Nvidia shares dropped significantly on news of lower sales, with the double whammy of a estimated $200 million charge to replace defective laptop chips. Nvidia was already struggling to compete with AMD's subsidiary ATI, plus an encroachment on Nvidia's bread and butter graphics processors by industry leader Intel. A soft economy isn't helping much, either. The warranty cost for the chips is especially galling; Nvidia says the chips were OK but were damaged by their packaging material. Ouch.

In the past six weeks, prices of graphics cards for personal computers with Nvidia's 9800GTX chip have fallen to $200 from as much as $275, said Blake Fischer, an analyst with Stifel Nicolaus & Co. in Dallas. He recommends buying the shares, which he doesn't own.

Nvidia also said it will be less profitable than previously estimated, without providing details. In May, the company forecast that gross margin, the percentage of sales left after production costs, would widen 1 percentage point from 44.6 percent in the first quarter. The second quarter ends July 31.

I predict the "less profitable than previously suggested" number will turn out to be... $200 million. Just a hunch. Blake Fischer is not alone in his assessment; other analysts quoted in the article also see the depressed share price as a buying opportunity, and like Nvidia's long term prospects. Just not their packaging.