NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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’ contentions and evidence and concluded that “the creditors of 3dfx were not injured by the Transaction.” This decision did not entirely dispose of the Trustee’s action; however, as the 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~~an d on September 25, 2008, ~~NVID IA~~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. 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.

Rambus Inc.

On July 10, 2008, Rambus Inc., or Rambus, filed suit against NVIDIA, 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 been consolidated into a single proceeding in the Northern District of California. On April 13, 2009, the Court issued an order staying motion ~~practice~~pr actice and allowing only ~~docume nt~~document discovery to proceed. ~~On January 27, 2010, the Court entered an order setting a~~A case management conference was held on September 1, 2010, and a further case management conference is currently scheduled for ~~March 12, 2010 which has now been continued to October 26, 2010.~~January 28, 2011.

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 sought an exclusion order barring the importation of products that allegedly infringe the now five Rambus patents. The ITC instituted the investigation and a hearing was held on October 13-20, 2009. The Administrative Law Judge issued an Initial Determination on January 22, 2010, 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 was reviewed by the ITC. The ITC issued a Final Decision on July 26, 2010. In its Final Decision, the ITC found that NVIDIA infringed three related patents and issued a limited exclusion order prohibiting import of certain NVIDIA products. NVIDIA ~~intends~~is appealing the ruling. Rambus is also appealing certain aspects of the ruling that were unfavorable to ~~appeal the ruling.~~Rambus.

NVIDIA also sought reexamination of the patents asserted in the ITC, as well as other patents, in the United States Patent and Trademark Office, or USPTO. Proceedings are underway with respect to all challenged patents. With respect to the claims asserted in the ITC, the USPTO has issued a preliminary ruling invalidating many of the claims. The USPTO has issued "Right to Appeal Notices" for the three patents found by the administrative law judge to be valid, enforceable and infringed. In the Right to Appeal Notices, the USPTO Examiner has cancelled all asserted claims of one of the patents and allowed the asserted claims on the other two patents. Rambus and NVIDIA are both seeking review of the USPTO Examiner's adverse findings. NVIDIA intends to pursue its offensive an d defensive cases vigorously in both actions.

Rambus has also been subject to an investigation in the European Union. NVIDIA was not a party to that investigation, but has recently sought to intervene in the appeal of the investigation. ~~However, as~~As a result of Rambus’ commitments to resolve that investigation, for a period of five years from the date of the resolution, Rambus must now provide 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, or the Required Rambus License. On August 12, 2010, we entered into the Required Rambus License. Pursuant to the agreement, Rambus charges a royalty of (i) one percent of the net sales price per unit for certain memory controllers and (ii) two percent of the net ~~sales~~s ales price per unit for certain other memory controllers, ~~provid ed~~provided that the maximum average net sales price per unit for these royalty bearing products shall be deemed not to exceed a maximum of $20. The agreement has a term until December 9, 2014. However, NVIDIA may terminate the agreement on or after August 12, 2011 with thirty 30 days prior written notice to Rambus.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

On December 1, 2010, Rambus filed a new lawsuit against NVIDIA and several other companies alleging six claims for patent infringement. This lawsuit is pending in the Northern District of California. On the same day, Rambus filed a complaint with the ITC alleging that NVIDIA and several other companies violated 19 U.S.C. Section 1337 based on a claim of patent infringement of three Rambus patents. The asserted patents are related to each other, and the three patents in the ITC complaint are also at issue in the lawsuit pending in the Northern District of California. Many of the patents at issue in the new lawsuits are also being challenged in Rambus' other disputes with NVIDIA. NVIDIA intends to vigorously defend these new lawsuit s.

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 products used in notebook configurations. 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. 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. 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 August 19, 2009, we filed a motion to dismiss the Amended Consolidated Complaint, and the Court heard arguments on that motion on October 19, 2009. 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 vio lations~~fo r 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. In addition, on April 1, 2010, Plaintiffs filed a motion to certify a class consisting of all people who purchased computers containing certain of our MCP and GPU products. On May 3, 2010, we filed an opposition to Plaintiffs’ motion for class certification. A hearing on both ~~moti ons~~motions was held on June 14, 2010. On July 16, 2010, the parties filed a stipulation with the District Court advising that, following mediation they had reached a settlement in principle in The NVIDIA GPU Litigation. The settlement in principle is subject to certain approvals, including final approval by the court. As a result of the settlement in principle, the other estimated settlement, and offsetting insurance reimbursements, NVIDIA recorded a net charge of $12.7 million to sales, general and administrative expense during the second quarter of fiscal year 2011. In addition, a portion of the $181.2 million of additional charges we recorded against cost of revenue related to the weak die/packaging set during the second quarter of fiscal year 2011, relates to estimated additional repair and replacement costs related to the implementation of these settlements. On July 19, 2010, the District Court entered an order setting a Preliminary Approval hearing for August 30, 2010, and a Final Approval hearing for November 22, 2010, and removing the pending motions from its calendar. On August 12, 2010, the parties executed a Stipulation and Agreement of Settlement and Release. On September 15, 2010, the Court issued an order granting preliminary approval of the settlement and providing for notice to the potential class members. The Court has rescheduled the Final Approval hearing for December 20, 2010.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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. On ~~October~~Octob er 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’ 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’ 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. On November 5, 2009, the Court of Appeals issued an opinion reversing the District Court’s appointment of one of the lead plaintiffs’ counsel, and remanding the matter for further proceedings.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)~~

~~(Unaudited)~~

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~~file d a Consolidated Amended Class Action Complaint for Violations of the Federal Securities Laws, 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~~sought unspecified compensatory damages. We filed a motion to dismiss the consolidated ~~complaint. A~~complaint in March 2010 and a hearing ~~on our motion to dismiss~~ was held on June 24, 2010 before Judge Seeborg. On October 19, 2010, Judge Seeborg ~~and the matter is currently under submission.~~granted our motion to dismiss with leave to amend. On December 2, 2010, co-Lead Plaintiffs filed a second consolidated amended complaint.

Intel Corporation

On February 17, 2009, Intel Corporation filed suit against NVIDIA Corporation, seeking declaratory and injunctive relief relating to a license 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 NVIDIA chipset products and enjoining NVIDIA from stating that it has license 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 further harmed.~~processors.

On March 23, 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 license agreement, and enjoining Intel from interfering with NVIDIA's license rights. In addition, the counterclaims seek a finding that Intel has materially breached its obligations under the 2004 license agreement, and requests various remedies for that breach, ~~including~~includin g termination of Intel's cross licensing ~~rights.~~rights and damages. On April 16, 2009, Intel filed its answer to our counterclaims.

~~Discovery is proceeding and trial is currently~~Trial was scheduled for December 6, ~~2010.~~ 2010, but the parties have mutually agreed to postpone the trial until a future date to be determined after the New Year.

NVIDIA ~~disputes Intel’s claims and intends to vigorously defend these claims, as well as pursue its counterclaims.~~CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 13 - Stockholders’ Equity

Stock Repurchase Program

Our Board of Directors has authorized us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2013. 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 Rule 10b-18 of the Securities Exchange Act, 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 repurc hase~~s hare 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.

We did not enter into any structured share repurchase transactions or otherwise purchase any shares of our common stock during the three and ~~six~~nine months ended ~~August 1,~~October 31, 2010. Through ~~August 1,~~October 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 ~~August 1,~~October 31, 2010, we are authorized, subject to certain specifications, to repurchase shares of our common stock up to $1.24 billion through May 2013.

2324

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Convertible Preferred Stock

As of ~~August 1,~~October 31, 2010 and January 31, 2010, there were no shares of preferred stock outstanding.

Common Stock

At the Annual Meeting of Stockholders held on June 19, 2008, our stockholders approved an increase in our authorized number of shares of common stock to 2,000,000,000. The par value of our common stock remained unchanged at $0.001 per share.

Please refer to Note 2 of these Notes to the Condensed Consolidated Financial Statements for further discussion regarding the cash tender offer for certain employee stock options completed in March 2009.

Note 14 -– Comprehensive ~~Loss~~Income (Loss)

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

	Three Months Ended					Six Months Ended					Three Months Ended						Nine Months Ended
	August 1, 2010		July 26, 2009			August 1, 2010		July 26, 2009			October 31, 2010			October 25, 2009			October 31, 2010			October 25, 2009
	(In thousands)										(In thousands)
Net loss	$	(140,961)	$	(105,302	)	$	(3,367)	$	(306,640	)
Net Income (loss)											$	84,862		$	107,577		$	81,495		$	(199,063	)
Net change in unrealized gains (losses) on available-for-sale securities, net of tax		840		3,896			(244)		5,505			1,653			1,295			1,408			6,799
Reclassification adjustments for net realized losses on available-for-sale securities included in net loss, net of tax		(478)		(157	)		(692)		(700	)		(220	)		(320	)		(911	)		(1,019	)
Total comprehensive loss	$	(140,599)	$	(101,563	)	$	(4,303)	$	(301,835	)
Total comprehensive income (loss)											$	86,295		$	108,552		$	81,992		$	(193,283	)

Note 15 - 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 year 2011, we began reporting internally the results of our former MCP segment along with the results of our GPU segment to reflect the way we manage the GPU business. Comparative periods presented reflect this change. Our GPU business is comprised primarily of our GeForce and ION products that support desktop, notebook and netbook personal computers, or PCs. The GPU business also includes memory products. Our professional solutions business, or PSB, is comprised of our Quadro professional workstation products and other professional graphics products, including our NVIDIA Tesla high-performance computing products. Our consumer products business, or CPB, is comprised of our Tegra mobile brand and products that support ~~tablets an d~~tab lets and smartbooks, smartphones, personal media players, or PMPs, internet television, automotive navigation, and other such devices. CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics devices.

