Linked by timl on Sun 5th Jun 2011 16:25 UTC
Microsoft "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." The agreement appears to be over 10 years old, dating back to the time of the contract for the GPU of the original X-Box. It has likely gained relevance again now that Microsoft allegedly wants to more closely control hardware of tablets running its upcoming Windows 8 OS.
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RE[5]: yeah... no.
by malxau on Sun 5th Jun 2011 22:43 UTC in reply to "RE[4]: yeah... no."
Member since:

... and that filing says nothing about any "acquisition" that the article speculates.

The 10-Q says, "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. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA."

The article says, "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...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. "

This doesn't seem to me like speculation or embellishment. If the 10-Q is accurate, and let's assume it is, InformationWeek's conclusions seem valid.

(The real shock in this news is NVDA's management consider this a 'risk' to its business; given MSFT's history of overpayment in acquisitions, it hardly seems to hurt NVDA materially at all.)

It is an old agreement, which companies are supposed to disclose esp. when they involve IP exchange. And given the nature of DirectX development it makes perfect sense, since that is shared MS-NV IP, MS got the right to have a say if a competitor of MS was to buy NVIDIA and thus control that IP.

I don't disagree with you over the origination or motivation behind the agreement. The issues now are the terms of the agreement and whether those terms remain enforceable.

Reply Parent Score: 3

RE[6]: yeah... no.
by tylerdurden on Mon 6th Jun 2011 18:06 in reply to "RE[5]: yeah... no."
tylerdurden Member since:

Sigh, yes it is pure speculation, because that filing says nothing about Microsoft intending to purchase NVIDIA, AT ALL.

It is a risk because it reduces NVIDIA's board ability to negotiate with a 3rd party if said party is interested in buying the company and offer a high price for their shares.

The mission of a publicly traded company is increasing stock holder's value, first and foremost. That is why this info was released in the SEC filing. So if there is a constrain to said increase in value, and being purchased is a common "exit strategy," then the release makes sense. Does that mean they are getting purchased, nope. The filing also states that Intel and AMD are their direct competitors and they could significantly impede NVIDIA's growth. Does that mean that is the case? Nope, it simply is stated as a clear and present danger to NVIDIA's investors and their stock bottom line.

As I said, there is no hint at NVIDIA being bought by Microsoft. But rather that if NVIDIA were to be bought, Microsoft would have an important say in OK the purchasing of the company. Which is something completely different, and the reason why this "article" and the extrapolations it made were/are ridiculous.

Edited 2011-06-06 18:11 UTC

Reply Parent Score: 2