NVidia Eyes Playstation 3?
Thanks to CNN for their article discussing nVidia's possible overtures to Sony regarding the PS3. The piece points out that "ATI beat out nVidia earlier this month for the right to provide the graphics chip for Microsoft's next game machine. That followed ATI's March announcement that it had struck a technology development deal with Nintendo." It then quotes analyst Erach Dasai as suggesting: "The reality is nVidia is not sitting in a vacuum. They are in discussions with Sony for the PS3", although elsewhere, the article cites "...cost concerns [for developing graphics chips out-of-house], combined with Sony's do-it-ourself history, that has some other analysts a bit more skeptical that nVidia will be able to win a PS3 contract."
"Why did Microsoft strike a deal with ATI and not just buy the company?"
Why spend the extra money instead of just licensing a new chip? Microsoft is a business trying to make money, they're not the Borg.
"Derp de derp."
Its very little to do with size. Sony have had a long tradition of circuit design, they were one of the first licensees of the transistor, and that was back in the 40s I think. Microsoft have been writing software for a few years now, but their hardware experience is limited to mice and keyboards and only recently the x-box.