The “All Other” category includes non-recurring charges 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. There were no non-recurring charges for the three months and ~~six~~nine months ended ~~August 1,~~October 31, 2010. Non-recurring charges related to our cash tender offer to purchase certain employee stock options were $140.2 million for the ~~six~~nine months ended ~~July 26,~~October 25, 2009. Please refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements for further discussion regarding the cash tender offer.

2425

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

	GPU			PSB		CPB			All Other			Consolidated			GPU			PSB		CPB			All Other			Consolidated
	(In thousands)														(In thousands)
Three Months Ended August 1, 2010:
Three Months Ended October 31, 2010:
Revenue	$	550,413		$	215,091	$	45,704		$	-		$	811,208		$	581,863		$	210,115	$	51,934		$	-		$	843,912
Depreciation and amortization expense	$	30,743		$	7,201	$	8,629		$	-		$	46,573		$	31,488		$	7,782	$	7,516		$	-		$	46,786
Operating income (loss)	$	(221,711	)	$	85,226	$	(38,722	)	$	-		$	(175,207	)	$	48,521		$	87,027	$	(31,765	)	$	-		$	103,783
Three Months Ended July 26, 2009:
Three Months Ended October 25, 2009:
Revenue	$	615,617		$	116,626	$	44,277		$	-		$	776,520		$	717,658		$	129,638	$	55,910		$	-		$	903,206
Depreciation and amortization expense	$	35,549		$	7,211	$	6,562		$	-		$	49,322		$	33,972		$	6,648	$	8,150		$	-		$	48,770
Operating income (loss)	$	(127,437	)	$	32,822	$	(15,492	)	$	-		$	(110,107	)	$	80,833		$	38,600	$	(11,588	)	$	-		$	107,845
Six Months Ended August 1, 2010:
Nine Months Ended October 31, 2010:
Revenue	$	1,331,266		$	404,821	$	76,934		$	-		$	1,813,021		$	1,913,130		$	614,935	$	128,868		$	-		$	2,656,933
Depreciation and amortization expense	$	65,602		$	12,597	$	15,521		$			$	93,720		$	97,180		$	20,379	$	23,037		$	-		$	140,596
Operating income (loss)	$	(106,367	)	$	159,091	$	(80,538	)	$	-		$	(27,814	)	$	(57,846	)	$	246,117	$	(112,302	)	$	-		$	75,969
Six Months Ended July 26, 2009:
Nine Months Ended October 25, 2009:
Revenue	$	1,163,001		$	222,775	$	54,975		$	-		$	1,440,751		$	1,880,659		$	352,413	$	110,885		$	-		$	2,343,957
Depreciation and amortization expense	$	71,720		$	14,389	$	13,871		$	-		$	99,980		$	105,692		$	21,037	$	22,021		$	-		$	148,750
Operating income (loss)	$	(196,037	)	$	53,927	$	(58,721	)	$	(140,241	)	$	(341,072	)	$	(115,204	)	$	92,527	$	(70,309	)	$	(140,241	)	$	(233,227	)

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:

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	August 1, 2010		July 26, 2009		August 1, 2010		July 26, 2009		October 31, 2010		October 25, 2009		October 31, 2010		October 25, 2009
	(In thousands)								(In thousands)
Revenue:
China	$	271,362	$	323,478	$	648,681	$	583,628	$	282,300	$	359,207	$	930,981	$	942,835
Taiwan		189,027		203,185		467,152		369,621		220,322		240,597		687,474		610,218
Other Asia Pacific		155,164		95,151		282,799		165,635		112,292		116,408		395,091		282,043
United States		61,143		59,882		148,159		111,772		79,474		64,822		227,633		176,594
Other Americas		72,781		50,469		137,682		121,072		78,737		71,385		216,419		192,457
Europe		61,731		44,355		128,548		89,023		70,787		50,787		199,335		139,810
Total revenue	$	811,208	$	776,520	$	1,813,021	$	1,440,751	$	843,912	$	903,206	$	2,656,933	$	2,343,957

Revenue from significant customers, those representing 10% or more of total revenue, aggregated approximately ~~10%~~12% of our total revenue from one customer and ~~23%~~13% of our total revenue from ~~two customers~~one customer for the three and ~~six~~nine months ended ~~August 1,~~October 31, 2010, respectively. Revenue from significant customers aggregated approximately 14% and 12% of our total revenue from one customer for the three and ~~six~~nine months ended ~~July 26, 2009.~~October 25, 2009, respectively.

Accounts receivable from significant customers, those representing 10% or more of total accounts receivable, aggregated approximately ~~36%~~34% of our accounts receivable balance from three customers at ~~August 1,~~October 31, 2010 and approximately 20% of our accounts receivable balance from two customers at January 31, 2010.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 16 – Subsequent Event~~

On August 18, 2010, NVIDIA and the landlord for four of our primary headquarters buildings in Santa Clara, California, agreed to amend the leases for those buildings. The amended leases (i) extend the term of each building lease by seven years, (ii) reduce the base monthly rent payable by NVIDIA, and (iii) provide for the return of security deposits to NVIDIA.

The lease amendments take effect in fiscal year 2013. As a result of these amendments our related contractual obligations increased by $10.6 million for fiscal year 2013, $11.6 million for fiscal year 2014, $11.9 million for fiscal year 2015 and $52.3 million for fiscal years 2016 and thereafter.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” ~~“predict,~~̶ 0;predict,” ~~“poten tial”~~“potential” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby ~~qualify~~qual ify our forward-looking ~~statem ents~~statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries, except where it is made clear that the term means only the parent company.

NVIDIA, the NVIDIA logo, CUDA, GeForce, ION, NVIDIA 3D Vision, PhysX, Quadro, Tegra, and Tesla are trademarks and/or registered trademarks of NVIDIA Corporation in the ~~U.S.~~United States and other countries. Other company and product names may be trademarks of the respective companies with which they are associated.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 6. Selected Financial Data” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2010 and Part II, “Item 1A. Risk Factors”, of our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q, before deciding to purchase, hold or sell shares of our common stock.

Overview

Our Company

NVIDIA Corporation invented the graphics processing unit, or GPU, in 1999. Since then, it has strived to set new standards in visual computing with interactive graphics available on devices ranging from tablets and portable media players to notebooks and workstations. Expertise in programmable GPUs has led to breakthroughs in parallel processing which make supercomputing inexpensive and widely accessible. We serve the entertainment and consumer market with our GeForce and ION graphics products, the professional design and visualization market with our Quadro graphics products, the high-performance computing market with our Tesla computing solutions products, and the mobile computing market with our Tegra system-on-a-chip products. We have three major operating segments: the GPU business, the Profe ssional Solutions Business, or PSB, and the Consumer Products Business, or CPB.

Our GPU business is comprised primarily of our GeForce and ION products that support desktop, memory products, notebook and netbook personal computers, or PCs, including chipset products that were previously described as media and communications processor, or MCP. Our PSB is comprised of our NVIDIA Quadro professional workstation products and other professional graphics products, including our NVIDIA Tesla high-performance computing products. Our CPB is comprised of our Tegra mobile products that support tablets and smartbooks, smartphones, personal media players, or PMPs, internet television, automotive navigation, and other similar devices. CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics ~~dev ices.~~de vices. Original equipment manufacturers, original design manufacturers, add-in-card manufacturers, system builders and consumer electronics companies worldwide utilize our processors as a core component of their entertainment, business and professional solutions.

We were incorporated in California in April 1993 and reincorporated in Delaware in April 1998. Our headquarter facilities are in Santa Clara, California. Our Internet address is www.nvidia.com. The contents of our website are not a part of this Form 10-Q.

Recent Developments, Future Objectives and Challenges

GPU Business

During the third quarter of fiscal year 2011, we launched 12 new GPU products, including the GeForce GTS 450 and GeForce GT 430. The GTS 450 is designed to deliver the most advanced GPU and gaming experience for budget conscious gamers. The GT 430 is designed for photo and video editing, Blu-ray 3D, and the next-generation of GPU-accelerated Web browsers and Web content for mainstream PC users. We also launched a complete range of notebook GPUs in the GeForce 400M family with Optimus technology, a proprietary NVIDIA product feature designed for mobile applications to optimize power usage and extend battery life. Lenovo and Dell have already shipped their new product lines based on GeForce 400M with Optimus.

During the second quarter of fiscal year 2011, we launched our GeForce GTX 460. The GTX 460 uses our second-generation Fermi architecture and delivers a DirectX 11 gaming experience at a balance of price, performance and power.

During the first quarter of fiscal year 2011, we announced and shipped our GeForce GTX 480 and 470 GPUs, the first GPUs based on our Fermi architecture. The GeForce GTX 480 and GTX 470 GPUs are designed to excel at tessellation, the defining feature of DirectX 11. The GeForce GTX 480/470 GPUs also provide a higher computational capability, which is designed to allow game developers to increase the level of physics realism via our PhysX API. We also began shipments of the GeForce 320M chipset to Apple for incorporation into their latest 13-inch MacBook notebooks. The 320M delivers up to an 80% performance increase over the previous GeForce 9400M GPU. Our stereo 3D technology continued to gain acceptance in the quarter as we sold a record number of our NVIDIA 3D Vision ki ts.

