Friday, August 01, 2008

curiouser and curiouser

Another rumor, this one coming from DigiTimes, not the most credible of sources, has it that NVIDIA is getting out of the chipset business.

If you have to know what's really happening RIGHT NOW, I'd suggest it's time to take a chill pill.

For the moment, those of us not in the know will have to make due with possibilities, and there's plenty of those to go around.

In keeping with the moment, allow me to suggest a possibility even I consider improbable, that Apple might be buying NVIDIA.

NVIDIA's market cap is sitting just a hair above $6 Billion, or about a third of Apple's cash on hand, so there's no question of Apple being able to afford the purchase, which would likely be mainly a stock deal in any case. What is in question is whether it would be seen, within Apple, as an appropriate expenditure that got them something they really needed, and whether NVIDIA would be amenable to the deal.

One problem with this scenario is that it's much too large to account for the relatively minor hit to gross margins Apple's CFO mentioned in a recent conference call, and for the most part already accounted for, so let's scale back the speculation to consider the possibility that Apple might be buying just the part of NVIDIA that produced their recently-introduced single-chip chipsets, and the associated intellectual property.

If, as DigiTimes suggests, other manufacturers were uninterested in NVIDIA's technology, this would leave Apple with an exclusive on a jumpstart towards again producing their own chipsets, providing both an opportunity to differentiate their machines from systems using Intel's off-the-shelf solutions and an additional impediment to those who would undermine their hardware based business model by selling Mac-compatibles.

True? Doubtful, but it's the sort of high stakes deal that just might be true. The "$23 million related to stock-based compensation expense" (Seeking Alpha) Apple CFO Peter Oppenheimer mentioned as contributing to the drop in gross margins in the current (September) quarter *might* be about packages put together to help retain engineering staff in the unit acquired from NVIDIA. Far fetched? Yeah, a little, but not so much so that it couldn't be right.

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