2000 Nonstatutory Equity Incentive Plan

On August 1, 2000, our Board approved the 2000 Nonstatutory Equity Incentive Plan, or the 2000 Plan, to provide for the issuance of our common stock to employees and affiliates who are not directors, executive officers or 10% stockholders. The 2000 Plan provides for the issuance of nonstatutory stock options, stock bonuses, restricted stock purchase rights, restricted stock unit awards and stock appreciation rights. Options granted under the 2000 plan generally expire in six to 10 years from the date of grant. The Compensation Committee appointed by the Board, or the Compensation Committee, has the authority to amend the 2000 Plan and to determine the option term, exercise price and vesting period of each grant. Options granted to new employees prior to February 10, 2004, generally vest ratably over a four-year period, with 25% becoming vested approximately one year from the date of grant and the remaining 75% vesting on a quarterly basis over the next three years. From February 10, 2004, initial options granted to new employees generally vest ratably quarterly over a three-year period. Grants to existing employees in recognition of performance generally vest as to 25% of the shares two years and three months after the date of grant and as to the remaining 75% of the shares subject to the option in equal quarterly installments over a nine month period. We amended our 2000 Plan in October 2006 to add the ability to issue restricted stock unit awards and stock appreciation rights and make certain other modifications. There were a total of 21,939,202 shares authorized for issuance and 18,776,119 shares available for future issuance under the 2000 Plan as of January 28, 2007.

1998 Equity Incentive Plan

The 1998 Equity Incentive Plan, or the 1998 Plan, was adopted by our Board on February 17, 1998 and was approved by our stockholders on April 6, 1998 as an amendment and restatement of our then existing Equity Incentive Plan which had been adopted on May 21, 1993. The 1998 Plan provides for the issuance of our common stock to directors, employees and consultants. The 1998 Plan provides for the issuance of stock bonuses, restricted stock purchase rights, incentive stock options or nonstatutory stock options. There were a total of 110,094,385 shares authorized for issuance and 2,570,982 shares available for future issuance under the 1998 Plan as of January 28, 2007.

Pursuant to the 1998 Plan, the exercise price for incentive stock options is at least 100% of the fair market value on the date of grant or for employees owning in excess of 10% of the voting power of all classes of stock, 110% of the fair market value on the date of grant. For nonstatutory stock options, the exercise price must be no less than 85% of the fair market value on the date of grant.

Option grants issued under the 1998 Plan generally expire in six to ten years from the date of grant. Vesting periods are determined by the Board or the Compensation Committee. Initial option grants to new employees made after February 10, 2004 under the 1998 Plan generally vest ratably quarterly over a three year period. Subsequent option grants generally vest up to 25% of the shares two years and three months after the date of grant and as to the remaining 75% of the shares subject to the option in quarterly installments over a nine month period.

1998 Non-Employee Directors’ Stock Option Plan

In February 1998, our Board adopted the 1998 Non-Employee Directors’ Stock Option Plan, or the Directors’ Plan, to provide for the automatic grant of non-qualified options to purchase shares of our common stock to our directors who are not employees or consultants of ~~NVIDIA~~us or ~~our subsidiaries, under the 1998 Non-Employee Directors’ Stock Option Plan (the Directors’ Plan) and the 1998 Equity Incentive Plan (the 1998 Plan).~~ of an affiliate of us.

In July 2000, the Board ~~of Directors~~ amended the 1998 Plan to incorporate the automaticgrant provisions of the Directors’ Plan into the 1998 Plan. ~~Only a~~Future automatic grants to non-employee ~~director may receive stock option grants pursuant~~directors will be made according to the ~~automatic grant provisions and such option grants are non-discretionary. Our Board~~terms of ~~Directors amended~~ the Directors’ Plan, ~~in May 2002. The amendments~~but will be made inout of the 1998 Plan until such time as shares may become available for issuance under the amended Directors’ Plan. In May 2002, ~~while intended~~and subsequently in March 2006, the Directors’ Plan was amended further to ~~continue to provide incentives to our non-employee directors, took into account our growth since 1998 and the resulting increase in value of our common stock and therefore in each case reduced~~reduce the number of shares granted to our non-employee directors. The ~~terms~~altered automatic grant provisions of the Directors’ Plan asare also incorporated into the 1998 Plan. The terms of the amended Directors’ Plan are described below.

As of April 30, 2004, options to purchase 811,250 shares of common stock were outstanding and no shares remained available for future grant under the Directors’ Plan. As of April 30, 2004, options covering 388,750 shares had been exercised under the Directors’ Plan. Unless terminated sooner, the Directors’ Plan will terminate in February 2008. As of April 30, 2004, options to purchase 1,935,000 shares of common stock were outstanding pursuant to grants made to non-employee directors under the 1998 Plan. Future grants to non-employee directors will be made from shares available under our 1998 Plan unless shares are otherwise available under the Directors’ Plan. Unless sooner terminated, the 1998 Plan will also terminate in February 2008.

~~Initial Grants.~~Under the amended Directors’ Plan, each non-employee director who is elected or appointed to ~~NVIDIA’s~~our Board ~~of Directors~~ for the first time is automatically granted an option to purchase ~~75,000~~90,000 shares, which vests quarterly over a three-year ~~period.~~period, or Initial Grant.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

~~Annual Grants – Board Members.~~On August 1 of each year, each non-employee director is automatically granted an option to purchase ~~25,000~~30,000 shares, or ~~the~~ Annual Grant. ~~The~~These Annual Grants will begin vesting on the second anniversary of the date of the grant and vest quarterly during the next year. The Annual Grants will be fully vested on the third anniversary of the date of the grant, provided that the director ~~has~~ attended at least 75% of the meetings during the year following the date of the grant. ~~On August 1,2003,~~ we granted options covering 25,000 shares to each of Messrs. Coxe, Gaither, Jones, Miller, Seawell and Stevens at an exercise price per share of $19.09. The exercise price of each option was equal to the closing price of ou r common stock as reported on Nasdaq National Market for the last market-trading day prior to the date of grant.

~~Annual Grants – Committee Members.~~On August 1 of each year, each non-employee director who is a member of a committee of the Board, ~~of Directors is~~except for the Nominating and Corporate Governance Committee, will automatically be granted an option to purchase ~~5,000~~10,000 shares, or the Committee Grant. The Committee Grants ~~vest~~vests in full on the first anniversary of the date of the grant, provided that the director has attended at least 75% of the meetings during the year following the date of the grant. ~~On August 1, 2003 we granted options covering 5,000 shares to each~~Directors who were members of two committees, Messrs. Coxe, Gaither, Jones, Miller, Seawell and Stevens at an exercise price per share of $19.09. The exercise price of each option was equal to the closing price of our common stock as reported on Nasdaq National Market for the last market-trading day prior to the date of grant. Messrs. Coxe,Cox, Gaither and Jones, ~~are members~~waived their grant of ~~more than one~~an additional 10,000 shares for being a member of a second committee in fiscal 2005 and ~~they elected to receive only a single grant for committee service during fiscal year 2004.~~2006.

