Microsoft and Nvidia Have Acquisition Pact

An anonymous reader writes "Infoweek is reporting that Microsoft has obtained the exclusive right to match any buyout offers for Nvidia. The obscure pact was uncovered in SEC documents, and apparently stems from Microsoft's licensing of Nvidia chips for the Xbox. But its real value now lies in the fact that Nvidia has become a major player in tablet chips, including chips for Windows 8 slates."

Comments

I say the oppsite

[Osgeld]

when XBOX was using nvidia chips (thats XBOX1, 360 uses an ATI system) Nvidia was a smaller company in a fairly new and fairly niche industry catering JUST to game geeks.

its not the same playing field in 2011

Re:I say the oppsite

[sortius_nod]

Yeh, that's bullshit.

Nvidia were already the premier graphics solution for professionals, they already had an established market and were making a fortune at the time selling gaming & professional chips. Microsoft did nothing other than guarantee sales of chips.

While I don't like Nvidia cards, they were already huge prior to the Xbox, so sitting there and saying they were a "niche industry" is just patently false. Unlike ATi they didn't get sold off to a processor maker. Maybe that's something to keep in mind. They didn't get a market position like that from the xbox (considering the sales numbers of xbox vs ps2), the 360 is the MS console that took off, and look who makes the chips for it.

This just seems like a typical corporate deal. It's not unusual, MS were relying on Nvidia not being sold to the competition and pricing MS out of making the Xbox. No company would be stupid enough to leave out any clauses preventing or delaying sale of a supplier to a competitor when inking such a major deal. It was major for MS, but really, Nvidia could have taken or left it.

Re:I say the oppsite

[datapharmer]

Ever heard of CAD? What about GPU assisted computing? Physicists, mathematicians, cryptographers, video editors and engineers all need powerful graphics cards, not just gamers and graphics designers.

Soo, if I wanted to bankrupt Microsoft

[mozumder]

I just go to nVidia and tell them I'm going to buy them out for $10 trillion?

Re:Soo, if I wanted to bankrupt Microsoft

[Dragonslicer]

Presumably, Nvidia's side of the agreement is that if Microsoft chooses to match an offer, Nvidia has to accept Microsoft's offer instead of whoever else made an offer.

Re:Soo, if I wanted to bankrupt Microsoft

[Local ID10T]

I just don't see the point of the pact if it doesn't really require anyone to do anything.

It requires Nvidia to give Microsoft a chance to buy them out before they sell to someone else. It is generally known as a right of first refusal.

Re:Soo, if I wanted to bankrupt Microsoft

[recoiledsnake]

Presumably, Nvidia's side of the agreement is that if Microsoft chooses to match an offer, Nvidia has to accept Microsoft's offer instead of whoever else made an offer.

That doesn't make any sense. All this agreement will do is turn it into a bidding war instead of a silent and secret deal behind doors.

Re:Soo, if I wanted to bankrupt Microsoft

[Anonymous Coward]

At the time Microsoft wanted to assure their supply line. If Sony bought NVidia they could decide that they no longer wished to make certain products, like the chips used in the XBox. MS basically reserved the right to buy NVidia if anyone else tried to aquire them (which would also give them the rights to the chips as well making them then able to farm out the fabrication to another company)

Re:Soo, if I wanted to bankrupt Microsoft

[Locutus]

so Nvidia signed an open pact without any regard to Microsoft products using Nvidia chips? Just how many years had Nvidia's lawyers completed before they signed this kind of agreement with no less than Microsoft? Can we call them lawyers if they hadn't passed the Bar yet?

all I'll say is what idiots. Maybe they used to be Sun Microsystem Java licensing lawyers.

LoB

Re:Soo, if I wanted to bankrupt Microsoft

[Billly Gates]

Business 101, when you have a big customer like Ms or Walmart you make amends as to not loose such a huge opportunity and give a competitor like ATI the deal. Suppliers hate things like bulk discounts too and it hurts mom and pop shops. But a smaller profit margin and annoying clauses are better than nothing. There are laws about insider trading which limit public knowledge about aquisitions. We didnt know about the skype deal until after it was locked by MS.