Professional Solutions Business

~~Demand~~ During the third quarter of fiscal year 2011, our Quadro business further benefitted from the strength of our Fermi architecture with the launch of the Quadro 2000 midrange GPU and the Quadro 600 entry-level GPU. These professional graphics solutions put the computational and visualization benefits of our Fermi architecture within reach of all engineers, designers and animators, with the Quadro 2000 delivering significantly higher performance across leading CAD applications, such as SolidWorks and Autodesk 3ds Max, and the Quadro 600 positioned at a competitive price/performance point. Our Tesla supercomputing business continues to make progress with key project wins not only in our core market segments, but also with traction in a number of new focus areas. A notable achievement this quarter was the unveiling of the Tianhe-1A supercomputer at HPC 2010 China. The system uses more than 7,000 Tesla M2050 GPUs, is three-times more energy efficient than an equivalent CPU-only system and takes up half as much floor space.

During the second quarter of fiscal year 2011, demand for our workstation products ~~continues~~continued to recover, fueled by demand from enterprise customers and new growth markets like video editing. During SIGRRAPH 2010, we introduced new Quadro GPU products based on our Fermi architecture and 3D Vision Pro, a new 3D stereoscopic solution that empowers engineers, designers, architects and computational chemists who work with complex 3D designs ~~with~~to experience a rich, reliable 3D viewing ~~experience~~ for large scale visualization environments.

The new Quadro GPUs deliver performance that is up to five times faster for 3D applications and up to eight times faster for computational simulation than our previous Quadro generation products. During the second quarter of fiscal year 2011, our Tesla high performance computing products achieved another record revenue quarter, and ~~continue~~continues to make progress in our targeted vertical markets including supercomputing, energy and finance.

During the first quarter of fiscal year 2011, we announced that a range of NVIDIA Quadro professional graphics solutions are certified by Adobe for Adobe Creative Suite 5 software, which provides real-time video editing and effects processing of Adobe Premiere Pro CS5. Tesla achieved record revenue during the first quarter of fiscal year 2011 following the launch of Tesla products based on our new Fermi architecture.

Consumer Products Business

~~Our next generation NVIDIA~~During the third quarter of fiscal year 2011, we continued to see promising signs in our Tegra ~~mobile processor~~business, helped by Android’s adoption. Gartner reported in November 2010 that Android was ~~designed~~now the world’s second-most popular smart phone operating system, ahead of the iPhone and Blackberry operating systems. We expect Tegra shipment volumes to ~~power~~begin ramping up late in the ~~new generation~~fourth quarter of ~~tablets, slates, mobile Internet devices (MIDs), e-readers, automotive safety~~fiscal year 2011 and ~~entertainment solutions,~~the first quarter of fiscal year 2012, fueled by the production release of Android-based smartphone and ~~Internet TV boxes.~~tablet products. We have multiple next-generation Tegra design wins in both tablets ~~smartbooks~~ and ~~smartphones that are expected to ship during the second half of fiscal year 2011.~~smartphones. We have also announced that Volkswagen and Audi will use our next-generation Tegra starting in 2012.

Product Defect

During the second quarter of fiscal year 2011, we recorded aan additional charge to cover the estimated remaining customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set in certain versions of our previous generation ~~media and communications processor, or~~ MCP and ~~graphics processing unit, or~~ GPU products used in notebook configurations. The net charge amounted to $193.9 million, of which $181.2 million was charged against cost of revenue. The extra remediation costs are primarily due to additional platforms from late failing systems that we had not previously considered to be at risk. Included in the charge are the estimated costs of implementing a settlement reached during the second quarter of fiscal year 2011 with ~~t he~~the plaintiffs of a putative consumer class action lawsuit related to this same matter and another related estimated consumer class action settlement. As a result of this settlement, the other estimated settlement, and offsetting insurance reimbursements, we recorded a net charge of $12.7 million to sales, general and administrative expense during the second quarter of fiscal year 2011. Together with the $282.0 million net charge we had previously recorded for related estimated costs, this brings the total cumulative net charge to $475.9 million, of which $466.4 million has been charged against cost of revenue.

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 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 products.

In September, October and November 2008, several putative securities class action lawsuits were filed against us, asserting various claims related to the impacted MCP and GPU products. Please refer to Note 12 of these Notes to the Condensed Consolidated Financial Statements for further information regarding this litigation and the settlement.

Rambus License

In November 2008, Rambus filed a complaint alleging patent infringement against NVIDIA and other respondents with the U.S. International Trade Commission, or ITC. The complaint seeks an exclusion order barring the importation of products that allegedly infringe the Rambus patents.

The ITC has instituted an investigation and a hearing was held in October 2009. The Administrative Law Judge issued an Initial Determination in January 2010, 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. The ITC issued a Final Decision on July 26, 2010. In its Final Decision, the ITC found that NVIDIA infringed three related patents and issued a limited exclusion order prohibiting import of certain NVIDIA products. NVIDIA ~~intends to appeal~~is appealing the ruling.

Rambus has also been subject to an investigation in the European Union. NVIDIA was not a party to that investigation. However, as a result of Rambus’ commitments to resolve that investigation, for a period of five years from the date of the resolution, Rambus must now provide 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, or the Required Rambus License.

On August 12, 2010, we entered into the Required Rambus License. Pursuant to the agreement, Rambus charges a royalty of (i) one percent of the net sales price per unit for certain memory controllers and (ii) two percent of the net sales price per unit for certain other memory controllers, provided that the maximum average net sales price per unit for these royalty bearing products shall be deemed not to exceed a maximum of $20. As a result, we believe that the impact on our ongoing overall gross margin, depending on the product mix, will be approximately one gross margin point. The agreement has a term until December 9, 2014. However, NVIDIA may terminate the agreement on or after August 12, 2011 with 30 days prior written notice to Rambus.

Stock Repurchase Program

Our Board of Directors, or our Board, has authorized us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2013. During the three and ~~six~~nine months ended ~~August 1,~~October 31, 2010, we did not enter into any structured share repurchase transactions or otherwise purchase any shares of our common stock. Through ~~August 1,~~October 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 ~~August 1,~~October 31, 2010, we are authorized, subject to certain specifications, to repurchase shares of our common stock up to $1.24 billion through May 2013.

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 a operating segment basis for purposes of making operating decisions and assessing financial performance.

During the first quarter of fiscal year 2011, we began reporting internally the results of our former MCP segment along with the results of our GPU segment to reflect the way we manage the GPU business. Comparative periods presented reflect this change. We report financial information for three operating segments to our CODM: the GPU business, which is comprised primarily of our GeForce and ION products that support desktop, notebook and netbook ~~personal computers, or~~ PCs and also includes memory products; the PSB, which is comprised of our NVIDIA Quadro professional workstation products and other professional graphics products, including our NVIDIA Tesla high-performance computing products; and our CPB, which is comprised of our Tegra mobile products that support tablets and smartbooks, ~~sma rtphones, personal media players, or~~smartphones, PMPs, ~~internet~~interne t television, automotive navigation, and other similar devices. CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics devices.

The “All Other” category includes non-recurring charges 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. There were no non-recurring charges for the first ~~half~~nine months of fiscal year 2011. Non-recurring charges related to our cash tender offer to purchase certain employee stock options were $140.2 million for the first quarter of fiscal year 2010. Please refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements for further discussion regarding the cash tender offer and Note 15 of the Notes to the Condensed Consolidated Financial Statements for further disclosure regarding segment information.

Results of Operations

The following table sets forth, for the periods indicated, certain items in our condensed consolidated statements of operations expressed as a percentage of revenue.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	August 1, 2010			July 26, 2009			August 1, 2010			July 26, 2009			October 31, 2010			October 25, 2009			October 31, 2010			October 25, 2009
Revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		83.4			79.8			67.4			76.0			53.5			56.6			63.0			68.5
Gross profit		16.6			20.2			32.6			24.0			46.5			43.4			37.0			31.5
Operating expenses
Research and development		26.0			24.8			23.6			34.3			24.3			21.9			23.8			29.5
Sales, general and administrative		12.2			9.5			10.5			13.4			9.9			9.5			10.3			11.9
Total operating expenses		38.2			34.3			34.1			47.7			34.2			31.4			34.1			41.4
Operating loss		(21.6	)		(14.1	)		(1.5	)		(23.7	)
Income (loss) from operations														12.3			12.0			2.9			(9.9	)
Interest and other income, net		0.8			0.4			0.5			0.6			0.0			0.3			0.3			0.5
Loss before income tax benefit		(20.8	)		(13.7	)		(1.0	)		(23.1	)
Income tax benefit		(3.5	)		(0.2	)		(0.8	)		(1.8	)
Net loss		(17.3	)%		(13.5	)%		(0.2	)%		(21.3	)%
Income (loss) before income tax expense (benefit)														12.3			12.3			3.2			(9.4	)
Income tax expense (benefit)														2.2			0.3			0.1			(1.0	)
Net Income (loss)														10.1			12.0	%		3.1			(8.4	)%

Three and ~~six~~nine months ended ~~August 1,~~October 31, 2010 and ~~July 26,~~October 25, 2009

