In one of the most dramatic representations yet of the downturn in the global economy, GPU maker Nvidia's entire fiscal 2009 dove deep into the red ink, turning a banner year into a red flag in just one quarter.

If it hadn't have been for the economy, Nvidia's year would actually have turned out okay. But a $147.6 million loss for just the quarter ending last January -- its fiscal Q4 2009 -- dipped the entire year into the red to the tune of $30.

"Our sell-in was less than the channels sell-out," reported Nvidia CFO Marvin Burkett yesterday (our thanks to Seeking Alpha for the transcript). "We believe current channel inventory is only slightly more than one month, down from almost three months last quarter. ASPs [average selling prices] across the board were relatively unchanged from the prior quarter, so the decline in revenue was primarily a reflection of the decline in unit volume."

In other words, builders aren't buying, in a very big way, and it's builders who constitute the bulk of Nvidia's customers. As a result, fiscal 2009's total year profit is down 37% over fiscal 2008, due in major part to the last quarter reaping 60% less revenue over the previous year's Q4, and gross profit (before expenses) that's down annually almost three-fourths.

The cause: Somehow, you knew Nvidia would find a way to blame Intel. This time, it's the rise of the netbook -- a PC form factor that doesn't need, or have room for, discrete graphics chips.

"All of a sudden the Atom processor has driven a dramatic surge of netbook PCs," stated Nvidia CEO Jen-Hsun Huang yesterday. Echoing language from Microsoft last week, Huang went on, "Some people call it a netbook PC but the fact of the matter is they're inexpensive PCs. And during difficult times many people who still need to have a PC or would like to have a PC now has a very inexpensive version to buy. And so the demand for Atom PCs and these net books if you will has really, really surged.

"I think what's going to happen is that the low end part of the marketplace is going to cannibalize the mid-range part of the market," Huang continued. "And people who want performance still will go for performance. The netbook will hardly serve their needs. But for a lot of people in the mid-range part of the marketplace the net book is clearly, clearly going to disrupt that."

Huang's solution to the problem involves two phases, one of which employs an if-you-can't-beat-them-join-them approach. Nvidia will be putting more emphasis on its Ion graphics chipset introduced in December, in an effort to leverage the success of Atom to create a platform that rests on Atom.

The second involves further investment of resources in departments other than conventional discrete GPU cards, with one of them being its own Tesla "desktop supercomputer." It was launched in June 2007, but Nvidia executives reported yesterday that the system "continues to ramp," without providing much further detail.

Huang also reported "some progress" with Tegra, the company's planned low-power processor for mobile computing devices (we don't want to call them "netbooks" just yet). It's still planned for shipment in the second half of the calendar year, though analysts appeared skeptical yesterday that such devices would have a significant impact on margins -- a number which, for now, is negative.

While Nvidia touted its innovative new designs, customers shouldn't expect to see very many instantiations of them in the coming quarter. As CFO Burkett found himself admitting yesterday, "We have significantly cut back our [wafer] starts. I don't think that's a surprise to anyone. When you have this inventory level we don't need a lot more wafers."