~~Annual Grants – Vesting.~~If a non-employee director fails to attend at least 75% of the regularly scheduled meetings during the year following the grant of an option, rather than vesting as described previously, the Committee Grants will vest annually over four years following the date of grant at the rate of 10% per year for the first three years and 70% for the fourth year, and the Annual Grants will vest 30% upon the three-year anniversary of the grant date and 70% for the fourth year, such that in each case the entire option will become fully vested on the four-year anniversary of the date of the ~~grant and the Committee Grants will vest annually over four years following the date of grant at the rate of 10% per year for the first three years and 70% for the fourth year.~~grant. For ~~the~~ Annual Grants and Committee Grants, if the person has not been serving on the Board ~~of Directors~~ or committee since a prior year’s annual meeting, the number of shares granted will be reduced pro rata for each full quarter prior to the date of grant during which such person did not serve in such capacity.

The Compensation Committee administers the amended Directors’ Plan. A total of 1,200,000 shares have been authorized and issued under the amended Directors’ Plan of which none is available for future issuance as of January 28, 2007. As described above, future grants to non-employee directors will be made out of the 1998 Plan.

1998 Employee Stock Purchase Plan


	4

In February 1998, our Board approved the 1998 Employee Stock Purchase Plan, or the Purchase Plan. In June 1999, the Purchase Plan was amended to increase the number of shares reserved for issuance automatically each year at the end of our fiscal year for the next 10 years (commencing at the end of fiscal 2000 and ending 10 years later in 2009) by an amount equal to 2% of the outstanding shares on each such date, including on an as-if-converted basis preferred stock and convertible notes, and outstanding options and warrants, calculated using the treasury stock method; provided that the maximum number of shares of common stock available for issuance from the Purchase Plan could not exceed 52,000,000 shares. The number of shares will no longer be increased annually as we reached the maximum permissible number of shares at the end of fiscal 2006. There are a total of 52,000,000 shares authorized for issuance. At January 28, 2007, 18,857,690 shares have been issued under the Purchase Plan and 33,142,310 shares are available for future issuance.

~~General Provisions.~~The ~~exercise~~Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Under the Purchase Plan, the Board has authorized participation by eligible employees, including officers, in periodic offerings following the adoption of the Purchase Plan. Under the Purchase Plan, separate offering periods shall be no longer than 27 months. Under the current offering adopted pursuant to the Purchase Plan, each offering period is 24 months, which is divided into four purchase periods of 6 months.

Employees are eligible to participate if they are employed by us or an affiliate of us as designated by the Board. Employees who participate in an offering may have up to 10% of their earnings withheld pursuant to the Purchase Plan up to certain limitations and applied on specified dates determined by the Board to the purchase of shares of common stock. The Board may increase this percentage at its discretion, up to 15%. The price ~~for such options is~~of common stock purchased under the Purchase Plan will be equal to ~~100%~~the lower of the fair market value of the common stock on the commencement date of ~~grant. No option granted under such provisions~~each offering period and the purchase date of each offering period at 85% at the fair market value of the common stock on the relevant purchase date. During fiscal 2007, 2006 and 2005, employees purchased approximately 3.8 million, 3.6 million, and 4.0 million shares with weighted-average prices of $6.42, $5.59, and $4.36 per share, respectively, and grant-date fair values of $3.64, $1.70, and $1.57 per share, respectively. Employees may be exercised after the expiration, which is either 10 years or six years from the date it was granted. Options granted after May 8, 2003 have a six, rather than 10, year term. Such options generally are non-transferable. However, an optionee may designate a beneficiary who may exercise the option following the optionee’s death. An optionee whose service relationship with NVIDIA or any of our affiliates, whether as a non-employee director or subsequently as an employee, director or consultant ceases for any reason, may exercise vested options for the term providedend their participation in the ~~option agreement, 12 months generally, 18 months~~Purchase Plan at any time during the offering period, and participation ends automatically on termination of employment with us and in ~~the event of death.~~each case their contributions are refunded.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

~~Change of Control.~~ ~~If we sell substantially all of our assets, or we are involved in any merger or any consolidation in which we are not~~The following summarizes the ~~surviving corporation, or if there is any other change in control, all outstanding stock options either will be assumed or substituted for by any surviving entity. If~~transactions under the ~~surviving entity does not assume or substitute for the stock options, the stock options will terminate if they are not exercised prior to any sale of assets, merger or consolidation.~~1998 Plan, 2000 Plan, 1999 Plan, 2004 Plan and Directors’ Plan:

~~Compensation of Executive Officers~~

	Options Available for Grant			Options Outstanding			Weighted Average Exercise Price Per Share
Balances, January 25, 2004		57,914,062			85,533,410		$	7.10
Authorized		-			-			-
Granted		(17,029,852	)		17,029,852			11.74
Exercised		-			(6,103,750	)		4.10
Cancelled		4,139,198			(4,139,198	)		9.41
Balances, January 30, 2005		45,023,408			92,320,314		$	8.05
Authorized		-			-
Granted		(16,417,786	)		16,417,786			13.87
Exercised		-			(18,074,266	)		5.95
Cancelled		2,705,354			(2,705,354	)		10.29
Balances, January 29, 2006		31,310,976			87,958,480		$	9.50
Authorized		1,091,383			-			-
Granted and assumed		(12,539,612	)		12,539,612			29.60
Exercised		-			(24,585,893	)		8.01
Cancelled		1,917,537			(1,917,537	)		13.42
Balances, January 28, 2007		21,780,284			73,994,662		$	13.29

~~Summary Compensation Table~~

The following table ~~presents summary information for~~summarizes the ~~fiscal years ended~~options outstanding, options vested and expected to vest and options exercisable as of January ~~27, 2002, January 26, 2003 and January 25, 2004, concerning the compensation awarded or paid to, or earned by our Chief Executive Officer andthe otherfour most highly compensated executive officers at January 25, 2004. These individuals~~28, 2007:

	Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾
Options outstanding		73,994,662	$	13.29		3.77	$	1,363,448,818
Options vested and expected to vest		66,365,198	$	12.40		3.70	$	1,282,391,307
Options exercisable		42,212,234	$	9.30		3.25	$	943,461,713

⁽¹⁾ The aggregate intrinsic value in the table ~~below are referred to~~above represents the total pre-tax intrinsic value for in-the-money options at January 28, 2007, based on the $31.47 closing stock price of our common stock on the NASDAQ Global Select Market, which would have been received by the option holders had all option holders exercised their options as ~~the Named Executive Officers.~~of that date. The total number of in-the-money options outstanding and exercisable as of January 28, 2007 was 72.2 million shares and 41.9 million shares, respectively.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

The following table summarizes information about stock options outstanding as of January 28, 2007:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.16 - $0.17		105,000		0.6	$	0.16		105,000	$	0.16
0.33 - 0.40		290,537		0.9	$	0.38		290,537	$	0.38
0.69 - 0.97		3,740,783		1.3	$	0.87		3,740,783	$	0.87
1.13 - 1.25		112,327		2.8	$	1.15		97,409	$	1.13
2.05 - 2.94		3,006,036		2.5	$	2.35		3,004,052	$	2.35
3.83 - 5.54		4,970,417		3.6	$	4.70		4,830,338	$	4.73
5.76 - 8.59		13,470,438		3.0	$	7.27		10,562,463	$	7.30
8.77 - 13.13		23,143,952		3.7	$	11.76		11,881,607	$	11.40
13.19 - 19.77		11,958,889		4.4	$	16.30		5,980,184	$	16.29
20.63 - 30.90		11,498,508		5.3	$	27.10		1,449,430	$	22.73
31.97 - 46.94		1,380,007		6.1	$	37.06		123,646	$	44.65
48.99 - 73.01		251,356		7.2	$	61.62		111,935	$	60.50
73.87 - 86.40		65,361		6.2	$	79.04		33,799	$	79.75
312.42 - 312.42		200		1.0	$	312.42		200	$	312.42
1,249.66 and above		851		3.0	$	1,324.55		851	$	1,324.55
		73,994,662		3.8	$	13.29		42,212,234	$	9.30