Revenue

Revenue was ~~$811.2~~$843.9 million for our ~~second~~third quarter of fiscal year 2011, compared to ~~$776.5~~$903.2 million for our ~~second~~third quarter of fiscal year 2010, which represents ~~an increase~~a decrease of approximately 5%6.6%. Revenue was ~~$1.81~~$2.66 billion for the first ~~half~~nine months of fiscal year 2011 and ~~$1.44~~$2.34 billion for the first ~~half~~nine months of fiscal year 2010, which represented an increase of ~~26%~~13.4%. We expect revenue to increase slightly during the ~~third~~fourth quarter of fiscal year 2011 as compared to the ~~second~~third quarter of fiscal year 2011. A discussion of our revenue results for each of our operating segments is as follows:

GPU Business. GPU Business revenue decreased by approximately ~~11%~~18.9% to ~~$550.4~~$581.9 million in the ~~second~~third quarter of fiscal year 2011, compared to ~~$615.6~~$717.7 million for the ~~second~~third quarter of fiscal year 2010. ~~This decrease resulted from decreased sales of our desktop GPU and MCP products offset by increased sales of our notebook GPU and memory products.~~ The decline in sales of ~~desktop~~mainstream GPU and MCP products was primarily due to a drop in unit shipments driven by weakness in our end customer markets as well as market share losses according to the latest 2010 PC Graphics Report from Mercury Research. We believe that rising memory costs and the weakness of the Euro during the second quarter of fiscal year 2011 contributed to increased end market prices of graphics add-in ca rd and that, in addition, the growing economic concerns in Europe and China began to create pressure on discretionary spending in those regions. As a result, we believe the market moved towards lower-cost GPUs and PCs with integrated graphics, both of which we believe negatively impacted our GPU Business revenue for the second quarter of fiscal year 2011. Offsetting those declines were increases in sales of our notebook GPU and memory products in the second quarter of fiscal year 2011 when compared to second quarter of fiscal year 2010. The growth in sales of notebook GPU products was driven by a continuing shift in the market demand towards notebook PCs from desktop PCs. The growth in memory sales is driven by the launch of our new generation of GPUs with Fermi architecture.

GPU Business revenue increased slightly by ~~approximately 15%~~1.7% to ~~$1.33~~$1.91 billion for the first ~~half~~nine months of fiscal year 2011 compared to ~~$1.16~~$1.88 billion for the first ~~half~~the first nine months of fiscal year 2010. The increase was primarily the result of increased sales of our notebook GPU ~~and memory~~ products offset by decreased sales of our desktop GPU and MCP products. The growth in the sales of notebook GPU products was driven by a continuing shift in the market demand towards notebook PCs from desktop PCs. ~~The growth in memory sales was driven by the launch of our new generation of GPUs with Fermi architecture.~~ Offsetting this growth was a decrease in sales of our MCP products due to a drop in unit shipments driven by weakness in our end customer ~~markets as well as a loss in market share according to the latest 2010 PC Graphics Report f rom Mercury Research.~~markets.

PSB. PSB revenue increased by approximately ~~84%~~62.1% to ~~$215.1~~$210.1 million in the ~~second~~third quarter of fiscal year 2011, compared to ~~$116.6~~$129.6 million for the ~~second~~third quarter of fiscal year 2010. PSB revenue increased by ~~82%~~74.5% to ~~$404.8~~$614.9 million for the first ~~half~~nine months of fiscal year 2011 as compared to ~~$222.8~~$352.4 million for the first ~~half~~nine months of fiscal year 2010. These increases were driven by growth in both our Quadro and Tesla brands. Unit shipments of our Quadro workstation products increased, fueled by demand from enterprise customers as the market recovered from the previous recessionary conditions. Tesla achieved record revenue during the second quarter and first half of fiscal year 2011, driven by the launch of products containing our new Fermi architecture.

CPB. CPB revenue ~~increased~~decreased by 3%7.1% to ~~$45.7~~$51.9 million in the ~~second~~third quarter of fiscal year 2011, compared to ~~$44.3~~$55.9 million for the ~~second~~third quarter of fiscal year 2010. This decrease in CPB revenue was primarily due to a sales decline in our products for the entertainment market. Offsetting this decline was an increase in Mobile revenue driven by increased unit shipments of Tegra. CPB revenue increased by approximately ~~40%~~16.2% to ~~$76.9~~$128.9 million for the first ~~half~~nine months of fiscal year 2011 as compared to ~~$55.0~~$110.9 million for the first ~~half~~nine months of fiscal year 2010. ~~These increases~~This increase in CPB revenue ~~were~~was primarily driven by increased unit shipments of our Tegra products.

Concentration of Revenue

Revenue from sales to customers outside of the United States and other Americas accounted for ~~83%~~81% and ~~86%~~85% of total revenue for the ~~second~~third quarter of fiscal years 2011 and 2010, respectively, and 83% and 84% for ~~both~~ the first ~~half~~nine months of fiscal years 2011 and ~~2010.~~2010 respectively. Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if the revenue is attributable to end customers in a different location.

Revenue from significant customers, those representing 10% or more of total revenue aggregated approximately ~~10%~~12% of our total revenue from one customer for the ~~second~~third quarter and ~~23%~~13% of our total revenue from ~~two customers~~one customer for the first ~~half~~nine months of fiscal year 2011. Revenue from significant customers aggregated approximately 14% and 12% of our total revenue from one customer for the ~~second~~third quarter and first ~~half~~nine months of fiscal year ~~2010.~~2010, respectively.

Gross Profit and Gross Margin

Gross profit consists of total revenue, net of allowances, less cost of revenue. Cost of revenue consists 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 and warranty provisions and shipping costs. Cost of revenue also includes development costs for license, service arrangements and stock-based compensation related to personnel associated with manufacturing.

Gross margin is the percentage of gross profit to revenue. Our gross margin can vary in any period depending on the mix of types of products sold. Our gross margin is significantly impacted by the mix of products we sell. Product mix is often difficult to estimate with accuracy. Therefore, if we experience product transition challenges, if we achieve significant revenue growth in our lower margin product lines, or if we are unable to earn as much revenue as we expect from higher margin product lines, our gross margin may be negatively impacted.

Our overall gross margin was ~~16.6%~~46.5% and ~~20.2%~~43.4% for the ~~second~~third quarter of fiscal year 2011 and 2010, respectively and ~~32.6%~~37.0% and ~~24.0%~~31.5% for the first ~~half~~nine months of fiscal year 2011 and 2010, respectively. The ~~regression~~improvement in gross margin for the ~~second~~third quarter of fiscal year 2011 when compared to the ~~second~~third quarter of fiscal year 2010 was ~~impacted by an additional charge related~~attributable to ~~weak die/packaging material set~~a more favorable product mix and also by our write-down of excess inventories. Inventory reserves taken during the second quarter and first half of fiscal year 2011 were approximately $94 million and $122 million higher compared to reserves taken in the second quarter and first half of fiscal year 2010, respectively. Offsetting these charges were the continuing positive impact of improved yields of our 40nm products as well as ~~ot her~~other manufacturing cost reductions. Additionally, during the third quarter of fiscal year 2011, we sold products that had been previously reserved and also recorded new inventory reserves on other components. While the net impact to the quarter was immaterial, each of these offsetting items represented an impact on gross margin of approximat ely 3%. Impact of sales of items previously reserved was insignificant for the third quarter of fiscal year 2010.

We intend to focus on improving our gross margin by delivering cost effective product architectures, enhancing business processes and delivering profitable growth. ~~As such, we~~We expect gross margin to ~~increase~~stay flat during the ~~third~~fourth quarter of fiscal year 2011 as compared to the ~~second~~third quarter of fiscal year 2011.

A discussion of our gross margin results for each of our operating segments is as follows:

GPU Business. The gross margin of our GPU Business ~~decreased~~increased slightly during the ~~second~~third quarter of fiscal year 2011 as compared to the ~~second~~third quarter of fiscal year ~~2010,~~2010. The increase was primarily due to positive contribution from products based on our Fermi architecture. Margins also improved as a result of favorable product mix, better yields of our 40nm products as well as other manufacturing cost reductions. Gross margin was flat during the first ~~half~~nine months of fiscal year 2011 as compared to the first ~~half~~nine months of fiscal year 2010. ~~The decrease was primarily due to~~Both fiscal years included the impact of an additional charge related to weak die/packaging material set used in certain versions of previous generation MCP and GPU products, net of insurance ~~reimbursements.~~rei mbursements. During the second quarter of fiscal year 2011, we recorded a net charge against cost of revenue of $181.2 million that includes anticipated customer warranty, repair, return, replacement and associated costs arising from a weak die/packaging material set as well as additional ~~reme diation~~remediation costs and the estimated costs of a pending settlement of a class action lawsuit. During the second quarter of fiscal year 2010 we had recorded a net charge of $120.0 million to cost of revenue for this same matter. Additionally, during the second quarter of fiscal year 2011, unexpected PC market weakness resulted in excess inventory. As a consequence, we recorded related charges for inventory reserves and the gross margin of our GPU Business was negatively impacted by these charges. ~~Offsetting these charges were the continuing positive impact of improved yields of our 40nm products as well as other manufacturing cost reductions.~~

PSB. The gross margin of our PSB increased during the ~~second~~third quarter of fiscal year 2011 as compared to the ~~second~~third quarter of fiscal year 2010 ~~and was relatively flat~~as well as during the first ~~half~~nine months of fiscal year 2011 as compared to the first ~~half~~nine months of fiscal year 2010. The increase was primarily due to the positive contribution of new products that we launched during ~~the second quarter of~~ fiscal year 2011 containing our new Fermi architecture. Lower gross margin for the third quarter of fiscal year 2010 and nine months ended fiscal year 2010 was primarily due to decline in ASPs caused by pricing pressure due to the slow recovery of corporate spending following the economic recession.

