Lower than expected sales of the Xbox -- and lower sales forecasts -- led Microsoft to ask component suppliers to adjust shipments accordingly. As Xbox chips sales account for about 20 percent of Nvidia's revenue, any decline in orders from Microsoft has a significant impact on Nvidia's bottom line.
Microsoft and Nvidia are in a legal dispute as to the pricing of the chips that Nvidia produces. Nvidia has stated that losing the dispute would force the company to sell its chips to Microsoft at a loss.