~~Annual Compensation~~

~~Long TermCompensation Awards~~Year Ended

~~Name and Principal Position~~

~~Fiscal~~
~~Year~~

~~Salary ($)~~

~~Bonus ($)~~

~~Securities~~
~~Underlying~~
~~Options (#)~~

~~Jen-Hsun Huang~~
~~President and Chief Executive Officer~~

~~2004~~

~~2003~~
~~2002~~

~~$400,000~~

~~400,763~~
~~400,000~~

~~412,000~~

—
~~400,000~~

~~200,000~~

~~250,000~~
~~500,000~~

January 28, 2007

Total intrinsic value of options exercised

530.7 million

Total cash received from employees as a result of employee stock option exercises

196.2 million

We settle employee stock option exercises with newly issued common shares. We do not have any equity instruments outstanding other than the options described above as of January 28, 2007.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Note 3 - 3dfx

During fiscal year 2002, we completed the purchase of certain assets from 3dfx Interactive, Inc., or 3dfx, for an aggregate purchase price of approximately $74.2 million. On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an agreement, which closed on April 18, 2001, to purchase certain graphics chip assets from 3dfx. Under the terms of the Asset Purchase Agreement, the cash consideration due at the closing was $70.0 million, less $15.0 million that was loaned to 3dfx pursuant to a Credit Agreement dated December 15, 2000. The Asset Purchase Agreement also provided, subject to the other provisions thereof, that if 3dfx properly certified that all its debts and other liabilities had been provided for, then we would have been obligated to pay 3dfx two million shares of NVIDIA common stock. If 3dfx could not make such a certification, but instead properly certified that its debts and liabilities could be satisfied for less than $25.0 million, then 3dfx could have elected to receive a cash payment equal to the amount of such debts and liabilities and a reduced number of shares of our common stock, with such reduction calculated by dividing the cash payment by $25.00 per share. If 3dfx could not certify that all of its debts and liabilities had been provided for, or could not be satisfied, for less than $25.0 million, we would not be obligated under the agreement to pay any additional consideration for the assets.

In October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California. In March 2003, we were served with a complaint filed by the Trustee appointed by the Bankruptcy Court which sought, among other things, payments from us as additional purchase price related to our purchase of certain assets of 3dfx. In early November 2005, after many months of mediation, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, reached a conditional settlement of the Trustee’s claims against NVIDIA. This conditional settlement, presented as the centerpiece of a proposed Plan of Liquidation in the bankruptcy case, was subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy Court after notice and hearing. The Trustee advised that he intended to object to the settlement, which would have 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 3dfx asset purchase price of $95.0 million and $4.2 million of direct transaction costs were allocated based on fair values presented below. The final allocation of the purchase price of the 3dfx assets is contingent upon the outcome of all of the 3dfx litigation. Please see Note 12 for further information regarding this litigation.

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

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

Note 4 - Business Combinations

On February 20, 2006, we completed our acquisition of ULi Electronics, Inc., or ULi, a core logic developer for the personal computer, or PC, industry. The acquisition represents our ongoing investment in our platform solution strategy and has strengthened our sales, marketing, and customer engineering presence in Taiwan and China. The aggregate purchase price consisted of cash consideration of approximately $53.1 million.

On March 29, 2006, we completed our acquisition of Hybrid Graphics Ltd., or Hybrid Graphics, a developer of embedded 2D and 3D graphics software for handheld devices. The aggregate purchase price consisted of cash consideration of approximately $36.7 million.

On January 5, 2007, we completed our acquisition of PortalPlayer, a leading supplier of semiconductors, firmware, and software for personal media players, or PMPs, and secondary display-enabled computers. We believe that the acquisition will accelerate our ongoing investment in our handheld product strategy. Pursuant to the terms of the acquisition, we paid cash consideration of approximately $344.9 million in exchange for common stock in PortalPlayer and recognized an additional purchase price of $2.9 million, the value of approximately 658,000 options of NVIDIA common stock issued upon conversion of outstanding PortalPlayer stock options.

We allocated the purchase price of each of these acquisitions to tangible assets, liabilities and identifiable intangible assets acquired, as well as in-process research and development, or IPR&D, if identified, based on their estimated fair values. The excess of purchase price over the aggregate fair values was recorded as goodwill. The fair value assigned to identifiable intangible assets acquired was based on estimates and assumptions determined by management. Purchased intangibles are amortized on a straight-line basis over their respective useful lives. The allocation of the purchase price has been prepared on a preliminary basis and reasonable changes are expected as additional information becomes available.

The following is a summary of estimated fair values of the assets we acquired and liabilities we assumed as of January 28, 2007 for acquisitions we completed in fiscal 2007:

	ULi			Hybrid Graphics			PortalPlayer
	(In thousands)
Fair Market Values
Cash and cash equivalents	$	21,551		$	1,180		$	10,174
Marketable Securities		-			-			176,492
Accounts receivable		8,148			808			16,480
Inventories		4,896			-			1,883
Other assets		935			73			12,945
Property and equipment		1,010			134			9,755
In-process research and development		-			602			13,400
Goodwill		31,051			27,906			114,816
Intangible assets:
Existing technology		2,490			5,179			8,900
Customer relationships		653			2,650			2,700
Trademark		-			482			-
Non-compete agreements		-			72			-
Total assets acquired		70,734			39,086			367,545
Current liabilities		(16,878	)		(1,373	)		(12,139	)
Acquisition related costs		(781	)		(740	)		(7,516	)
Long-term liabilities		-			(301	)		(46	)
Total liabilities assumed		(17,659	)		(2,414	)		(19,701	)
Net assets acquired	$	53,075		$	36,672		$	347,844

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

ULi

Hybrid Graphics

PortalPlayer

Straight-line depreciation / amortization period

Property and equipment

4 - 49 months

1 month - 36 months

3 months - 60 months

Intangible assets:

~~Marvin D. Burkett (1)~~
~~Chief Financial Officer~~
Existing technology

~~2004~~

~~2003~~
~~2002~~

3 years

~~300,000~~

~~137,769~~
—

3 years

~~368,780~~

~~124,500~~
—

3 years

Customer relationships

—

~~400,000~~
—

3 years

Trademark

3 years

~~Jeffrey D. Fisher~~
~~Executive Vice President, Worldwide Sales~~
Non-compete agreements