CPB. The gross margin of our CPB increased during the ~~second~~third quarter of fiscal year 2011 as compared to the ~~second~~third quarter fiscal year 2010 ~~and was relatively flat~~as well as during the during the first ~~half~~nine months of fiscal year 2011 as compared to the first ~~half~~nine months of fiscal year 2010. The increase was primarily driven by increased unit shipments of higher margin Tegra ~~products.~~products and royalties from game console-related products in the comparative period.

Operating Expenses

	Three Months Ended										Six Months Ended										Three Months Ended											Nine Months Ended
	August1, 2010			July 26, 2009			$ Change		% Change		August 1, 2010			July 26, 2009			$ Change		% Change		October31, 2010			October 25, 2009			$ Change			% Change		October 31, 2010			October 25, 2009			$ Change			% Change
	(in millions)										(in millions)										(in millions)											(in millions)
Research and development expenses	$	210.6		$	192.9		$	17.7	9	%	$	428.7		$	494.7		$	(66.0)	(13)	%	$	204.5		$	197.9		$	6.6		3.3	%	$	633.3		$	692.6		$	(59.3	)	8.6	%
Sales, general and administrative expenses		98.9			73.9			25.0	34	%		189.7			192.8			(3.1)	(2)	%		83.8			86.0			(2.2	)	2.6	%		273.5			278.8			(5.3	)	1.9	%
Total operating expenses	$	309.5		$	266.8		$	42.7	16	%	$	618.4		$	687.5		$	(69.1)	(10)	%	$	288.3		$	283.9		$	4.4		1.5	%	$	906.8		$	971.4		$	(64.6	)	6.7	%
Research and development as a percentage of net revenue		26.0	%		24.8	%						23.6	%		34.3	%						24.3	%		21.9	%							23.8	%		29.5	%
Sales, general and administrative as a percentage of net revenue		12.2	%		9.5	%						10.5	%		13.4	%						9.9	%		9.5	%							10.3	%		11.9	%

Research and Development

Research and development expenses were ~~$210.6~~$204.5 million and ~~$192.9~~$197.9 million during the ~~second~~third quarter of fiscal year 2011 and 2010, respectively, an increase of ~~$17.7~~$6.6 million, or 9%3.3%. Compensation and benefits increased by ~~$7.6~~$6.7 million and stock based compensation increased by $1.3 million, primarily related to growth in ~~headcount and development~~headcount. Development spending also increased ~~by $3.8~~$1.4 million. These increases were offset by a decrease of ~~$2.5~~$2.8 million in depreciation and amortization associated with fully depreciated assets.

Research and development expenses were ~~$428.7~~$633.3 million and ~~$494.7~~$692.6 million in the first ~~half~~nine months of fiscal years 2011 and 2010, respectively, a decrease of ~~$66~~$59.3 million, or ~~13%~~8.6%. During the first ~~half~~nine months of fiscal year 2010, research and development expenses included stock-based compensation of $90.5 million related to the purchase of certain outstanding options that were tendered in March 2009. In addition, ongoing stock-based compensation expense decreased in the first ~~half~~nine months of fiscal year 2011 by ~~$5.4~~$4.1 million resulting from the cancellation of stock options pursuant to the tender offer in March 2009 and depreciation and amortization decreased by ~~$4.8~~$7.6 million as a result of fully depreciated assets. These decreases were offset by increases in compensation and benefits by ~~$13.3~~$20.0 million primarily related to ~~gr owth~~growth in headcount and increases in development spending by ~~$11.3~~$12.7 million.

Sales, General and Administrative

Sales, general and administrative expenses were ~~$98.9~~$83.8 million and ~~$73.9~~$86.0 million during the ~~second~~third quarters of fiscal years 2011 and 2010, respectively, ~~an increase~~a decrease of ~~$25.0~~$2.2 million, or ~~34%~~2.6%. This ~~increase~~decrease was primarily attributable to ~~estimated costs of $15.0~~$4.9 million ~~that we recorded during~~decrease in outside professional fees incurred in the ~~second~~prior year due to certain litigation and other matters and $3.8 million decrease in other expenses primarily due to renegotiated rents for our main campus and settlement proceeds received in third quarter of fiscal year ~~2011 for the pending settlement of~~2011. This decrease was offset by a ~~putative consumer class action lawsuit related to the weak die/packaging material set. In addition,~~$6.4 million increase in compensation and benefits ~~increased~~ by ~~$8.5 million~~ due to headcount growth in departments related to sales, general, and administrative ~~functions, and an increase in marketing expense of $3.0 million. These increases were offset by a decrease of $0.8 million in depreciation and amortization due to fully depreciated assets.~~functions.

Sales, general and administrative expenses were ~~$189.7~~$273.5 million and ~~$192.8~~$278.8 million for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively, a decrease of ~~$3.1~~$5.3 million, or 2%1.9%. ~~During~~The decrease was primarily attributable to $5.4 million decrease in outside professional fees and $3.0 million decrease in depreciation and amortization due to fully depreciated assets. Additionally, the first ~~half~~nine months of fiscal year 2010, sales, general and administrative expenses included stock-based compensation of $38.3 million related to the purchase of certain outstanding options that were tendered in March 2009. In addition, ongoing stock-based compensation expense decreased by $1.3 million resulting from the cancellation of stock options pursuant to the tender offer. Depreciation and amortization also decreased due to fully depreciated assets. These decreases were offset by increases in compensation and benefits of ~~$17.6~~$24.0 million primarily due to headcount growth in departments related to sales, general, and administrative ~~func tions,~~functions, and an increase in marketing expense of ~~$4.7~~$4.9 million. ~~During~~Additionally, during the second quarter of fiscal year 2011, we recorded a charge for estimated costs of implementing a settlement with the plaintiffs of a putative consumer class action lawsuit and another related estimated consumer class action settlement. As a result of the settlement in principle, another related estimated settlement, and offsetting insurance reimbursements, we recorded a net charge of $12.7 million to sales, general and administrative expenses.

We expect operating expenses to be approximately $300 million in the ~~third~~fourth quarter of fiscal year 2011.

Interest Income

Interest income consists of interest earned on cash, cash equivalents and marketable securities. Interest income was ~~$4.8~~$4.2 million and ~~$5.8~~$5.4 million in the ~~second~~third quarter of fiscal years 2011 and 2010, respectively, a decrease of ~~$1.0~~$1.2 million. Interest income was ~~$10.4~~$14.6 million and ~~$11.9~~$17.3 million for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively, a decrease of ~~$1.5~~$2.7 million. These decreases were primarily due to lower interest rates in the ~~second~~third quarter and first ~~half~~nine months of fiscal year 2011 when compared to the ~~second~~third quarter and first ~~half~~nine months of fiscal year 2010.

Other Income (Expense), net

Other income and expense primarily consists of realized gains and losses on the sale of marketable securities and foreign currency translation. Other ~~income,~~(expense), net of other ~~(expense)~~income was ~~$2.1~~($4.4) million in the ~~second~~third quarter of fiscal year 2011 compared to ($~~1.9)~~3.1) million of other (expense), net of other income in the ~~second~~third quarter of fiscal year 2010. The ~~fluctuation~~increase of ~~$4.0~~$1.3 million was primarily driven by ~~realized gains from investments~~an increase in foreign currency losses in the ~~second~~third quarter of fiscal year 2011.

Income Taxes

We recognized income tax ~~benefit~~expense (benefit) of ~~$28.1~~$18.7 million and ~~$15.0~~$3.8 million for the ~~second quarter~~three and ~~first half of fiscal year 2011,~~nine months ended October 31, 2010, respectively, and ~~$1.8~~$2.6 million and ~~$25.3~~$(22.7) million for the ~~second quarter~~three and ~~first half of fiscal year 2010,~~nine months ended October 25, 2009, respectively. Income tax ~~benefit~~expense (benefit) as a percentage of income (loss) before taxes, or our effective tax rate, was ~~16.6%~~18.1% and ~~81.6%~~4.4% for the ~~second quarter~~three and ~~first half of fiscal year 2011,~~nine months ended October 31, 2010, respectively, and ~~1.7%~~2.4% and ~~7.6%~~10.2% for the ~~second quarter~~three and ~~first half of fiscal year 2010,~~nine months ended October 25, 2009, respectively.

~~The expected~~

Our effective tax ~~benefit derived from our loss~~rate on income before tax for the first ~~half~~nine months of fiscal year 2011 atof 4.4% was lower than the United States federal statutory rate of 35% due primarily to income earned in jurisdictions where the tax rate is lower than the United States federal statutory tax rate ~~of 35% differs from our actual effective tax rate of 81.6% due to~~and favorable discrete events that occurred in the ~~first half~~nine months of fiscal year 2011 primarily attributable to the expiration of statutes of limitations in certain non-U.S. jurisdictions for which we had not previously recognized related tax benefits, offset by permanent tax differences related to stock-based compensation and the impact of statutory tax rates in non-U.S. jurisdictions that are less than the U.S. federal statutory tax rate of 35%.benefits. The U.S. federal research tax credit expired on December 31, 2009. We will recognize the tax benefit of the U.S. federal research tax credit if and when reenacted into law.

