Morgan Stanley Comments On Nividia Winding Down Icera

In a report published Wednesday, Morgan Stanley analyst Joseph Moore commented on

's announcement on Tuesday that it would wind down its Icera baseband business. According to Moore, a shutdown of the business is more likely even though the company is open to a sale. The analyst added that he believes the employee headcount had already been already coming despite a press release noting there are 500 employees still working in the division. Moore suggested that the elimination of 500 employees would save the company about $20 million per quarter, which tax effected is about three cents per share. However, the company has previously noted that it planned on reducing spending on Icera anyways, so the savings benefit will be partially offset by increases elsewhere. "We had already basically assumed that Nividia had minimal expectations for Icera baseband," Moore wrote. "While management enthusiasm was quite high five to six quarters ago around potential for smartphone wins, it has been clear for some time that this was no longer the case, and to management's credit they quickly shifted focus to other markets." However, Moore argued that Nividia's stock is "expensive" despite the positive announcement and he is worried that the "softer" PC supply chain will "eventually catch up with them." Furthermore, the businesses Nividia classifies as ‘gaming' remains impacted by consumer PC market end demand, thus gaming is a slow growth market in aggregate. Shares remain Underweight rated with an unchanged price target of $19.50.