~~2004~~

~~2003~~
~~2002~~

~~300,000~~

~~300,875~~
~~302,308~~

3 years

~~193,280~~

—
~~237,500~~

~~70,000~~

~~40,000~~
~~70,000~~

~~Di Ma, Ph.D.~~

~~Vice President, Operations~~

~~2004~~

~~2003~~
~~2002~~

~~225,000~~

~~225,413~~

~~226,404~~

~~166,966~~

—

~~126,000~~

~~70,000~~

~~40,000~~

~~David M. Shannon (2)~~
~~Vice President and General Counsel~~

~~2004~~

~~2003~~
~~2002~~

~~250,000~~

~~128,989~~
—

~~140,711~~

~~350,000~~
—

—

~~250,000~~
—

~~(1)~~ ~~Mr. Burkett joined NVIDIA~~The amount of the IPR&D represents the value assigned to research and development projects of Hybrid Graphics and PortalPlayer that had commenced but had not yet reached technological feasibility and had no alternative future use. In accordance with Statement of Financial Accounting Standards No. 2, or SFAS No. 2, Accounting for Research and Development Costs, as ~~Chief Financial Officer in September 2002.~~clarified by FASB issued Interpretation No. 4, or FIN 4,

~~(2) Mr. Shannon joined NVIDIA~~Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method an interpretation of FASB Statement No. 2, amounts assigned to IPR&D meeting the above-stated criteria were charged to research and development expenses as ~~Vice President and General Counsel in July 2002.~~part of the allocation of the purchase price.

~~Option Grants~~The pro forma results of operations for these acquisitions have not been presented because the effects of the acquisitions, individually or in ~~Fiscal 2004~~the aggregate, were not material to our results.

Note 5 - Goodwill

The carrying amount of goodwill is as follows:

	January 28, 2007		January 29, 2006
	(In thousands)
3dfx	$	75,326	$	75,326
MediaQ		35,342		52,913
ULi		31,051		—
Hybrid Graphics		27,906		—
PortalPlayer		114,816		—
Other		16,984		17,078
Total goodwill	$	301,425	$	145,317

During fiscal 2007, we recorded $31.1 million, $27.9 million and $114.8 million as goodwill related to our acquisitions accounted for under the purchase method of accounting of ULi, Hybrid Graphics and PortalPlayer, respectively. Please refer to Note 4 of the Notes to Consolidated Financial Statements for further information. In addition, during fiscal 2007, the amount allocated to MediaQ Inc., or MediaQ, goodwill was adjusted to $35.3 million as a result of the reversal of the valuation allowance of deferred tax assets related to our acquisition of MediaQ.

During fiscal 2006, we recorded $12.2 million as goodwill for the acquisition of a small international company accounted for under the purchase method of accounting. In addition, during fiscal 2006, we recorded $25.0 million as goodwill related to the purchase of certain assets of 3dfx. Please refer to Note 3 of the Notes to Consolidated Financial Statements for further information.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

In computing fair value of our reporting units, we use estimates of future revenues, costs and cash flows from such units. The amount of goodwill allocated to our GPU, MCP, Handheld GPU, Consumer Electronics, and All Other segments as of January 28, 2007, was $99.3 million, $46.2 million, $137.7 million, $11.9 million, and $6.3 million, respectively. As of January 29, 2006, the amount of goodwill allocated to our GPU, MCP, Handheld GPU, Consumer Electronics, and All Other segments, was $99.3 million, $15.1 million, $12.7 million, $11.9 million, and $6.3 million, respectively. Please refer to Note 14 of the Notes to Consolidated Financial Statements for further segment information.

Note 6 - Amortizable Intangible Assets

We are currently amortizing our intangible assets with definitive lives over periods ranging from 1 to 5 years on a straight-line basis. The components of our amortizable intangible assets are as follows:

	January 28, 2007							January 29, 2006
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Technology licenses	$	37,516	$	(20,480	)	$	17,036	$	21,586	$	(13,595	)	$	7,991
Patents		34,623		(24,569	)		10,054		23,750		(19,911	)		3,839
Acquired intellectual property		50,212		(31,894	)		18,318		27,086		(24,516	)		2,570
Trademarks		11,310		(11,310	)		-		11,310		(10,807	)		503
Other		1,494		(1,391	)		103		1,494		(976	)		518
Total intangible assets	$	135,155	$	(89,644	)	$	45,511	$	85,226	$	(69,805	)	$	15,421

The increase in the gross carrying amount of acquired intellectual property as of January 28, 2007 as compared to January 29, 2006 is primarily related to $3.1 million, $8.4 million and $11.6 million of intangible assets that resulted from our acquisitions of ULi, Hybrid Graphics and PortalPlayer, respectively, during fiscal 2007. Please refer to Note 4 of our Notes to Consolidated Financial Statements for further information. In addition, the $10.9 million increase in the gross carrying amount of patents is related primarily to patents licensed from Opti Incorporated, or Opti, for $8.0 million as a result of the license and settlement agreements described in Note 12 of our Notes to Consolidated Financial Statements.

During fiscal 2007, we entered into a confidential patent licensing arrangement. As part of this arrangement, we recorded a charge of $16.0 million to the cost of revenue category in our statement of income related to past usage of certain patents subject to the arrangement. Our commitment for future license payments under this arrangement could range from $97.0 million to $110.0 million over a ten year period; however, the net outlay under this arrangement may be reduced by the occurrence of certain events covered by the arrangement. The increase in the gross carrying amount of technology licenses as of January 28, 2007 when compared to January 29, 2006 is primarily related to approximately $14.4 million committed by us during fiscal 2007 under this arrangement.

Amortization expense associated with intangible assets for fiscal years 2007, 2006 and 2005 was $19.8 million, $16.9 million and $19.7 million, respectively. Future amortization expense for the net carrying amount of intangible assets at January 28, 2007 is estimated to be $17.1 million in fiscal 2008, $11.1 million in fiscal 2009, $6.9 million in fiscal 2010, $2.8 million in fiscal 2011, $2.0 million in fiscal 2012, and $5.6 million in fiscal 2013 and thereafter.

We ~~grant options~~account for our investment instruments in accordance with 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 of greater than three months when purchased and some equity investments. We classify our marketable securities at the date of acquisition in the available-for-sale category as our intention is to ~~our executive officers under our 1998 Equity Incentive Plan, or~~convert them into cash for operations. These securities are reported at fair value with the ~~1998 Plan. As~~related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of ~~April 30, 2004, options to purchase~~stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method. Net realized losses for fiscal years 2007 and 2006 were $0.2 million and $2.8 million, respectively.

Note 7 - Marketable Securities

The following is a ~~total~~summary of ~~38,892,779 shares were outstanding under the 1998 Plan~~cash equivalents and ~~options to purchase 12,791,750 shares remained available for grant under the 1998 Plan.~~ marketable securities at January 28, 2007 and January 29, 2006:

	January 28, 2007
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
Asset-backed securities	$	153,471	$	92	$	(450	)	$	153,113
Commercial paper		113,576		—		(2	)		113,574
Obligations of the United States government & its agencies		59,729		—		(627	)		59,102
United States corporate notes, bonds and obligations		277,641		26		(1,099	)		276,568
Equity Securities		2,491		3,338		—			5,829
Money market		467,198		—		—			467,198
Total	$	1,074,106	$	3,456	$	(2,178	)	$	1,075,384
Classified as:
Cash equivalents								$	501,948
Marketable securities									573,436
Total								$	1,075,384