The expected tax benefit derived from our loss before tax for the first ~~half~~nine months of fiscal year 2010 at the United States federal statutory tax rate of 35% differs from our actual effective tax rate of ~~7.6%~~10.2% due primarily to permanent tax differences related to stock-based compensation ~~including with respect to our stock option purchase completed in the first quarter of fiscal year 2010,~~ and losses recognized in tax jurisdictions where no tax benefit has been recognized, partially offset by the U.S. tax benefit of the ~~United States~~ federal research tax credit. Our actual effective tax rate was also impacted by discrete events in the first nine months of fiscal year 2010, primarily related to our stock option purchase completed in March 2009 and the favorable impact from the expiration of statutes of limitations in certain non-U.S. jurisdictions.

Please refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for further information regarding the components of our income tax expense.

Liquidity and Capital Resources

	As of August 1, 2010			As of January 31, 2010			As of October 31, 2010			As of January 31, 2010
	(In millions)						(In millions)
Cash and cash equivalents		$	377.0		$	447.2		$	451.2		$	447.2
Marketable securities			1,395.5			1,281.0			1,536.0			1,281.0
Cash, cash equivalents, and marketable securities		$	1,772.5		$	1,728.2		$	1,987.2		$	1,728.2

	Six Months Ended						Nine Months Ended
	August 1,			July 26,			October 31,				October 25,
	2010			2009			2010				2009
		(In millions)						(In millions)
Net cash provided by operating activities		$	28.9	$	277.2			$	241.1		$	418.6
Net cash used in investing activities		$	(176.4)	$	(140.1	)		$	(340.4	)	$	(235.6	)
Net cash provided by (used) in financing activities		$	77.3	$	(31.1	)
Net cash provided by financing activities								$	103.3		$	13.8

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, original design manufacturers or 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~~or der to be included in our ~~custome rs’~~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 oper ating 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. As such, our financial results would suffer if for any reason our products do not continue to achieve widespread adoption by the 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, includ ing 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. During fiscal years 2009 and 2010 and the ~~second quarter of~~nine months ended fiscal year 2011 we recorded net warranty charges of $466.4 million against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set used in certain versions of our previous generation MCP and GPU products shipped after July 2008 and used in notebook configurations. Please see the risk entitled “We are subject to litigation arising from alleged defects in our previous generati on MCP and GPU products, which if determined adversely to us, could harm our business” for further information regarding this product defect.

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 included ~~4,011~~4,059 full-time employees as of ~~August 1,~~October 31, 2010 and ~~3,856~~3,864 employees as of ~~July 26,~~October 25, 2009, respectively. Research and development expenditures were ~~$210.6~~$204.5 million and ~~$192.9~~$197.9 million for the ~~second~~third quarter of fiscal years 2011 and 2010, respectively, and ~~$428.7~~$633.3 million and ~~$494.7~~$692.6 million for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively. Research and development expenses included stock-based compensation expense of ~~$14.5~~$14.1 million and ~~$13.3~~$12.9 million for the ~~second quarter~~third quar ter of ~~fis cal~~fiscal years 2011 and 2010, respectively, and ~~$29.1~~$43.3 and ~~$34.5~~$47.4 million for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively. Additionally, during the first ~~half~~nine months of fiscal year 2010, research and development expenses included stock-based compensation of $90.5 million related to the purchase of certain outstanding options that were tendered in March 2009. 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~~thes e expenses to increase ~~i n~~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 reduce 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 o ur 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. 60;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 pr oducts 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. Aggregate sales to customers in excess of 10% of total revenue for the ~~second~~third quarter and first ~~half~~nine months of fiscal year 2011, was ~~10%~~12% from one customer and ~~23%~~13% from ~~two customers~~one customer respectively. Aggregate sales to customers in excess of 10% ~~of total revenue for the second quarter~~were approximately 14% and ~~first half of 2010, accounted for approximately~~ 12% of our total revenue from one ~~customer.~~customer for the third quarter and first nine months of 2010. 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 ~~vol ume~~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 ~~36%~~34% of our accounts receivable balance from three customers at ~~August 1,~~October 31, 2010 and approximately 20% of our accounts receivable balance from two customers at January 31, 2010.

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 re venue 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 and other Americas. We generated ~~83%~~81% and ~~86%~~85% of our revenue for the ~~second~~third quarter of fiscal years 2011 and 2010, respectively, and 83% and 84% of our revenue for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively, from sales to customers outside the United States and other Americas. As of ~~August 1,~~October 31, 2010, we have offices in ~~fifteen~~15 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.

Conditions outside the control of our 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 volatile, and 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 capabilities. For example, because we rely heavily on TSMC to produce a significant portion of our s ilicon wafers, earthquakes, typhoons or other natural disasters in Taiwan and Asia could limit our wafer supply and thereby harm our business, financial condition, and operational results.

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 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 addition, we rely on stock-based awards as a 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.

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.

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 ~~extr eme~~extreme and could negatively impact our ability to pay the consideration with shares of ~~common~~c ommon 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.

All of our cash equivalents and marketable securities are treated as “available-for-sale” 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 decl ines 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.

At ~~August 1,~~October 31, 2010, we had ~~$1.77~~approximately $1.99 billion 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, 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 ~~August 1,~~October 31, 2010, we did not have any investments in auction-rate preferred securities.

The financial turmoil that affected the banking system and financial markets and the increased possibility that financial institutions might consolidate or go out of business 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 o n 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. 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 ~~August 1,~~October 31, 2010, our investments in government agencies and government sponsored enterprises represented approximately 60% of our total investment portfolio, while the financial sector accounted for approximately ~~28%~~32% of our total investment portfolio. Of the financial sector investments, over half are guaranteed by the U.S. government. Substantially all of our investments are with A/A2 or better rated securities. If the fair value of our investments in these sectors was to decline by 2%-5%, fair market ~~val ues~~v alues for these investments would decrease by approximately ~~$28-~~$32-$7079 million.

4951

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 fiscal years 2009 and 2010 and the second quarter of fiscal year 2011 we recorded net warranty charges against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set used in certain versions of our previous generation MCP and GPU products shipped after July 2008 and used in notebook configurations. During the second quarter of fiscal year 2011, we recorded aan additional charge to cover the estimated remaining customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set in certain versions of our previous generation media and communications processor, or MCP, and graphics processing unit, or GPU, products used in notebook configurations. The net charge amounted to $193.9 ~~milli on,~~million, of which $181.2 million was charged against cost of revenue. The extra remediation costs are primarily due to additional platforms from late failing systems that we had not previously considered to be at risk. Included in the charge are the estimated costs of implementing a settlement reached during the second quarter of fiscal year 2011 with the plaintiffs of a putative consumer class action lawsuit related to this same matter and the other estimated consumer class action settlement. As a result of this settlement, the other estimated settlement, and offsetting insurance reimbursements, we recorded a net charge of $12.7 million to sales, general and administrative expense during the second quarter of fiscal year 2011. Together with the $282.0 million net charge we had previously recorded for related estimated costs, this brings the total cumulative net charge to $475.9 million, of which $466.4 million has been charged against cost of revenue.

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. Testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing factors for these failures. 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 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 products.

In September, October and November 2008, several putative securities 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.

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 Inc. and with various parties related to our acquisition of 3dfx in 2001. Please refer to Note 12 of the Notes to the Condensed Consolidated Financial Statements 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 or prevent us from selling or importing certain of our products. 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 ex pensive 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 United States 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 2009 and in the beginning of 2010, President Obama’s administration ~~has~~ released various international tax proposals, ~~that~~some of which, if enacted into law would substantially reduce our ability to defer United States taxes on such ~~indefinitel reinvestment~~indefinitely reinvested non-United States earnings ~~eliminate or substantially reduce our ability to claim foreign tax credits,~~ and/or eliminate certain tax deductions ~~unti l~~until foreign earnings are ~~repatriated~~repatriate d 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.

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.

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~~arra ngements are not concluded on commercially reasonable ~~term s,~~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.

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 p ossibility 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��~~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.

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.

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 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. 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.

During fiscal year 2009, we 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 mitigating any environmental problems;

●·	adverse changes in the value of these properties, due to interest rate changes, changes in the 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.

5254

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 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.

We record compensation expense for stock options, restricted stock units and our employee stock purchase plan using the fair value of those awards in accordance with generally accepted accounting principles in United States of America, or U.S. GAAP. Stock-based compensation expense was ~~$24.6~~$25.2 million and ~~$25.4~~$23.0 million for the ~~second~~third quarter of fiscal years 2011 and 2010, respectively, and ~~$49.8~~$74.9 million and ~~$59.5~~$82.5 million for the first ~~half~~nine months of fiscal years 2011 and 2010, respectively, related to on-going vesting of equity awards, which negatively impacted our operating results. Additionally, in March 2009, we completed a cash tender offer to purchase certain employee stock options. A total of 28.5 million options were tendered under the offer for an aggregate cash purchase price of $78.1 million, in exchange for the cance llation of the eligible options. As a result of the tender offer, we incurred a charge of $140.2 million consisting of the remaining unamortized stock based compensation expense associated with the unvested portion of the options tendered in the offer, stock-based compensation expense resulting from amounts paid in excess of the fair value of the underlying options, plus associated payroll taxes and professional fees. We believe that expensing employee equity compensation will continue to negatively impact our operating results.

To the extent that 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 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. 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-te rm 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 12 of the Notes to Condensed Consolidated Financial Statements for further information regarding these laws uits. 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.

