Microsoft Has Acquisition Deal With Nvidia

Microsoft logoRedmond's purchase option automatically kicks in if a third-party offers $3.4 billion or more for tablet chipmaker's shares.

Microsoft and Nvidia have an agreement in place that spells out terms relating to a possible acquisition of the graphics and mobile processor manufacturer, regulatory documents indicate.

The deal gives Microsoft the exclusive right to match any offer for 30% or more of Nvidia's outstanding shares by a third-party, according to an SEC filing reviewed by InformationWeek.

"Under the agreement, if an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock," Nvidia said in the filing, dated May 27.

The pact puts Redmond in a position to effectively veto attempts by any of its rivals to snap up Nvidia, which makes key components for the red-hot tablet market.

Nvidia's ARM-based Tegra chip is widely used by a number of major mobile device manufacturers. It's employed in Google Android-based tablets and smartphones from Samsung, Motorola, and others. Microsoft itself earlier this week demonstrated Windows 8 tablets running on the new, quad-core "Kal-El" version of Tegra.

There's also been rumblings over the past couple of years that Apple views Nvidia as a possible takeover target. Apple's A5 CPU for the iPad 2 uses ARM's system-on-a-chip design, an architecture in which Nvidia has considerable expertise as Tegra also relies on ARM.

Microsoft and Nvidia negotiated their acquisition deal as part of a broader arrangement under which Microsoft licensed Nvidia graphics chips for use in the Xbox entertainment and gaming console. The obscure pact is more than a decade old, but is apparently still in effect—even though Nvidia lost the contract to provide GPUs for the Xbox to ATI Technologies in 2003. ATI was later acquired by AMD.

Buried deep within a quarterly earnings report Nvidia filed last week was a warning to investors that a number of factors could derail an acquisition by a third-party. For one, Nvidia's board can issue new shares without stockholder approval. That means it could dilute the percentage available to a would-be acquirer. Also, its strict voting rules would make it difficult for a third-party to mount a hostile acquisition campaign by proxy.

Most notably, Nvidia said any change in control of the company could be delayed or prevented by "our agreement with Microsoft," according to the filing. At current valuations, the clause would kick in if a potential acquirer offered about $3.4 billion for 30% or more of Nvidia.

The deal could be extremely valuable to Microsoft. Any acquisition of Nvidia by a rival could deliver another setback to the software maker's significantly delayed tablet plans. Conversely, if Microsoft took control of Nvidia it could maintain a tighter grip on its supply chain for mobile components.

There are already signs Microsoft is looking to rein in the hardware stack around Windows. Company representatives have reportedly issued specific guidelines to OEMs who want to build tablets and other devices for Windows 8 in order to ensure a uniform experience for end-users and to ease headaches for developers. An outright buyout of some component suppliers, including Nvidia, could be the next logical step.

Microsoft officials declined to comment.

Tags: Microsoft, NVIDIA

Add comment

Your name:
Sign in with:
Your comment:

Enter code:

E-mail (not required)
E-mail will not be disclosed to the third party

Last news

Pokemon GO had the potential to net $1 billion a year
The report said that Hon Hai has invested about US$600 million in India
Market research firm IDC reports that in the third quarter of this year
Customers will only have to shell out 50% of the cost of their Galaxy S7 device
New flagship will launch in 2017
Patent hints at name of the upcoming Surface AIO
IBM, Globalfoundries and Samsung have chosen to use extreme ultraviolet (EUV) light to pattern transistors
Samsung Galaxy TabPro S - a tablet with the Windows-keyboard
The first Windows-tablet with the 12-inch display Super AMOLED
June 7, 2016 /
Keyboards for iOS
Ten iOS keyboards review
July 18, 2015 /
Samsung E1200 Mobile Phone Review
A cheap phone with a good screen
March 8, 2015 / 4
Creative Sound Blaster Z sound card review
Good sound for those who are not satisfied with the onboard solution
September 25, 2014 / 2
Samsung Galaxy Gear: Smartwatch at High Price
The first smartwatch from Samsung - almost a smartphone with a small body
December 19, 2013 /
HP Slate 7 is a 7-inch Android 4 Tablet PC with good sound
A cost-effective, 7-inch tablet PC from a renowned manufacturer
October 25, 2013 / 4

News Archive



Do you use microSD card with your phone?
or leave your own version in comments