	January 29, 2006
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
Asset-backed securities	$	224,649	$	1	$	(983	)	$	223,667
Commercial paper		138,091		13		(7	)		138,097
Obligations of the United States government & its agencies		72,753		8		(834	)		71,927
United States corporate notes, bonds and obligations		179,930		5		(1,467	)		178,468
Money market		256,593		—		—			256,593
Total	$	872,016	$	27	$	(3,291	)	$	868,752
Classified as:
Cash equivalents								$	470,334
Marketable securities									398,418
Total								$	868,752

The following table ~~presents each stock option grant~~provides the breakdown of the investments with unrealized losses at January 28, 2007:

	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)
Asset-backed securities	$	56,663	$	(144	)	$	64,872	$	(307	)	$	121,535	$	(451	)
Commercial paper		37,528		(2	)		—		—			37,528		(2	)
Obligations of the United States government & its agencies		28,058		(217	)		31,044		(410	)		59,102		(627	)
United States corporate notes, bonds and obligations		103,118		(318	)		110,700		(780	)		213,818		(1,098	)
Total	$	225,367	$	(681	)	$	206,616	$	(1,497	)	$	431,983	$	(2,178	)

As of January 28, 2007, we had 87 investments that were in an unrealized loss position with an average unrealized loss duration of less than one year. The gross unrealized losses related to fixed income securities were due to changes in interest rates. We have determined that the gross unrealized losses on investment securities at January 28, 2007 are temporary in nature. We review our investments to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Our investment policy requires the purchase of top-tier investment grade securities, the diversification of asset type and certain limits on our portfolio duration.

The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale at January 28, 2007 and January 29, 2006 by contractual maturity are shown below.

All of our marketable securities are debt instruments with the exception of $5.8 million of publicly traded equity securities at January 28, 2007.

	January 28, 2007				January 29, 2006
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
Less than one year	$	810,754	$	810,081	$	491,259	$	491,246
Due in 1 - 5 years		257,623		256,274		364,065		361,047
Due in 6-7 years		3,238		3,201		16,692		16,459
Total	$	1,071,615	$	1,069,556	$	872,016	$	868,752

Certain balance sheet components are as follows:

Note 8 - Balance Sheet Components

	January 28, 2007		January 29, 2006
	(In thousands)
Inventories:
Raw materials	$	56,261	$	25,743
Work in-process		111,058		107,847
Finished goods		187,361		121,280
Total inventories	$	354,680	$	254,870	��

The significant increase in finished goods inventories primarily relates to our build-up of inventory levels of several of our MCP and memory products to meet forecasted sales demand.

	January 28, 2007		January 29, 2006
	(In thousands)
Deposits and other assets:
Investments in non-affiliates	$	11,684	$	11,684
Long-term prepayments		8,245		7,504
Other		8,420		8,289
Total deposits and other assets	$	28,349	$	27,477

	January 28, 2007			January 29, 2006			Estimated Useful Life
	(In thousands)						(Years)
Property and Equipment:
Land	$	1,230		$	-			(A	)
Software and licenses		195,556			153,618			3 - 5
Test equipment		135,607			88,468			3
Computer equipment		113,538			106,061			3
Office furniture and equipment		24,203			21,618			5
Leasehold improvements		92,784			88,376			(B	)
Construction in process		6,580			2,260			(C	)
		569,498			460,401
Accumulated depreciation and amortization		(308,670	)		(282,249	)
Total property and equipment, net	$	260,828		$	178,152

(A) Land is a non-depreciable asset.

(B) Leasehold improvements are amortized based on the lesser of either the asset’s estimated useful life or the remaining lease term.

Depreciation expense for fiscal years 2007, 2006 and 2005 was $88.0 million, $76.4 million, and $71.3 million, respectively. Assets recorded under capital leases included in property and equipment were $17.1 million as of January 28, 2007 and January 29, 2006. Related accumulated amortization was $17.1 million as of January 28, 2007 and January 29, 2006. Amortization expense for fiscal 2006 and 2005 related to capital leases was $1.2 million, and $3.8 million, respectively. As of January 28, 2007, all assets recorded under capital leases have been fully amortized.

	January 28, 2007		January 29, 2006
	(In thousands)
Accrued Liabilities:
Accrued customer programs	$	181,182	$	90,056
Deferred revenue		1,180		217
Customer advances		239		1,556
Taxes payable		37,903		58,355
Accrued payroll and related expenses		81,352		53,080
Deferred rent		12,551		11,879
Accrued legal settlement		30,600		30,600
Other		21,725		13,521
Total accrued liabilities	$	366,732	$	259,264

The increase in accrued customer programs as of January 28, 2007 when compared to January 29, 2006 primarily relates to an increase in rebates payable to OEMs as a result of our increased sales to OEMs during fiscal ~~2004~~2007 when compared to ~~each~~fiscal 2006. The increase in accrued payroll and related expenses as of January 28, 2007 when compared to January 29, 2006 primarily relates to the significant increase in the number of employees during fiscal 2007.

	January 28, 2007		January 29, 2006
	(In thousands)
Other Long-term Liabilities:
Asset retirement obligation	$	6,362	$	6,440
Accrued payroll taxes related to stock options		8,995		9,412
Other long-term liabilities		14,180		4,184
Total other long-term liabilities	$	29,537	$	20,036

FASB Interpretation No. 45, or FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the ~~individuals listed~~obligation it assumes under that guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.

Note 9 - Guarantees

We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates. The reductions to revenue for estimated product returns for fiscal years 2007, 2006 and 2005 are as follows:

Description	Balance at Beginning of Period		Additions ⁽¹⁾		Deductions ⁽²⁾			Balance at End of Period
	(In thousands)

Year ended January 28, 2007 Allowance for sales returns	$	10,239	$	37,033	$	(32,795	)	$	14,477

Year ended January 29, 2006 Allowance for sales returns	$	11,687	$	35,127	$	(36,575	)	$	10,239

Year ended January 30, 2005 Allowance for sales returns	$	9,421	$	22,463	$	(20,197	)	$	11,687

⁽¹⁾Allowances for sales returns are charged as a reduction to revenue.

⁽²⁾Represents amounts written off against the allowance for sales returns.

In connection with certain agreements that we have executed in the ~~Summary Compensation Table. The exercise price~~past, we have at times provided indemnities to cover the indemnified party for matters such as tax, product and employee liabilities. We have also on occasion included intellectual property indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be estimated because many of ~~each option was equal~~these agreements do not have a maximum stated liability. As such, we have not recorded any liability in our consolidated financial statements for such indemnifications.