Re:Soo, if I wanted to bankrupt Microsoft

[Bacon Bits]

Just how many years had Nvidia's lawyers completed before they signed this kind of agreement with no less than Microsoft?

More than you, clearly.

"We agree that you will have tens of millions of sales of your product for which we will pay you, and should anyone try to buy your company, we can offer to buy you out for the same price. So if you get one offer to be bought out, you pretty much get two."

You know what happens when a company is bought out? The executives, lawyers, and owners/shareholders make a boatload of cash. This was basically win/win for nVidia (unless they had really good prospects or wanted to be bought out by another company) while assuring MS that they won't lose the source of their chips to a competitor without a chance to stop it. All this does is discourage other parties from making lowball offers. All MS would do is hold on to nVidia until they no longer needed the chips, then spin it off.

Re:Soo, if I wanted to bankrupt Microsoft

[whoever57]

That doesn't make any sense. All this agreement will do is turn it into a bidding war instead of a silent and secret deal behind doors.

Actually, no. It will have the reverse effect -- no bids. There is no incentive to bid because MS only has to match your bid and then MS wins. The deck is stacked heavily in MS's favor, so why bid at all?

This deal reduces the acquisition value of nVidia because it will put off many companies from bidding.

Re:Soo, if I wanted to bankrupt Microsoft

[mikael]

Some history on the 3D graphics chip industry; SGI sold a good number of their 3D technology patents to Microsoft. A good number of SGI engineers went to work for Nvidia. NVidia also acquired patents and technology from 3Dfx (there was a patent battle around the late 1990's), which led to 3Dfx merging with NVidia. With all that patent cross-licensing, it would be a natural consequence.

Nvidia made Nforce Pro chips for severs / workstat

[Joe_Dragon]

Nvidia made Nforce Pro chips for severs / workstations as well some good intel / amd chipsets. Also made good intel chipsets before Intel locked them out.

MS is not a hardware company

[Darkness404]

Microsoft is not a hardware company and would most likely kill nVidia. Out of Microsoft's major hardware projects, the 360 was a complete failure in the hardware department, Surface, while neat is hardly a gamechanger, and the first Xbox had a major ergonomics flaw (I mean, were the controllers designed for giants or what) at first, and the internals were pretty much just generic PC hardware.

Re:MS is not a hardware company

[im_thatoneguy]

I prefer the Duke controller over the S model, or the new 360 for that matter. Just because you have tiny girl hands does not mean that some of us don't have normal sized hands.

I loved the original Xbox controller. The new one is way better than the S controller which was unusable in my opinion but there's still nothing that compares to the ergonomics of the original. I have little tiny child sized hands but it was still incredibly comfortable.

Re:MS is not a hardware company

[gman003]

The first Xbox ... internals were pretty much just generic PC hardware.

Not even that. For a gaming rig, the Xbox internals were CRAPPY. The processor was basically a Celeron 733, only 64MB of RAM, and what was essentially a GeForce 4 Ti 4200 (the lowest-end of nVidia's DirectX 8 cards).

Re:MS is not a hardware company

[Walzmyn]

-Microsoft is not a hardware company

I disagree. I have a GREAT Microsoft mouse. In fact, I consider it to be much more valuable than the several pieces of their software I had to delete off my hard drive when I originally bought my computers.

Re:MS is not a hardware company

[Darkness404]

Microsoft purchases a -lot- of companies and the vast majority of them end up scrapped and dead. nVidia makes hardware, not software, and most of the hardware projects made/sold by Microsoft have either failed or had major design flaws.

If Microsoft acquires nVidia, it isn't going to be nVidia that has the final say, instead, it will be Microsoft, since Microsoft has historically made crappy hardware and no matter how many companies it has acquired (currently well over one hundred) Microsoft's way of doing things has remained the same.

Citation needed.

When was the last time, or first time, have you ever seen a Microsoft Surface? The system is still prohibitively expensive, and even all the cool features have yet to be implemented in Windows/Windows Phones despite Surface being about 3 years old by now and there has been 1-2 Windows phone releases since then and a major Windows desktop release since then.

