future Minimum Lease Obligations
	(In thousands)		(In thousands)
Year ending January:
2010	$	44,448
2011		42,763	$	46,905
2012		41,196		47,944
2013		13,244		15,930
2014		7,906		9,628
2015 and thereafter		4,068
2015				6,158
2016 and thereafter				18,395
Total	$	153,625	$	144,960

		Future Capital Lease Obligations		Future Capital Lease Obligations
		(In thousands)		(In thousands)
Year ending January:
2010		$	4,185
2011			4,311	$	4,311
2012			4,440		4,440
2013			4,573		4,573
2014	��		4,710		4,710
2015 and thereafter			25,757
2015					4,852
2016 and thereafter					20,905
Total		$	47,976	$	43,791
Present Value of minimum lease payments		$	26,562	$	25,634

Current portion		$	928	$	1,184
Long term portion		$	25,634	$	24,450

	GPU		PSB		MCP			CPB			All Other			Consolidated
	(In thousands)
Year Ended January 31, 2010:
Revenue	$	1,764,684	$	510,223	$	871,606		$	163,878		$	16,054		$	3,326,445
Depreciation and amortization expense	$	60,102	$	20,279	$	38,209		$	16,710		$	61,379		$	196,679
Operating income (loss)	$	1,456	$	190,084	$	96,033		$	(14,195	)	$	(372,323	)	$	(98,945	)
Year Ended January 25, 2009:
Revenue	$	1,912,262	$	693,376	$	655,565		$	136,334		$	27,322		$	3,424,859
Depreciation and amortization expense	$	55,405	$	21,587	$	32,442		$	19,372		$	56,217		$	185,023
Operating income (loss)	$	122,111	$	322,514	$	(132,921	)	$	(24,293	)	$	(358,111	)	$	(70,700	)
Year Ended January 27, 2008:
Revenue	$	2,518,281	$	588,358	$	710,353		$	251,137		$	29,731		$	4,097,860
Depreciation and amortization expense	$	38,272	$	9,596	$	28,409		$	21,482		$	37,715		$	135,474
Operating income (loss)	$	717,985	$	305,395	$	57,214		$	28,104		$	(272,352	)	$	836,346

			Fair value measurement at reporting date using								Fair value measurement at reporting date using
				Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		High Level of Judgment					Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs		High Level of Judgment
	January 25, 2009			(Level 1)	(Level 2)		(Level 3)		January 31, 2010			(Level 1)	(Level 2)		(Level 3)
		(In thousands)								(In thousands)
Other debt securities issued by U.S. Government agencies ~~(4)~~(1)	$	318,121	$	-	$	318,121	$	-	$	496,205	$	-	$	496,205	$	-
Corporate debt securities ~~(3)~~(2)		251,174		-		251,174		-		518,220		-		518,220		-
Mortgage-backed securities issued by Government-sponsored entities ~~(1)~~(3)		161,199		-		161,199		-		166,353		-		166,353		-
Money market funds ~~(5)~~(4)		139,046		14,646		-		124,400		94,339		81,380				12,959
Commercial paper (2)		56,997		-		56,997		-
												-				-
Debt securities issued by United States Treasury ~~(1)~~(5)		55,275		-		55,275		-		317,839		-		317,839		-
Asset-backed securities ~~(1)~~(3)		38,858		-		38,858		-		17		-		17		-
Total assets	$	1,020,670	$	14,646	$	881,624	$	124,400	$	1,592,973	$	81,380	$	1,498,634	$	12,959