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The company claims that revenue in the second quarter will reach between $875 million and $950 million, but that its profit margin would be narrower than previously predicted.

Problems with defective laptops graphics chips are causing higher than normal failure rates in notebooks from unspecified manufacturers, and the cost of repairing and returning these models is expected to reach between $150 and $200 million.

"Although the failure appears related to the combination of the interaction

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between the chip material set and system design, we have a responsibility to our customers and will take our part in resolving this problem," says Nvidia president Jen-Hsun Huang.

"This has been a challenging experience for us. However, the lessons we've learned will help us build far more robust products in the future.

As for the present, we have switched production to a more robust die/package material set and are working proactively with our OEM partners to develop system-management software that will provide better thermal management to the GPU," continues Huang.

The company has also been forced to slash the price of some of its chips as AMD makes a concerted push into the low-end notebook graphics market.

The release of AMD's 4850 and 4870 cards have also had an impact on Nvidia's sales. The cards performance rivals that of Nvidia cards, but at around a third of the price.