Note 10 - Stockholders’ Equity

Stock Repurchase Program

On August 9, 2004 we announced that our Board had authorized a stock repurchase program to ~~the closing price of our common stock as reported on the Nasdaq National Market for the last market-trading day prior to the date of grant. The exercise price may be paid in cash, in~~repurchase shares of our common stock, ~~valued at fair market value~~subject to certain specifications, up to an aggregate maximum amount of $300 million. Subsequently, on March 6, 2006, we announced that our Board had approved a $400 million increase to the ~~exercise date or through~~original stock repurchase program. As a ~~cashless exercise procedure involving a same-day sale~~result of this increase, the ~~purchased shares.~~


	5

The potential realizable value is calculated based on the ten-year term of the option at the time of grant. Stock price appreciation of 5% and 10% is assumed pursuant to rules promulgated by the SEC and does not represent our prediction of our stock price performance. The potential realizable values at 5% and 10% appreciation are calculated by:

~~• multiplying the number of shares~~amount of common stock the Board has authorized to be repurchased has now been increased to a total of $700 million. The repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase programs, in compliance with the Securities Exchange Act of 1934, or the Exchange Act, Rule 10b-18, subject to ~~a given option by the exercise price per share;~~

~~• assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table until the expiration~~market conditions, applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of ~~the option; and~~

~~• subtracting from that result the aggregate option exercise price.~~

The shares listed in the following table under “Number of Securities Underlying Options Granted” are subject to vesting. The option granted to Mr. Huang vests over a one-year period beginning on May 15, 2007 at a rate of 25% per quarter and has a seven-year term, which is consistent with the Committee’s decision in fiscal 2004 to have the term of the option grants be set at less than ten years. The term of Mr. Huang’s option provides a two-year period beyond full vesting until the option expires. The options granted to Mr. Fisher and Dr. Ma vest on a quarterly basis over a four-year period and have six-year terms. The terms of Mr. Fisher’s and Dr. Ma’s options also provide a two-year period beyond full vesting until the option expires. The term of each option is subject to earlier termination if the optionee’s service with us ceas es. Under certain circumstances following a change of control, the vesting of such option grants may accelerate and become immediately exercisable.

Percentages shown under “Percent of Total Options Granted to Employees in Fiscal Year” are based on an aggregate of 12,495,144 options granted to our employees under all of our equity incentive plans during the fiscal year ended January 25, 2004.

Individual Grants

Potential Realizable Value at
Assumed Annual Rates
of Stock Price Appreciation
for Option Term
Name
Number of
Securities
Underlying
Options
Granted (#)
Percent of
Total Options
Granted to
Employees in
Fiscal Year
Exercise
Price
Per
Share ($)
Expiration
Date
5% ($)
10% ($)
Jen-Hsun Huang 200,000 1.60% $14.27 05/15/10 $1,161,865 $2,707,639
Marvin D. Burkett --- --- --- --- --- ---
Jeffrey D. Fisher 70,000 0.56% $14.27 04/30/09 $339,722 $770,712
Di Ma, Ph.D. 70,000 0.56% $14.27 04/30/09 $339,722 $770,712
David M. Shannon --- --- --- --- --- ---

~~Aggregated Option Exercises in Fiscal 2004 and Option Values at January 25, 2004~~

The following table presents the aggregate option exercises during the fiscal year ended January 25, 2004, as well as the number and value of securities underlying unexercised options that are held by, each of the individuals listed in the Summary Compensation Table as of January 25, 2004.

~~Amounts shown under the column “Value Realized” are based on the fair market value of our~~ common stock onand the exercise date as reported on the Nasdaq National Market less the aggregate exercise price. Amounts shown under the column “Value of Unexercised In-the-Money Options at January 25, 2004” are based on a price of $23.09 per share, which was the last reported sale price of our common stock on the Nasdaq National Market on January 23, 2004, the last trading day of fiscal year 2004, without taking into account any taxes thatprogram may be ~~payable in connection with the transaction, multiplied by the number of shares underlying the option, less the exercise price payable for these shares.~~suspended at any time at our discretion.


	6

Number of Securities Underlying
Unexercised Options at
January 25, 2004
Value of Unexercised
In-the-Money Options at
January 25, 2004
Name
Shares
Acquired
on Exercise (#)
Value
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Jen-Hsun Huang 0 $0 2,629,000 1,250,000 $46,117,028 $7,293,700
Marvin D. Burkett 0 $0 125,000 275,000 $1,701,250 $3,742,750
Jeffrey D. Fisher 50,000 $814,865 276,243 111,177 $4,656,639 $1,109,137
Di Ma, Ph.D. 0 $0 50,000 80,000 $412,166 $692,494
David M. Shannon 0 $0 78,125 171,875 $939,063 $2,065,938

~~Compensation Committee Interlocks and Insider Participation~~

~~For the fiscal year ended January 25, 2004, the Compensation Committee consisted of Messrs. Coxe, Gaither and Jones. No member of the Compensation Committee is an officer or employee of~~ NVIDIA and none of our executive officers serve as a member of a compensation committee of any entity that has one or more executive officers serving as a member of our Compensation Committee. Each of our directors or their affiliated entities, other than Mr. Seawell, has purchased and holds NVIDIA securities.

~~Employment and Change of Control Agreements~~

~~Employment Agreements~~

~~David M. Shannon.~~ We entered into an employment agreement with David M. Shannon, our Vice President and General Counsel, dated July 12, 2002, effective as of the first day of employment. Under the terms of the agreement, Mr. Shannon received a sign-on bonus of $50,000 and an annual salary of $250,000. If Mr. Shannon had resigned or was terminated with cause prior to the one-year anniversary of his employment, he was obligated to return the sign-on bonus. In addition, pursuant to the employment agreement, as Mr. Shannon satisfactorily performed his duties on a full-time basis during the first six-months of his employment he was paid a $300,000 bonus in February 2003. Mr. Shannon was entitled to accelerated vesting of one year of equivalent vesting under his stock option for 250,000 shares if he had been involuntarily terminated within 12 months of his hir e date as a direct result of a merger, consolidation, acquisition or sale of assets of NVIDIA.CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Marvin D. Burkett~~. We entered into an employment agreement with Marvin D. Burkett, our Chief Financial Officer, dated August 12, 2002, effective as of the first day of employment. Under the terms of the agreement, Mr. Burkett was entitled to an annual salary of $300,000 and a $150,000 bonus on the six-month anniversary of his hire date if he satisfactorily performed his duties on a full-time basis during that entire six month period. Mr. Burkett was paid this bonus in February 2003. Mr. Burkett~~was~~ ~~also entitled to a second $150,000 bonus payable on the first anniversary of his hire date if hecontinued~~ to satisfactorily perform his duties on a full-time basis through the one-y ear anniversary of his hiring. Mr. Burkett was paid this bonus in August 2003. Mr. Burkett was also entitled to accelerated vesting of one year of equivalent vesting under his stock option for 400,000 shares if he had been involuntarily terminated within 12 months of his hire date as a direct result of a merger, consolidation, acquisition or sale of assets of NVIDIA.

~~Change of Control Agreements~~

~~1998 Equity Incentive Plan and 2000 Nonstatutory Equity Incentive Plan~~. If we sell substantially all of our assets, or we are involved in any merger or any consolidation in which we are not the surviving corporation, or if there is any other change in control, all outstanding awards under the 1998 Equity Incentive Plan and 2000 Nonstatutory Equity Incentive Plan will either (a) be assumed or substituted for by the surviving entity or (b) if~~not assumed or substituted,the vesting and excercisability of the awards will accelerate in full and the awards will terminate if they are not exercised prior to the closing of the change of control.~~


	7

~~ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~(Continued)

~~The following table presents information regarding the ownership~~As part of our ~~common stock as~~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 ~~March 15, 2004 by:~~

·~~each director;~~

·~~each of the executive officers named in the Summary Compensation Table;~~

·~~all of our directors and executive officers as a group; and~~

·~~all those known by us to be beneficial owners of more than five percent of our common stock.~~

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of common stock subject to options currently exercisable within 60 days of March 15, 2004. These shares are not deemed outstanding for purposes of computing the percentage ownership of each other person. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Percentage of beneficial ownership is based on 165,471,706 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 fiscal 2007, we repurchased 10.3 million shares of our common stock for $275.0 million under structured share repurchase transactions, which we recorded on the trade date of the transaction. Through the end of fiscal 2007, we have repurchased 27.3 million shares under our stock repurchase program for a total cost of $488.1 million. During the first quarter of fiscal 2008, we entered into a structured share repurchase transaction to repurchase shares of our common stock for $125.0 million that we expect to settle prior to the end of our first fiscal quarter.

