Guest post by “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.
Every time I hear about Microsoft trying to control hardware specs, I expect a story about the EU trying to fine them again.
I would have thought NVIDIA would be worth a lot more than the number in that article.
It’s been a turbulent few years for Nv, they had the failing GPUs and chipsets, the long delays with the Fermi chips, the driver that could kill cards.
Not to mention that they have no chipset market these days and that first gen Tegra flopped with the Kin and Zune.
They’ve also bread othe ill will with their rebranding and renaming schemes, since they used the same cards from the 8800 series all the way up till the GTS250, yeah, AMDs guilty of the same thing though with the HD6 series…
This article is just a bunch of speculation based on a 10 year old agreement between nvidia and ms.
It’s not speculation. It’s from Nvidia’s latest 10-Q, dated 5/27/11. You can see it directly from the SEC’s site at
http://www.sec.gov/Archives/edgar/data/1045810/000104581011000031/q…
(see page 48.)
It’s a shame the informationweek article didn’t cite its sources, but they are very public.
That filing says nothing remotely related to this news.That was a release about the original XBOX graphics partnership. 10 years ago.
That partnership ended rather badly, given the contractual obligations MS strong armed intel and nvidia into. It is no coincidence the 360 went on to be based on IBM and ATI technologies.
This filing is what the article is referring to. It’s in a 2011 10-Q. NVDA still believes the agreement “may” remain enforceable or the provision wouldn’t be listed as a current “risk factor” in 2011. It is not relevant that the 360 uses different graphics technology; the issue is merely whether the original agreement remains in force.
… and that filing says nothing about any “acquisition” that the article speculates.
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.
If anything this filing displays the strong arm negotiation which NVIDIA had to concede in order to supply the graphics chips to MS. Thus, my point that the HW partnership between NVIDIA and MS was less than stellar for NV.
BTW, MS already has their own HW group.
Edited 2011-06-05 21:04 UTC
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.)
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.
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
What piques my interest is that the agreement is still in effect, and even seems to be open-ended.
I find it perfectly understandable that Microsoft would have wanted some insurance for the availability of a key part of the Xbox, which at the time was a huge investment. The horror scenario for Microsoft must have been Sony buying Nvidia, and cutting them off. But such an agreement far outlasting the expected lifetime of the product in question seems a bit strange to me, let alone an indefinite one.
So I wouldn’t be surprised if even back then, Microsoft also had some other, more strategic motives for this agreement. Perhaps nothing very concrete yet, and almost certainly not envisaging the current landscape of smartphones and tablets. But the fact remains that, even if they don’t actively want to acquire Nvidia, they can certainly still prevent others from gaining a strong foothold within that company.
So in selecting Tegra 2 as one of the “sanctioned” chipsets for Windows 8 tablets, they have chosen a platform that cannot be easily yanked away from them by competitors.
called ‘Sticky Fingers’
It seems that lately everywhere you turn there is Microsoft muddying the waters for everyone else.
to all those who thing that Apple is a controlling SOB, then frankly guys, you ain’t seen nothing yet.
Microsoft want total control over everything yet not be a proper H/W PC maker. I can’t help wondering if somewhere in their efforts to control just about everything they won’t go just that bit too far and break a whole shed load of anti competitive laws especially in the EU.
Personally I’d like to see Microsoft start becoming a PC maker and only allow their operating system to be installed on the hardware they sell – then we might get parasite organisations like Dell, HP, Toshiba and Lenovo (to name a few) to actually create their own operating system and bring some real innovation to the table. Sorry, being the ‘outlet store’ for Microsoft has resulted in a stagnating hardware market at the mercy of a software vendor having to cripple their software to support the lowest common denominator.
If the low-end hardware market stagnates, it could maybe (just maybe) mean that most people would even satisfied with a PIII and 256 MB RAM for what they do with their computer, and that as such fast evolution of the low-end hardware market is simply not needed.
It should not be hardware manufacturer’s problem if software becomes more bloated and runs slower on equivalent hardware at each release. Supporting new hardware without having to drop support for old hardware in the way is one of the core points of hardware abstraction, the most basic task of a modern operating system. Or have we went back to the dark ages where people coded software designed to deal with specific graphic and sound cards ?
Edited 2011-06-06 08:38 UTC
Did you forget about HP’s Web OS?
Meh, to me that doesn’t mean much given that the focus of my ‘wrath’ was directed at the laptop and desktop market; where vendors outsource something that I would consider a core part of the experience – developing the operating system themselves rather than letting some third party carry the responsibility.