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. Although our management systems are designed to maintain compliance, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations. If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions. We could also be held liable for any and all consequences arising out of exposure to hazardous materials used, stored, released, disposed of by us or located at, under or emanating from our facilities or other environmental or natural resource damage.

Environmental laws are complex, change frequently and have tended to become more stringent over time. For example, the European Union and China are two among a growing number of jurisdictions that have enacted in recent years restrictions on the use of lead, among other chemicals, in electronic products. These regulations affect semiconductor packaging. There is a risk that the cost, quality and manufacturing yields of lead-free products may be less favorable compared to lead-based products or that the transition to lead-free products may produce sudden changes in demand, which may result in excess inventory.

There is also a movement to improve the transparency and accountability concerning the supply of minerals coming from the conflict zones of the Democratic Republic of Congo. New U.S. legislation includes disclosure requirements regarding the use of “conflict” minerals mined from the ~~Democratice~~Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such “conflict” minerals. The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of semiconductor devices. As a result, there may only be a limited pool of suppliers who provide conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices. Also, ~~sinc e~~since our supply chain is complex, we may face reputational challenges with our customers and other stockholders if we are unable to sufficiently verify the origins for all metals used in our products.

Future environmental legal requirements may become more stringent or costly and our compliance costs and potential liabilities arising from past and future releases of, or exposure to, hazardous substances may harm our business and our reputation.

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 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. Additionally, changes in existing accounting rules or practices, including the possible conversion to unified international accounting standards, could have a significant adverse effect on our results of operations or the manner in which we conduct our business.

5456

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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

During fiscal year 2005, we announced that our ~~Board of Directors, or~~ Board had 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, subject to ~~certai n~~certain specifications , to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2010. On March 16, 2010, our Board further authorized an extension of the stock repurchase program from May 2010 to May 2013.

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 Rule 10b-18 under the Securities Exchange Act of 1934, as amended, 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 and ~~six~~nine months ended ~~August 1,~~October 31, 2010, we did not enter into any structured share repurchase transactions or otherwise purchase any shares of our common stock. Through the first ~~half~~nine months of fiscal year 2011, 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 ~~August 1,~~October 31, 2010, we are authorized, subject to certain specifications, to repurchase shares of our common stock up to $1.24 billion through May 2013.

Additionally, during the ~~second~~third quarter of fiscal year 2011, we granted approximately ~~2.7~~2.9 million stock options and ~~2.9~~3.9 million restricted stock units under the 2007 Equity Incentive Plan. In March 2009, we completed a cash tender offer for 28.5 million options held by our employees. Please refer to Note 2 and Note 3 of the Notes to Condensed Consolidated Financial Statements for further information regarding stock-based compensation related to our March 2009 stock option purchase and related to equity awards granted under our equity incentive programs.

5658

ITEM 6. EXHIBITS

EXHIBIT INDEX

Incorporated by Reference

Exhibit No.

Exhibit Description

Schedule/Form

File Number

Exhibit

Filing Date

10.15*+

2007 Equity Incentive Plan

10.20+

2007 Equity Incentive Plan- Non Statutory Stock Option

8-K

0-23985

10.20

09/13/2010

10.21+

2007 Equity Incentive Plan- Incentive Stock Option

8-K

0-23985

10.21

09/13/2010

10.22*+

2007 Equity Incentive Plan-Restricted Stock Unit Grant Notice and Restricted stock Unit Purchase Agreement

10.31*+

Fiscal Year 2011 Variable Compensation Plan (as amended September 7, 2010)

10.32*

Memory Controller Patent License Agreement Between Rambus Inc. and NVIDIA Corporation, dated August 12, 2010

10.33*

Second Amendment to Lease, dated August 18, 2010 between NVIDIA Corporation and Sobrato Interests III for Building A

10.34*

Third Amendment to Lease, dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building B

10.35*

Third Amendment to Lease, dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building C

10.36*

Second Amendment to Lease, dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building D

31.1*

Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2*

Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1#*

Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934

32.2#*

Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934

101.INS*

XBRL Instance Document

101.SCH*+±

XBRL Taxonomy Extension Schema Document

101.CAL*+±

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*+±

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*+±

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*±

XBRL Taxonomy Extension Definition Linkbase Document

* Filed Herewith

+ Management contract or compensatory plan or arrangement.

# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

+± Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, are deemed not filed for purposes of section 18 of ~~th e~~the Exchange ~~Act~~Ac t and otherwise are not subject to liability under these sections.

Copies of above exhibits not contained herein are available to any stockholder upon written request to:

Investor Relations: NVIDIA Corporation, 2701 San Tomas Expressway, Santa Clara, CA 95050.

5759

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~August 30,~~December 7, 2010
	NVIDIA Corporation
By:	/s/ DAVID L. WHITE
	David L. White
	(Duly Authorized Officer and Principal Financial and Accounting Officer)

5860

EXHIBIT INDEX

Incorporated by Reference

Exhibit No.

Exhibit Description

Schedule/Form

File Number

Exhibit

Filing Date

10.15*+

2007 Equity Incentive Plan

10.20+

2007 Equity Incentive Plan- Non Statutory Stock Option

8-K

0-23985

10.20

09/13/2010

10.21+

2007 Equity Incentive Plan- Incentive Stock Option

8-K

0-23985

10.21

09/13/2010

10.22*+

2007 Equity Incentive Plan-Restricted Stock Unit Grant Notice and Restricted stock Unit Purchase Agreement

10.31*+

Fiscal Year 2011 Variable Compensation Plan (as amended September 7, 2010)

10.32*

Memory Controller Patent License Agreement Between Rambus Inc. and NVIDIA Corporation, dated August 12, 2010

10.33*

Second Amendment to Lease, dated August 18, 2010 between NVIDIA Corporation and Sobrato Interests III for Building A

10.34*

Third Amendment to Lease, dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building B

10.35*

Third Amendment to Lease , dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building C

10.36*

Second Amendment to Lease, dated August 18, 2010, between NVIDIA Corporation and Sobrato Interests III for Building D

31.1*

Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2*

Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1#*

Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934

32.2#*

Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934

101.INS*

XBRL Instance Document

101.SCH*+±

XBRL Taxonomy Extension Schema Document

101.CAL*+±

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*+±

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*+±

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*±

XBRL Taxonomy Extension Definition Linkbase Document

* Filed Herewith

+ Management contract or compensatory plan or arrangement.

+± Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. These interactive data files are deemed not filed or part of a registration statement or ~~pros pectus~~prospectus for purposes of sections 11 or 12 of the Securities Act, are deemed not filed for purposes of section 18 of the Exchange ~~Act~~Ac t and otherwise are not subject to liability under these sections.

Copies of above exhibits not contained herein are available to any stockholder upon written request to:

Investor Relations: NVIDIA Corporation, 2701 San Tomas Expressway, Santa Clara, CA 95050.

5961

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

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 : FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	a) Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~August 1,~~October 31, 2010 and ~~July 26,~~October 25, 2009		3
	b) Condensed Consolidated Balance Sheets as of ~~August 1,~~October 31, 2010 and January 31, 2010		4
	c) Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~August 1,~~October 31, 2010 and ~~July 26,~~October 25, 2009		5
	d) Notes to Condensed Consolidated Financial Statements		6
~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		27
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~		38
~~Item 4.~~	~~Controls and Procedures~~		39
	~~PART II : OTHER INFORMATION~~
~~Item 1.~~	~~Legal Proceedings~~		40
~~Item 1A.~~	~~Risk Factors~~		40
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39
Item 4.	Controls and Procedures		40
	PART II : OTHER INFORMATION
Item 1.	Legal Proceedings		41
Item 1A.	Risk Factors		41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		56
~~Item 6.~~	~~Exhibits~~		57
~~Signature~~			58
Item 6.	Exhibits		59
Signature			60

	Three Months Ended					Six Months Ended						Three Months Ended						Nine Months Ended
	August 1, 2010		July 26, 2009			August 1, 2010			July 26, 2009			October 31, 2010			October 25, 2009			October 31, 2010			October 25, 2009

Revenue	$	811,208	$	776,520		$	1,813,021		$	1,440,751		$	843,912		$	903,206		$	2,656,933		$	2,343,957
Cost of revenue		676,916		619,797			1,222,352			1,094,332			451,850			511,423			1,674,202			1,605,755
Gross profit		134,292		156,723			590,669			346,419			392,062			391,783			982,731			738,202
Operating expenses
Research and development		210,635		192,855			428,740			494,652			204,527			197,948			633,267			692,600
Sales, general and administrative		98,864		73,975			189,743			192,839			83,752			85,990			273,495			278,829
Total operating expenses		309,499		266,830			618,483			687,491			288,279			283,938			906,762			971,429
Loss from operations		(175,207)		(110,107	)		(27,814)			(341,072)
Income (loss) from operations													103,783			107,845			75,969			(233,227	)
Interest income		4,805		5,779			10,376			11,903			4,220			5,444			14,596			17,347
Other income (expense), net		1,355		(2,773	)		(884)			(2,753	)		(4,418	)		(3,082	)		(5,302	)		(5,835	)
Loss before income tax benefit		(169,047)		(107,101	)		(18,322)			(331,922	)
Income tax benefit		(28,086)		(1,799	)		(14,955)			(25,282	)
Net loss	$	(140,961)	$	(105,302	)	$	(3,367	)	$	(306,640	)
Income (loss) before income tax benefit													103,585			110,207			85,263			(221,715	)
Income tax expense (benefit)													18,723			2,630			3,768			(22,652	)
Net income (loss)												$	84,862		$	107,577		$	81,495		$	(199,063	)