Convertible Preferred Stock

As of January 28, 2007 and January 29, 2006, there were no shares of preferred stock outstanding.

Note 11 - 401(k) Retirement Plan

We have a 401(k) Retirement Plan, or the 401(k) Plan, covering substantially all of our United States employees. Under the Plan, participating employees may defer up to 100% of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limits. We do not make employer contributions to the 401(k) Plan.

Note 12 - Financial Arrangements, Commitments and Contingencies

Inventory Purchase Obligations

At January 28, 2007, we had outstanding inventory purchase obligations totaling $364.5 million.

Capital Purchase Obligations

At January 28, 2007, we had outstanding capital purchase obligations totaling $4.8 million.

Lease Obligations

Our headquarters complex is located on a leased site in Santa Clara, California and is comprised of six buildings. The related leases expire in fiscal 2013 and include two seven-year renewals at our option for five buildings and a three-year renewal option for one building. Future minimum lease payments under these operating leases total $130.0 million over the remaining terms of the leases, including predetermined rent escalations, and are included in the future minimum lease payment schedule below.

In addition to the commitment of our headquarters, we have other domestic and international office facilities under operating leases expiring through fiscal 2015. Future minimum lease payments under our noncancelable operating leases as of January 28, 2007, are as follows:

	Future Minimum Lease Obligations
	(In thousands)
Year ending January:
2008	$	33,890
2009		33,480
2010		31,952
2011		31,549
2012		30,449
2013 and thereafter		6,445
Total	$	167,765

Rent expense for the years ended January 28, 2007, January 29, 2006 and January 30, 2005 was $32.6 million, $29.5 million, and $28.0 million, respectively.

Litigation

3dfx

On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an agreement to purchase certain graphics chip assets from 3dfx which closed on April 18, 2001.

In addition, while the conditional settlement agreement was awaiting the confirmation process, the Bankruptcy Court, over objection of the Creditors’ Committee and NVIDIA, ordered the discovery portion of the Trustee’s litigation to proceed. The expert discovery was completed, but the Bankruptcy Court also ruled on a Trustee discovery motion allowing additional discovery of NVIDIA. Because that order would have required NVIDIA to disclose privileged attorney-client communications, NVIDIA asked the District Court to review that order and to stay its execution while the District Court’s review is pending. The District Court did issue the requested stay order on August 3, 2006. Oral argument on that matter was held on November 15, ~~2004. Unless otherwise indicated,~~2006, and the ~~address~~District Court reversed the Bankruptcy Court’s order by order of its own dated December 15, 2006. The District Court permitted certain limited additional discovery, but concluded that on the record before it, there was no basis to set aside the attorney-client privilege.

In June 2006, the Audit Committee of the Board of NVIDIA, or the 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 and, as of the date of the filing of this Form 10-K, the SEC is continuing the inquiry of our historical stock option grant practices it began in late August 2006. In October 2006, we met with the SEC and provided it with a review of the status of the Audit Committee’s review and in November 2006 we voluntarily provided the SEC with further documents. We continue to cooperate with the SEC in its inquiry.

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. Plaintiffs filed a consolidated complaint in the United States District Court for the Northern District of California on February 28, 2007. The California Superior Court cases have been consolidated and plaintiffs are scheduled to file a consolidated complaint on or before March 22, 2007. 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. All allege in substantially similar fashion claims for, among other things, breach of fiduciary duty, unjust enrichment, insider selling, abuse of control, gross mismanagement, waste, constructive fraud, and violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, or the Exchange Act. 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.We intend to take all appropriate action in response to these complaints.

On October 19, 2004 Opti filed a complaint for patent infringement against NVIDIA in the United States District Court for the Eastern District of Texas. In its complaint, Opti asserted that unspecified NVIDIA chipsets infringe five United States patents held by Opti. Opti sought unspecified damages for our alleged conduct, attorneys’ fees and triple damages for alleged willful infringement by NVIDIA. In April 2006, the District Court issued a Markman ruling adopting Opti's proposed construction on 13 of the 15 terms at issue and Opti dropped from the lawsuit two of the five United States patents that Opti alleged NVIDIA infringes, and elected to pursue the three remaining patents at trial.

Opti

In August 2006, Opti and NVIDIA settled this litigation. Under that settlement, NVIDIA was obligated to pay to Opti $11.0 million dollars for past and present licenses to the patents in suit and NVIDIA agreed to make additional quarterly payments to Opti should NVIDIA use certain patented technology after January 31, 2007. The case has now been dismissed with prejudice. The agreements with Opti call for us to pay $11.0 million in exchange for Opti’s dismissal of its lawsuit against us and for certain patent license rights. Of this $11.0 million, we recorded $8.0 million as a patent-related intangible asset and $3.0 million as a charge to cost of revenue.

Department of Justice Subpoena and Investigation

Note 13 - Income Taxes

The provision for income taxes applicable to income before income taxes consists of the following:

	Year Ended
	January 28, 2007			January 29, 2006			January 30, 2005
	(In thousands)
Current:
Federal	$	(17	)	$	22,050		$	—
State		(2,401	)		375			355
Foreign		6,758			11,012			8,826
Total current		4,340			33,437			9,181
Deferred:
Federal		41,721			(2,692	)		1,237
State		—			—			(620	)
Total deferred		41,721			(2,692	)		617
Charge in lieu of taxes attributable to employer stock option plans		289			24,867			8,615
Provision for income taxes	$	46,350		$	55,612		$	18,413

Income before income taxes consists of the following:

	Year Ended
	January 28, 2007			January 29, 2006		January 30, 2005
	(In thousands)
Domestic	$	(19,617	)	$	52,112	$	(7,537	)
Foreign		514,097			304,676		114,565
	$	494,480		$	356,788	$	107,028

The provision for income taxes differs from the amount computed by applying the federal statutory income tax rate of 35% to income before income taxes as follows:

		Year Ended
		January 28, 2007			January 29, 2006			January 30, 2005
		(In thousands)
Tax expense computed at federal statutory rate		$	173,068		$	124,876		$	37,460
State income taxes, net of federal tax effect			(1,372	)		847			219
Foreign tax rate differential			(97,390	)		(57,286	)		(8,462	)
Research tax credit			(35,359	)		(13,175	)		(10,935	)
In-process research and development			4,690			—			—
Stock-based compensation			3,564			—			—
Other	��		(851	)		350			131
Provision for income taxes		$	46,350		$	55,612		$	18,413

The tax effect of temporary differences that gives rise to significant portions of the deferred tax assets and liabilities are presented below:

	January 28, 2007			January 29, 2006
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	23,272		$	134,385
Accruals and reserves, not currently deductible for tax purposes		17,702			16,109
Property, equipment and intangible assets		16,436			16,928
Research and other tax credit carryforwards		145,393			146,089
Stock-based compensation		31,835			45,924
Gross deferred tax assets		234,638			359,435
Less valuation allowance		(68,563	)		(233,016	)
Deferred tax assets		166,075			126,419
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries		(149,276	)		(85,716	)
Net deferred tax asset	$	16,799		$	40,703

Income tax expense as a percentage of income before taxes, or our annual effective tax rate, was 9.4% in fiscal 2007, 15.6% in fiscal 2006, and 17.2% in fiscal 2005. The difference in the effective tax rates amongst the three years was primarily a result of changes in our geographic mix of income subject to tax, with the additional change in mix in fiscal 2007 due to certain stock-based compensation expensed for financial accounting purposes under SFAS No. 123(R), and an increase in the amount of research tax credit benefit in fiscal 2007.