As I’ve said prior, FreeBSD + a good UI + some tweaks, then create a ecosystem via iWork and iLife clone and you’d get your shelf par the way there of getting out of the ‘drive to the bottom’ PC market and being able to maintain margins and bring in a reasonable profit each quarter.
Oh well, like I said – I’m happy with Mac OS X, it isn’t perfect but nothing in the world is so it is a matter of simply choosing the one that sucks the least for the job that you’re intending to use it for
I just find it funny now how Windows 8 looks like its going to be very web OS in nature, and will be used on tablets and pcs. HP is already planning a webos tablet. So they’re probably going to use a tablet competitor on notebooks that looks like a tablet OS, but isn’t a tablet.
I also use Mac OSX, simply because its what came on the notebook I bought years ago. Its sort of a good idea to have either Mac OSX or windows to use the odd software package that doesn’t have a good FOSS alternative.But really, when using it I just curse its non-kde-ness, Snow leopard seems really old and counter productive to my workflow.
I worry more about that with Apple personally. MS doesn’t have the management skills to pull that off…
Wow, amusing to see old paper rags being reduced to push speculative uninformed crap to compete with other on line sources of speculative uninformed crap. Not that they were any good when they were printed on dead trees, but amusing none the less…
Edited 2011-06-05 19:52 UTC
I have only one real concern if this goes through, and that is the future of official accelerated Nvidia drivers on Linux. Hopefully Microsoft will continue to produce them if they buy Nvidia. If not, hopefully ATI will jump on the opportunity and start producing a decent accelerated driver for Linux.
Of course they won’t! They want to control hardware and to beat the competition. Linux is a threat for M$.
On the desktop? No, it’s not. On the server, obviously it is. But servers don’t usually have need of accelerated video anyway.
On one hand, I can see Microsoft continuing to produce Nvidia drivers for Linux so they can sell more video chipsets. Like I said, Linux simply isn’t a threat to Microsoft on the desktop. On the other hand though, given that Linux has around 1% of the desktop market share, I can also see Microsoft arguing that it’s not profitable to produce Linux drivers, and use that as a reason to stop making them.
Microsoft claimed Linux holds 5% of the desktop market share in 2008, which may have been the result of their research or may have been an anti-DOJ smokescreen (among other possibilities).
If the former, that’s enough market share to justify continuing the driver development.
If the latter, then driver development would be a nice continuation of the smoke screen.
Either way, if Microsoft were to invoke the agreement, it may well be the Obama administration’s stance toward their monopoly that would drive the decision.
Although the real percentage of desktops running Linux is very hard to assess, independent sources, who have no interest in delivering misinformation to western consumers, also estimate the worldwide percentage installed base of desktop Linux to be somewhere between 5% and 12%.
Note also that installed base is not market share. Because it is not offered in mass-market stores, the vast majority of consumers simply have no opportunity to buy a Linux desktop system.
If you see a figure of 1% quoted for Linux desktops, as you often do, it is purely a marketing myth. You are being urged to “pay no heed to that man behind the curtain”.
M$ isn’t a threat to M$ on this mythical desktop.
Microsoft themselves estimate the percentage of desktops running Linux (aka the ‘installed base’) to be about 5%.
http://broadcast.oreilly.com/2010/09/debunking-the-1-myth.html
“Additional confirmation of the growth in Linux desktop market share last year came from an unlikely source: Microsoft CEO Steve Ballmer. Using a slide to visualize OS market share Ballmer had Linux desktop market share as a slightly larger slice of the pie than MacOS.”
Microsoft do indeed consider desktop Linux to be a threat.
Ballmer: “"i>>?I think depending on how you look at it, Apple has probably increased its market share over the last year or so by a point or more. And a point of market share on a number that’s about 300 million is interesting. It’s an interesting amount of market share, while not necessarily being as dramatic as people would think, but we’re very focused in on both Apple as a competitor, and Linux as a competitor.”
Some people estimate the installed base of Linux on the desktop could be as high as 12%.
That is pretty remarkable for a desktop OS that ordinary consumers cannot buy in mass-market stores.
Edited 2011-06-08 04:58 UTC
I think that by opening up their specs, ATI have already done the best they could in this regard.
Don’t hope for anything MS does. Hope they won’t lay their paws on Nvidia.
M$ getting their paws on NV would be best for everyone. M$ please put this garbage in the trash bin.
Sounds really bad. I hope Nvidia will never be sold to MS.