Intel Needs NVIDIA Again

Intel (Nasdaq: INTC  ) and NVIDIA (Nasdaq: NVDA  ) are about to settle their licensing differences and smoke a nice peace pipe, according to a Bloomberg report. Citing the usual unnamed sources and a report from respected chip analyst Uche Orji of UBS, Bloomberg posits that the heated exchange of mutual lawsuits will end with Intel possibly paying NVIDIA a settlement and signing an extensive cross-licensing contract. In another potential sign of an impending settlement, the two companies have canceled a court date scheduled for next week.

Putting a stop to this tussle will let NVIDIA back into the chipset design game, and should also give Intel more access to NVIDIA's advanced graphics technologies. That's an area where Intel's own efforts have been found sorely lacking against leading technologies from NVIDIA and Advanced Micro Devices (NYSE: AMD  ) .

Is Intel rushing to make this move in order to counter the threat from AMD's highly capable Fusion products? Building complete systems into one chip, or at least an integrated set of chips, is all the rage. Witness AMD's long-planned move into this space, as well as by the plethora of mobile chipsets made by NVIDIA, Qualcomm (Nasdaq: QCOM  ) , or Texas Instruments (NYSE: TXN  ) that fit this bill. Augmenting Intel's powerful central processors with NVIDIA's graphics know-how would be a strong antidote to a sea of competitive pressures on Intel.

I'm inclined to believe this report, because Intel needs to partner up with NVIDIA rather than destroy it. An outright acquisition would likely fail on antitrust grounds, but a cross-licensed partnership would be just the ticket. NVIDIA gets less out of the suggested deal than Intel does, so a sorely needed cash payment to make up the difference should be on its way.

Add Intel, NVIDIA, and AMD to your Foolish watchlist to follow this three-way drama just a little bit closer.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Intel is a Motley Fool Inside Value selection. NVIDIA is a Motley Fool Stock Advisor pick. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Qualcomm and Texas Instruments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (8) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 01, 2010, at 2:50 PM, austec wrote:

    INTEL is in an awkward position of making peace with Nvidia due to 3 Major management failures during the last decade:

    1. Intel believed that extensive lobbying ("bribes") in Washington would keep the FTC on Intel's side of the ring indefinitely.

    2. Intel's management completely underestimated the importance of the GPU in future computing applications (probably as a result of believing that their monopolistic behavior would go unchecked forever).

    3. Otellini distracted (as exemplified in NY AG and European Commission court evidence) all of Intel's executives by having them engage in "practice raids" - where they would test their ability to hide monopolistic business evidence.

    4. Intel's executives were more focused on how to secretly break antitrust laws than on innovating.

    So.. Now Intel has to wear the wife-beater, and Nvidia gets to play the loved and abused wife. How funny. Corporate law-breaking and love drama!

  • Report this Comment On December 01, 2010, at 2:51 PM, austec wrote:

    er,,, I mean 4.

  • Report this Comment On December 01, 2010, at 4:50 PM, TheBlindCat wrote:

    Anders,

    I like that you included a link to your previous article, "What Will It Take to Save NVIDIA?".

    I especially like the comment:

    "I'm not interested in nVidia at any price until top management is turned over and execs are brought in who can get out of the techhead mentality".

    Maybe John Sculley is available?

  • Report this Comment On December 01, 2010, at 6:21 PM, TEBuddy wrote:

    Nvidia needs to lose its attitude and create something original as well, to define a product of their own. AMD has come out with loads of innovations in graphics, Nvidia has capitalized on them in the past with GDDR3 VRAM. Nvidia's only advantage is when software developers make software that only runs on Nvidia graphics.

    Nvidia has also been a poor sport when paying up royalties or licenses to smaller companies I guess it thinks it can bully. Now they dont want to pay Intel, no new story there. Intel did nothing wrong to Nvidia, they offered them the ability to license the technology. AMD had been paying royalties to Intel for the longest time until their recent settlement, seeing as Intel uses a lot of AMD's technology as well.