As of January 28, 2007, with the adoption of SFAS No. 123(R), we have derecognized both deferred tax assets for the excess of tax benefit related to stock-based compensation, reflected in our federal and state net operating loss and research tax credit carryforwards, and the offsetting valuation allowance. Consistent with prior years, the excess tax benefit reflected in our net operating loss and research tax credit carryforwards, in the amount of $344.9 million as of January 28, 2007, 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 so on 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.

As of January 28 2007, we had a federal net operating loss carryforward of approximately $770.5 million and cumulative state net operating loss carryforwards of approximately $584.1 million. The federal net operating loss carryforward will expire beginning in fiscal 2012 and the state net operating loss carryforwards will begin to expire in fiscal 2008 according to the rules of each particular state. As of January 28, 2007 we had federal research tax credit carryforwards of approximately $129.0 million that will begin to expire in fiscal 2008. We have other federal tax credit carryforwards of approximately $1.2 million that will begin to expire in fiscal 2011. The research tax credit carryforwards attributable to states is approximately $125.6 million, of which approximately $121.3 million is attributable to the State of California and may be carried over indefinitely, and approximately $4.3 million is attributable to various other states and will expire beginning in fiscal 2016 according to the rules of each particular state. We have other California state tax credit carryforwards of approximately $4.8 million that will begin to expire in fiscal 2009. Utilization of net operating losses and tax credit carryforwards may be subject to limitations due to ownership changes and other limitations provided by the Internal Revenue Code and similar state provisions. If such a limitation applies, the net operating loss and tax credit carryforwards may expire before full utilization.

As of January 28, 2007, United States federal and state income taxes have not been provided on approximately $304.0 million of undistributed earnings of non-United States subsidiaries as such earnings are considered to be permanently reinvested.

Note 14 - Segment Information

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 fiscal 2006, we reorganized our operating segments to bring all major product groups in line with our strategy to position ourselves as the worldwide leader in programmable graphics processor technologies. We report financial information for four product-line operating segments to our CODM: the GPU Business is composed of products that support desktop PCs, notebook PCs, professional workstations and other GPU-based products; the MCP Business is composed of NVIDIA nForce products that operate as a single-chip or chipset that provide system functions, such as high speed processing and network communications, and perform these operations independently from the host CPU; our Handheld GPU Business is composed of products that support handheld PDAs, cellular phones and other handheld devices; and our Consumer Electronics Business is concentrated in products that support video game consoles and other digital consumer electronics devices and is composed of revenue from our contractual arrangements with SCE to jointly develop a custom GPU for SCE’s PlayStation3, revenue from sales of our Xbox-related products, revenue from our license agreement with Microsoft Corporation, or Microsoft, relating to the successor product to their initial Xbox gaming console, the Xbox360, and related devices, and digital media processor products. In addition to these operating segments, we have the “All Other” category that includes human resources, legal, finance, general administration and corporate marketing expenses, which total $242.3 million, $131.6 million and $118.0 million for fiscal years 2007, 2006 and 2005, respectively, that we do not allocate to our other operating segments. “All Other” also includes the results of operations of other miscellaneous operating segments that are neither individually reportable, nor aggregated with another operating segment. Revenue in the “All Other” category is primarily derived from sales of memory. Certain prior period amounts have been restated to conform to the presentation of our current fiscal quarter.

Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if our customers’ revenue is attributable to end customers that are located in a different location. The following tables summarize information pertaining to our revenue from customers based on invoicing address in different geographic regions:

	GPU		MCP			Handheld GPU			Consumer Electronics		All Other			Consolidated
	(In thousands)
Twelve Months Ended January 28, 2007:
Revenue	$	1,994,334	$	661,483		$	108,496		$	96,314	$	208,144		$	3,068,771
Depreciation and amortization expense	$	35,785	$	20,751		$	17,322		$	176	$	33,798		$	107,832
Operating income (loss)	$	583,873	$	77,952		$	(41,399	)	$	84,327	$	(251,301	)	$	453,452
Twelve Months Ended January 29, 2006:
Revenue	$	1,657,221	$	352,319		$	58,745		$	167,398	$	140,004		$	2,375,687
Depreciation and amortization expense	$	33,080	$	12,092		$	12,480		$	1,552	$	30,817		$	90,021
Operating income (loss)	$	359,821	$	32,865		$	(34,922	)	$	94,696	$	(115,796	)	$	336,664
Twelve Months Ended January 30, 2005:
Revenue	$	1,348,968	$	175,663		$	45,921		$	259,968	$	179,513		$	2,010,033
Depreciation and amortization expense	$	32,849	$	12,824		$	11,620		$	880	$	32,643		$	90,816
Operating income (loss)	$	178,597	$	(39,912	)	$	(37,532	)	$	107,901	$	(113,878	)	$	95,176

	Year Ended
	January 28, 2007		January 29, 2006		January 30, 2005
	(In thousands)
Revenue:
United States	$	332,268	$	340,598	$	473,721
Other Americas		171,851		38,572		11,045
China		659,711		401,612		269,306
Taiwan		1,118,989		1,131,784		883,346
Other Asia Pacific		483,872		250,844		169,888
Europe		302,080		212,277		202,727
Total revenue	$	3,068,771	$	2,375,687	$	2,010,033

Revenue from significant customers, those representing approximately 10% or more of total revenue for the respective dates, is summarized as follows:

	January 28, 2007		January 29, 2006
	(In thousands)
Long-lived assets:
United States	$	241,795	$	177,568
Other Americas		20,197		9,957
China		5,589		4,645
Taiwan		3,278		1,185
India		13,263		7,332
Other Asia Pacific		1,822		1,905
Europe		3,233		3,037
Total long-lived assets	$	289,177	$	205,629

	Year Ended
	January 28, 2007			January 29, 2006			January 30, 2005
Revenue:
Customer A		12	%		12	%		7	%
Customer B		5	%		14	%		18	%
Customer C		-	%		5	%		13	%

Accounts receivable from significant customers, those representing approximately 10% or more of total accounts receivable for the respective periods, is summarized as follows:

	January 28, 2007			January 29, 2006
Accounts Receivable:
Customer A		18	%		8	%
Customer B		5	%		11	%

Note 15 - Settlement Costs

Settlement costs were $14.2 million for fiscal 2006. The settlement costs are associated with two litigation matters, 3dfx and American Video Graphics, LP, or AVG. AVG is settled. For further information about the 3dfx matter, please refer to Note 12 of the ~~individuals~~Notes to Consolidated Financial Statements.