Basic net loss per share	$	(0.25)	$	(0.19	)	$	(0.01)		$	(0.56	)
Basic net income (loss) per share												$	0.15		$	0.20		$	0.14		$	(0.36	)
Shares used in basic per share computation		572,764		546,639			569,971			544,463			577,323			551,283			572,420			546,737

Diluted net loss per share	$	(0.25)	$	(0.19	)	$	(0.01)		$	(0.56	)
Diluted net income (loss) per share												$	0.15		$	0.19		$	0.14		$	(0.36	)
Shares used in diluted per share computation		572,764		546,639			569,971			544,463			582,648			574,381			584,500			546,737

	August 1, 2010		January 31, 2010			October 31, 2010			January 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	377,003	$	447,221		$	451,174		$	447,221
Marketable securities		1,395,497		1,281,006			1,536,046			1,281,006
Accounts receivable, net		395,934		374,963			399,502			374,963
Inventories		434,227		330,674			377,812			330,674
Prepaid expenses and other		44,549		38,214			34,416			38,214
Deferred income taxes		8,752		8,752			8,752			8,752
Total current assets		2,655,962		2,480,830			2,807,702			2,480,830
Property and equipment, net		542,216		571,858			585,672			571,858
Goodwill		369,844		369,844			369,844			369,844
Intangible assets, net		118,879		120,458			112,642			120,458
Deposits and other assets		44,367		42,928			39,719			42,928
Total assets	$	3,731,268	$	3,585,918		$	3,915,579		$	3,585,918

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	280,041	$	344,527		$	324,770		$	344,527
Accrued liabilities and other		539,098		439,851			491,719			439,851
Total current liabilities		819,139		784,378			816,489			784,378
Other long-term liabilities		127,881		111,950			177,851			111,950
Capital lease obligations, long term		23,734		24,450			23,359			24,450
Commitments and contingencies - see Note 12
Stockholders’ equity:
Preferred stock		—		—			—			—
Common stock		665		653			671			653
Additional paid-in capital		2,329,456		2,219,401			2,386,257			2,219,401
Treasury stock, at cost		(1,473,656)		(1,463,268	)		(1,479,392	)		(1,463,268	)
Accumulated other comprehensive income		11,234		12,172			12,667			12,172
Retained earnings		1,892,815		1,896,182			1,977,677			1,896,182
Total stockholders' equity		2,760,514		2,665,140			2,897,880			2,665,140
Total liabilities and stockholders' equity	$	3,731,268	$	3,585,918		$	3,915,579		$	3,585,918

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

	Three Months Ended						~~Six~~Nine Months Ended
	~~August 1,~~October 31, 2010			~~July 26,~~October 25, 2009			~~August 1,~~October 31, 2010			~~July 26,~~October 25, 2009
Stock Options		(Using a binomial model)
Expected life (in years)		4.0-5.5			3.9-5.7			3.1-6.7			~~3.8-4.2~~		~~3.1-6.7~~		~~3.8-5.8~~3.6-5.8
Risk free interest rate		~~2.2-2.6~~1.9-2.7	%		2.5-2.8	%		~~2.5-2.7~~1.9-3.0	%		~~2.2-3.0~~	%	~~1.8-2.7~~1.8-2.8	%
Volatility		~~48-53~~46-47	%		~~55-66~~48-49	%		43-53	%		~~55-72~~48-72	%
Dividend yield		-			-			-			-

	Options Outstanding			Weighted Average Exercise Price		Options Outstanding			Weighted Average Exercise Price
Stock Options	(In thousands)			(Per Share)		(In thousands)			(Per Share)
Balances, January 31, 2010		58,348		$	11.30		58,348		$	11.30
Granted		2,705		$	17.26		5,690		$	13.73
Exercised		(8,142	)	$	8.19		(9,454	)	$	8.05
Cancelled		(919	)	$	11.92		(1,388	)	$	12.11
Balances, August 1, 2010		51,992		$	12.09
Balances, October 31, 2010							53,196		$	12.12

	RSUs			Weighted Average Grant-date fair value		RSUs			Weighted Average Grant-date fair value
Restricted Stock Units	(In thousands)			(Per Share)		(In thousands)			(Per Share)
Balances, January 31, 2010		7,489		$	12.28		7,489		$	12.28
Granted		2,931		$	17.43		6,805		$	13.50
Vested		(1,558	)	$	10.18		(3,216	)	$	11.74
Cancelled		(276	)	$	14.34		(509	)	$	13.97
Balances, August 1, 2010		8,586		$	14.36
Balances, October 31, 2010							10,569		$	13.15

Balances, January 31, 2010	44,022
Stock options:
Granted	(~~2,705~~5,690	)
Cancelled	~~919~~1,388
Restricted Stock Units:
Granted	(~~2,931~~6,805	)
Cancelled	~~276~~509
Balances, ~~August 1,~~October 31, 2010	~~39,581~~33,424

	August 1, 2010									October 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	$	462,808	$	1,883	$	(4	)	$	464,687	$	507,621	$	1,727	$	(4	)	$	509,344
Corporate debt securities		586,624		3,745		(66	)		590,303		662,886		4,312		(26	)		667,172
Mortgage backed securities issued by United States government-sponsored enterprises		143,850		4,372		(152	)		148,070		140,404		4,551		-			144,955
Money market funds		47,749		-		-			47,749		28,848		-		-			28,848
Debt securities issued by United States Treasury		341,394		1,778		(52	)		343,120		376,899		2,455		(8	)		379,346
Total	$	1,582,425	$	11,778	$	(274	)	$	1,593,929	$	1,716,658	$	13,045	$	(38	)	$	1,729,665
Classified as:
Cash equivalents								$	198,432								$	193,619
Marketable securities									1,395,497									1,536,046
Total								$	1,593,929								$	1,729,665
	January 31, 2010									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	$	492,628	$	3,606	$	(29	)	$	496,205	$	492,628	$	3,606	$	(29	)	$	496,205
Corporate debt securities		514,200		4,064		(44	)		518,220		514,200		4,064		(44	)		518,220
Mortgage backed securities issued by United States government-sponsored enterprises		162,692		3,674		(13	)		166,353		162,692		3,674		(13	)		166,353
Money market funds		94,340		-		-			94,340		94,340		-		-			94,340
Debt securities issued by United States Treasury		316,520		1,318		-			317,838		316,520		1,318		-			317,838
Asset-backed securities		17		-		-			17		17		-		-			17
Total	$	1,580,397	$	12,662	$	(86	)	$	1,592,973	$	1,580,397	$	12,662	$	(86	)	$	1,592,973
Classified as:
Cash equivalents								$	311,967								$	311,967
Marketable securities									1,281,006									1,281,006
Total								$	1,592,973								$	1,592,973

	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
	August 1, 2010		(Level 1)		(Level 2)		(Level 3)		October 31, 2010		(Level 1)		(Level 2)			(Level 3)
	(In thousands)								(In thousands)
Debt securities issued by US Government agencies (1)	$	464,687	$	-	$	464,687	$	-	$	509,344	$	-		$	509,344		$	-
Debt securities issued by United States Treasury (2)		343,120		-		343,120		-		379,346		-			379,346			-
Corporate debt securities (3)		590,303		-		590,303		-		667,172		-			667,172			-
Mortgage-backed securities issued by Government-sponsored entities (4)		148,070		-		148,070		-		144,955		-			144,955			-
Money market funds (5)		47,749		34,790		-		12,959		28,848		15,889			-			12,959
Total cash equivalents and marketable securities	$	1,593,929	$	34,790	$	1,546,180	$	12,959	$	1,729,665	$	15,889		$	1,700,817		$	12,959

Balance, beginning of period, January 31, 2010	$	12,959	$	12,959
Transfer into Level 3		-		-
Other than temporary impairment		-		-
Redemption of funds		-		-
Balance, end of period, August 1, 2010	$	12,959
Balance, end of period, October 31, 2010			$	12,959

	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

●	~~decreased demand and market acceptance for our products and/or our customers’ products;~~
●	~~inability to successfully develop and produce in volume production our next-generation products;~~
●	~~competitive pressures resulting in lower than expected average selling prices; and~~
●	· decreased demand and market acceptance for our products and/or our customers’ products; · inability to successfully develop and produce in volume production our next-generation products; · competitive pressures resulting in lower than expected average selling prices; and · new product announcements or product introductions by our competitors.

	August 1, 2010								January 31, 2010							October 31, 2010								January 31, 2010
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)															(In thousands)
Technology licenses		$	136,088	$	(55,291)		$	80,797	$	135,112	$	(48,337	)	$	$86,775		$	136,466	$	(58,795	)	$	77,671	$	135,112	$	(48,337	)	$	$86,775
Acquired intellectual property			75,339		(55,476	)		19,863		75,339		(49,838	)		25,501			76,264		(58,319	)		17,945		75,339		(49,838	)		25,501
Patents			31,048		(12,829)			18,219		19,347		(11,165	)		8,182			31,098		(14,072	)		17,026		19,347		(11,165	)		8,182
Total intangible assets		$	242,475	$	(123,596	)	$	118,879	$	229,798	$	(109,340	)	$	$120,458		$	243,828	$	(131,186	)	$	112,642	$	229,798	$	(109,340	)	$	$120,458