NVIDIA Goes Mobile, Investors Go Elsewhere

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NVIDIA Corporation (NASDAQ:NVDA) stock fell this morning, in response to the news that the processor manufacturer was planning the release of its very own handheld gaming console. The move represents a new venture for the company, and would put it in direct competition with its former partner Sony Corporation (NYSE:SNE). The company made the announcement last night at CES 2013.

NVIDIA Goes Mobile, Investors Go Elsewhere

Back in 2004, NVIDIA partnered with the Japanese console giant to design the graphics processing part of its PS3 console. Sony Corporation (NYSE:SNE), along with Nintendo Co., Ltd (PINK:NTDOY) (TYO:7974), is one of the two major players in the dedicated handheld console market.

Investors reacted poorly to the news this morning. At the time of writing, shares in NVIDIA Corporation (NASDAQ:NVDA) had fallen by more than 2.5%. Traders seem wary of the firm getting involved in a market that seems headed for decline, and in a project that will steal away vital resources.

It seems that the company is being pushed from all sides in half a dozen markets right now. The contract for the design of the new Sony Corporation (NYSE:SNE) Playstation graphics processor went to the firm’s old rival Advanced Microdevices Inc. (NYSE:AMD).

The market mobile device processors, which NVIDIA has done reasonably well in in recent years, is getting more competitive. Intel Corporation (NYSE:INTC) is doing its best to gain market share, and QUALCOMM, Inc. (NASDAQ:QCOM) is constantly providing tough competition.

Disturbingly, it is the market NVIDIA Corporation (NASDAQ:NVDA) is finding such fierce competition that is likely to cause the largest problems for its new project. Mobile gaming on tablets and smartphones is expected to cannibalize much of the dedicated mobile console market as processors become more powerful, and game designers take their skills to the market.

For the gamers out there, a promotional video for the new console is available. The only truly interesting news about this console is the ability for players with an internet connection to stream games to the console from their home PCs. This means that players with internet connections will be able to play their PC games anywhere.

The idea is interesting, but similar ideas are being implemented in tablets and smartphones with cloud services. NVIDIA Corporation (NASDAQ:NVDA) is going to have to try hard to sell the concept to gamers. One of the most important factors, the price, was completely ignored by the company in their announcement.

The company, which specializes in graphics processing, is releasing a new product into a shrinking market. The costs are likely to be large, and without any indication of the price of the device, it is no wonder investors were nervous about the company this morning.

NVIDIA Corporation (NASDAQ:NVDA) said the device will be ready for the North American market in the second quarter of 2013. Depending on its success there, the device may become an overnight sensation, or it may simply go away. Pricing, along with marketing, will decide the fate of, what the company is calling, Project Shield.

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