  • Report this Comment On December 02, 2010, at 8:11 AM, rav55 wrote:

    The simple observation is that with AMD Fusion and Intel Sandy Bridge cpu/apu the chipset is a thing of the past. In fact it is likely that the PCI bus will disappear. On-die graphics will make discrete graphics cards expensive to develop as the middle price point is eliminated with on-die graphics. In fact the netbook and laptop gpu will also disappear as low power APU's replace both CPU and integrated graphics.

    In addition, the use of GPU's for supercomputing is going to take a huge hit as the sheer volume of GPU's will now diminish the "subsidy" that HPC receives through the graphics market.

    Nvidia can not be feeling the love right now. Nvidia has lost the AMD chipset market as well as the Discrete graphics market for AMD cpu's. I used to be an Nvidia brand user but ATI is now top dog in the Pofessional GPU market and with the release of the Radeon 6900 series AMD/ATI will again achieve the lead in discrete graphics as well.

    And now the word is that Microsoft XBOX will be using AMD Fusion..... it does not look good for Nvidia.

    http://www.kitguru.net/software/gaming/jules/microsoft-choos...

  • Report this Comment On December 02, 2010, at 11:32 AM, frankis wrote:

    My comment is that in the long run Microsoft will buy Intel and Nvidia, to have an exclusive platform for their software. And Apple has already considered doing the same by buying AMD where they get their own CPU's and Graphics technology in one deal.

    Thus an Apple/AMD deal I predict is less than a year away. Each will use the x86 or x64 instruction set as the basic processing structure but will go off their own way in special instructions or an x128 that will improve their operating system efficiency. Legacy software will slowly disappear and each will have their unique approach, allowing great improvements and less expensive hardware, especially Apple's.

    Remember how many auto companies there were in the early 1900's and how few survived. As the strongest bought their rivals and look alikes. Ponder this, if you'd like, it just makes too much sense! And thus there is a possibility it will happen later than sooner but it will as sure as Basic is the forerunner of Java. They will be the Ford and GM of our times, fighting for customers in the business world as well as the casual user.

  • Report this Comment On December 02, 2010, at 1:02 PM, TMFRhino wrote:

    rav55,

    Interesting article, but not sure where the headline comes from. It sounds like intuition says they'll go with AMD (due to strained NVDA relations and past INTC difficulties), but they didn't have any sources saying its a done deal or anything.

  • Report this Comment On December 03, 2010, at 8:43 AM, rav55 wrote:

    The Kitguru or Tweaktown sites seem to be the originators of this storey.

    And it does make sense as MicroSoft is currently using AMD/ATI R600 gpu with DirectX10. Clearly the next generation would want DirectX11 as that is Microsofts baby. Nvidia would be ruled out due to compatibility issues with current games.

    Since any on-die CPU/GPU or APU would run rings around the current crop of budget CPU and discrete graphics GPU the only alternative would be the Fusion APU. MSoft is already buying the R600 GPU the Fusion APU would be a more cost effective alternative, a 2 for 1 and no chipset and lower power consumption should the xbox want to be portable.

    Regarding Intel buying Nvidia: I used to think the same thing however a Rueters or Wall Street journal article pointed out that such a sale would likely be disallowed due to anti-trust concerns. Intel already has too be a piece of the pie. What would be more likely be what is now happening, Intel and Nvidia get into bed swap some licenses and live happily ever after.

    As for Apple buying AMD, well that would be good for the AMD stockholders but I'm not sure that it would be good for the consumer. AMD keeps Intel honest and I'm not sure that Steve Jobs independence streak would allow him much concern for the x86 lineage. But as a long term AMD admirer and stockholder I would have to welcome a purchase by Apple but with reservations. I think though that a purchase by Oracle would be better all around. Oracle's market is highend servers NOT techno-bling or laptops or desktops. x86 Compatibility would be assured while gaining market share in the server market. I would swap out my shares of AMD for Oracle and hold them long too.

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