Why Did NVIDIA Create Shield?

NVIDIA took the wraps off Project Shield, its new portable gaming device, on Sunday. The next day, the company promptly saw its shares fall in reaction to the device. In the following video, Austin Smith and senior technology analyst Eric Bleeker discuss one of the most surprising products of this year's Consumer Electronics Show.

Shield is troubling because NVIDIA has seen R&D expenses rise by 69% since its fiscal year that closed in January 2008 while revenue has been flat. That R&D increase is largely a result of the company's diversifying into new areas such as mobile processors. As a company in a challenged PC market, NVIDIA would naturally see its R&D exceed sales as it looked to new opportunities and markets. However, Eric worries that the device is a distraction from more pressing areas and an example of R&D inefficiency and bloat. Shield by itself won't make or break NVIDIA, but all the same, its chances of kickstarting more popular graphically intensive games in mobile gaming look remote at best. To see Eric's full thoughts, watch the following video.

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The article Why Did NVIDIA Create Shield? originally appeared on Fool.com.

Austin Smith has no position in any stocks mentioned. Eric Bleeker, CFA, owns shares of NVIDIA. The Motley Fool recommends NVIDIA and is short Sony. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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