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NVIDIA has pact with Microsoft to block outside takeovers

updated 12:35 pm EDT, Sat June 4, 2011

NVIDIA-Microsoft deal would discourage Apple buy

NVIDIA has a special deal with Microsoft to prevent outside deals and possibly let Microsoft itself buy it out, according to SEC filings. The Windows developer has rights of refusal on any attempt by a company to buy more than 30 percent of NVIDIA's share, preventing any other company from buying a controlling stake. NVIDIA also has "poison pills" that would let it issue shares without shareholder approval to prevent a controlling stake, and its shareholder voting rules would prevent an activist investor from easily overthrowing management.

The clauses, which extend back by a decade, don't necessarily amount to a Microsoft takeover but may instead be a buffer to keep NVIDIA independent. It would prevent a deal that would see NVIDIA controlled by a company that might not support Windows or would put tight restrictions on which Windows devices could use it. Intel, for example, could have matched AMD's buyout of ATI and prevented NVIDIA chips from being used in AMD-based computers.

That the pact is still ongoing would also be a possible deterrent against companies like Apple that might use NVIDIA as a weapon against Microsoft both on desktop and in mobile. It could get a genuinely Mac-optimized graphics option while dropping all Windows support, and it could take NVIDIA's Tegra line away as an option for Windows 8 tablets while using the better parts of the ARM chip for Apple's future iPads and iPhones.

Microsoft may be loathe to buy NVIDIA outright since it would raise anticompetitive concerns. The firm could not only make it difficult for Apple to use NVIDIA graphics but would almost certainly want to pull all support for Android. Virtually all Android 3.0 tablets use Tegra 2 processors due to Google's rush to beat the iPad 2 to market, and support for other processors is still in a rough state that would leave Android vulnerable. [via InformationWeek]



By Electronista Staff
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Comments

  1. macnnoel

    Fresh-Faced Recruit

    Joined: Feb 2005

    +11

    It's Wang computers all over again-

    So NVIDIA is basically preventing incentive for improvement and change-

    Great business strategy BTW.

    Comment buried. Show
  1. facebook_Clarence

    Via Facebook

    Joined: Jun 2011

    -33

    Good

    This is good. NVIDIA should stay independent and compete. They're doing a good job of it, why should they get bought out by some goobers like Apple?

  1. nat

    Junior Member

    Joined: Mar 2002

    +22

    oh clarence

    goobers? really? my dear dear boy... what term of endearment do you have for microsoft?

  1. SockRolid

    Forum Regular

    Joined: Jan 2010

    +10

    Microsoft's only recent "success"

    Microsoft's Xbox division is barely breaking even now. But over the years that division has lost billions, mostly due to the classic Red Ring of Death and subsequent Xbox 360 repair program.

    Kinect is Microsoft's way of cutting the losses in their Xbox division. So of course they're going to try and lock in their component suppliers.

    Funny how Microsoft is degenerating into a weird hybrid of "old school Windows and Office" plus "legacy console gaming."

  1. Gazoobee

    Forum Regular

    Joined: Feb 2009

    +13

    stupid

    Isn't it a bit dumb that Microsoft can't *buy* Nvidia because " ... it would raise anticompetitive concerns," but they can control Nvidia through underhanded agreements and special deals and this is somehow "okay"?

  1. jfgilbert

    Fresh-Faced Recruit

    Joined: Jan 2010

    +10

    Here's your sign...

    It's a clear statement that shareholder value does not rank very high in Nvidia's management priorities. Why would any investor keep their stock?

  1. spyintheskyuk

    Fresh-Faced Recruit

    Joined: Nov 2009

    +9

    However back to the real world

    There is no evidence at all that Apple have ever been interested in this company and they don't of course use Tegra chips. So all speculation or simply the use of the term 'Apple' to make a non story remotely interesting.

  1. Feathers

    Grizzled Veteran

    Joined: Oct 1999

    +7

    So...

    A pact with Microsoft prevents nVidia from acting in the best interests of its shareholders where a competitive buyout might raise the share price. Is this 5h1t legal?

  1. Jittery Jimmy

    Fresh-Faced Recruit

    Joined: Jan 2006

    +4

    Falling quickly.

    The only decent reason to put such rules in place is out-of-control executive management trying to hold onto power. Its unimpressive performance shows that.

    Why own shares in a company if management doesn't answer its owners? Why buy stock if executive management can destroy its value with a stroke of a pen?

  1. glideslope

    Grizzled Veteran

    Joined: Mar 2002

    +1

    Bye


    Sure glad I don't hold NVIDIA any longer.

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