NVIDIA Wants to Give You $1 Billion

In a press release Thursday, graphics chip specialist NVIDIA (NASDAQ: NVDA  ) announced it will return an additional $1 billion to shareholders this fiscal year in the form of dividends and share buybacks.

If this seems like a lot for a company whose entire market capitalization is under $8 billion... well, that's because it is.

Is $1 billion overkill?
For those of you keeping track, however, you know this is pocket change for NVIDIA, which had $3.73 billion in cash and no debt on its balance sheet at the end of its most recent quarter. In fact, that's one reason I singled out NVIDIA just a few days ago as one of three solid dividend stocks any investor could be happy to own.

Thursday's announcement, however, ups the ante, as it represents a massive vote of confidence that the puzzle pieces are in place for their long-term oriented efforts to succeed. As CEO Jen-Hsun Huang elaborated, "NVIDIA's strategies are gaining traction in the market and make us confident in our ability to continue generating cash." 

Sure enough, as Huang later mentioned, the company also repurchased $100 million in NVIDIA stock during its 2013 fiscal fourth quarter. The new buybacks, then, are an expansion of its existing efforts to reward investors' patience while its plans play out.

So what do those plans entail? Here are a few of the biggies:

Renewed mobile push
As I noted in February, the company has already seen more design wins with its yet-to-be-released Tegra 4 processor than the Tegra 3 had in total.

If that weren't enough, even more exciting was the unveiling of the Tegra 4i, a product NVIDIA jointly designed with microprocessor specialist ARM.

For its part, the Tegra 4i is NVIDIA's first fully integrated 4G LTE mobile processor. More importantly, by at least one reputable account, it appears to significantly outperform current competing chips from industry leader Qualcomm, whose management also curiously professed confidence of their own by raising its dividend just a few days ago.

Even so, thanks to NVIDIA's $367 million acquisition in 2011 of baseband specialist Icera, the Tegra 4i boasts another advantage in its integrated, reprogrammable soft modem, which should go a long way toward increasing its value proposition for device makers.

Smaller, faster, stronger
Next, NVIDIA also recently unveiled its high-level plans for the next two Tegra iterations through 2015, including a ridiculously efficient system-on-a-chip dubbed "Denver." When all is said and done, the resulting product behind Denver will be the "world's first high-performance 64-bit ARM processor," marking a 100-fold increase in performance over the first Tegra chip in just five years' time.

Cloud computing, NVIDIA-style
NVIDIA has also developed a number of cloud computing solutions which utilize its GRID computing technologies for graphics virtualization. Most recently NVIDIA unveiled a localized version of its world-class enterprise graphics solution with the rack-mounted Visual Computing Appliance, specifically aimed at small and medium-sized businesses.

In addition, the company is staying close to its roots with the pending launch of its GRID-enabled mobile gaming device, dubbed Project Shield, which should serve as an interesting first step to convincing consumers around the world of the viability of NVIDIA's long-term vision for gaming, sans those cumbersome consoles.

Foolish final thoughts
True to form, NVIDIA continues to show the world it has no intentions of resting on its laurels, and I'm convinced this move to return additional capital to shareholders bodes well for NVIDIA stock down the road.

Still, while NVIDIA was ahead of the curve launching its mobile Tegra processor, investing gains haven't followed as expected, with the company struggling to gain momentum in the smartphone market. The Motley Fool's brand-new premium report examines NVIDIA's stumbling blocks, but also homes in on opportunities that many investors are overlooking. We'll help you sort fact from fiction to determine whether NVIDIA is a buy at today's prices. Simply click here now to unlock your copy of this comprehensive report.


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