While giant chip maker Intel ($INTC) has continued to make the best mass-market PC based semiconductors, it's had lots of smaller competition nipping at its heels throughout its history. My favorite has always been NVidia ($NVDA) -- a maker of great cutting-edge technology used in high-end computers and game consoles. The two firms (Intel is 10X in marketcap) inked an agreement in 2004 to share some technology that Intel felt needed to be updated as new technology came to market. Well, they finally agreed on a new structure entitling NVDA to $1.5B in licensing fees over the next 5 years and providing access to each others' new technology.
This agreement signals a new era for NVidia. Our cross license with Intel reflects the substantial value of our visual and parallel computing technologies. It also underscores the importance of our inventions to the future of personal computing, as well as the expanding markets for mobile and cloud computing -- NVidia president and chief executive officer Jen-Hsun Huang (Xinhuanet)The market liked the news and NVDA has seen its stock rise 34% in 2011 alone. But is inking this deal with the 800lb Intel really good news for NVDA?
Here's a primer:
- Intel needed access to NVidia's tech, too
...the agreement shows that Intel sees the importance of the graphics processing technology that Nvidia dominates. Those sorts of chips are used in everything from smartphones to automobiles to television sets (San Jose Mercury News) ...Nvidia’s own graphics processing units are now challenging Intel’s chips as all-purpose processors and Nvidia is moving towards greater involvement in mobile computing, with chips based on the architecture of the UK’s Arm, rather than Intel’s x86 processor designs (FT) ...Microsoft ($MSFT) in turn, announced that its next version of Windows would be ARM compatible. Whether that turns "Wintel" into "Winvidia" won't be known for several years when Nvidia's ARM processor is ready for the market, but the announcement did strike a psychological blow against the old order of things (Fortune)
- Certain analysts are focused on what wasn't part of the deal
But the subtext of what wasn't part of the deal is also compelling...Nvidia has long been rumored to be trying to dip its toes in the processor market. The fact that Nvidia didn't get the rights to Intel's processor designs reinforces that Nvidia plans to take a different path to take on Intel. That path involves licensing a different design that is already popular for phones and other mobile devices. (NPR)
- It's now all about mobile computing
As computing becomes more about entertainment and less about productivity a host of companies are making their moves to make computing, fun, mobile and power efficient. But don’t expect Intel to give up its dominant role in the industry any time soon. (gigaOM)
- INTC validating NVDA's parallel processing tech
Nvidia specializes in processors that are ideal for processing complex graphics and has been promoting them to be used for other complicated mathematical tasks, such as medical imaging and weather forecasting. While traditional central processors found in PCs are designed to make huge calculations very quickly, one after another, graphics processors, or GPUs, excel at carrying out several small calculations at the same time, which makes them handy for specific kinds of tasks. Nvidia has been talking about the world needing a parallel processor and it seems Intel is validating their technology (CNBC)Regardless, most analysts see this as a win-win for both firms with demand for next-generation chips ramping as mobile computing sucks up existing supplies. Whether it's for offensive or defensive reasons, with this new agreement in hand, both INTC and NVDA look to benefit going forward. photo courtesy of JD Hancock