Tegra 2 is a dual-core ARM-based SoC easily capable of running Windows 8 with all UI acceleration enabled. NVIDIA produces chips already proven to power the NT kernel neatly (the original Tegra powered the Zune HD), so clearly it works. Microsoft just wants to make sure they don't get undermined by an NVIDIA buyout.

Yes, nVidia makes good hardware, but if nVidia was bought by Microsoft, it is entirely likely that nVidia would fail, much like just about every other company Microsoft has bought out.

Re:MS is not a hardware company

[the linux geek]

Slashdot inexplicably submitted instead of previewing. Here's the source:

http://blogs.msdn.com/b/xboxteam/archive/2006/02/17/534421.aspx

Re:MS is not a hardware company

[furiousgeorge]

The PS3 has 512MB of memory. 256 system memory, 256 video memory.

Re:MS is not a hardware company

[Bing Tsher E]

Every version of NT 4.0 is on the official Windows NT disk. There may be 'truncated' third party versions of the NT 4.0 CD. Mine is a Compaq OEM version, and every NT 3.x version I have ever seen also includes the alternative architectures.

I have installed the i386, Alpha, and PPC versions of NT 4.0 off that single CD.

Re:MS is not a hardware company

[Kalriath]

"The Linux Geek" provided a source saying you're wrong, on a Microsoft owned domain, written by a member of the Xbox engineering team, and they're the one spreading the bullshit? Your source by comparison is as credible as The Enquirer.

Re:Ugh

[Anonymous Coward]

This pact is more than a decade old, and you're worried about them getting "too much in bed with microsoft" because you now know about this deal? Paranoid much??

Re:Anti-competitive little shits

[Sprouticus]

I'd say RTFA, but this is slashdot.

This is a devensive measure by MS in case Sony or Nintendo (or some other company) decided to buy NVidia and then screw over MS in a effort to sink the XBox. Not saying it would happen, but that is the idea.

MS does not want to buy NVidia, they just want to be sure one of their few revenue streams doesnt go away.

nVidia Linux driver

[MrKaos]

I'm certain Microsoft will maintain the development of the excellent proprietary drivers for Linux should they ever acquire nVidia.

Re:nVidia Linux driver

[rahvin112]

Excellent? You must be using different drivers than me. They haven't been "excellent" in quite a while.

Haven't used ATI's open source driver on their newer hardware, but I can tell you at the rate they are making progress nVidia is going to be in a world of hurt on the Linux front pretty soon.

Re:Ugh

[Lanteran]

Paranoid much??

Yes.

Re:Anti-competitive little shits

[symbolset]

Since nVidia hasn't made XBox chips since 2003 and the ownership of the company is no longer material to Microsoft this contract should have been terminated long ago. No doubt making this commitment permanent after the companies part ways was not nVidia's intent. That Microsoft retains this right is just part of the Faustian bargains available there. If you dance with the devil, you will pay his fee. I wonder how many similar contracts are lingering out there...

Re:Chair game.

[ColdWetDog]

M$ is acquiring / making deals with companies which are key to Linux -- related to Gnome (Novell), KDE & Qt (Nokia), Skype (ok, it was weak but could become important) and Nvidia (the _only_ hardware recognized as allowing video h/w in Linux) -- I don't whether they want to suffocate ("cut the oxygen of") Linux (actually, they probl think "Ubuntu") or they plan to get cozy to pinguins as a last resort against Apple.

It's getting me nervous.

If that's the way you think about things, you should be getting nervous. And it doesn't have anything to do with Microsoft.

Linux gaming may suffer

[Turmoyl]

This may not bode well for Linux gaming. For the 10 years I've tried them ATI cards (more specifically their drivers) have never worked well in Linux. If M$ gets a hold of Nvidia I wouldn't be at all surprised to see NVidia's support for Linux falter as well.

EU Antitrust

[Tapewolf]

I imagine that the EU would probably block such an acquisition, since the Tegra is quite widely used on Android tablets and some phones as well IIRC. Their significance in the graphics card market and its impact on Linux and the Mac is unlikely to escape notice either.