A feeding frenzy on the stock market over rumors that Intel Corp was about to make a bid for Nvidia Corp, which saw Nvidia’s shares jump 8%, has subsided and was replaced with worries about the company’s future.
Nvidia’s shares have been boosted by hopes that AMD’s $5.4bn purchase of ATI Technologies Inc in July would force Intel to buy the one remaining graphics chip vendor. Nvidia shares have risen from $17.77 when the deal was announced to $30.44 yesterday.
This puts a value of $10.7bn on the company, 4.6 times last year’s sales and might even strain the resources of Intel, which has $6.4bn in the bank and is currently in the throes of a restructuring.
Without an Intel bid, Nvidia’s share are vulnerable at the current level. The aim of the AMD/ATI is to bundle the processor with a graphic chipset, which would offer cost advantages to PC vendors.
In addition, unlike AMD, Intel has graphics technology that it boosted this week with an agreement with graphics chip developer Imagination Technologies Group Plc to extend the licensing and deployment of its graphics and video IP cores for use with Intel’s PC, mobile computing and consumer architectures.
Imagination boasts of the low power capabilities of its technology. This fits in well with a market that has turned in favor of portable devices.
Nvidia also anticipated a swing toward portable devices and in 2003 it paid $70m for MediaQ Inc, hoping to profit from an explosion in demand for handheld devices with gaming and video capabilities.
Santa Clara, California-based MediaQ boasted an impressive customer base among handset and PDA manufacturers including Mitsubishi, Siemens, Dell, HP, Palm, Philips, Sharp and Sony. Nvidia CEO Jen-Hsun Huang said the deal would extend its competencies in ultra-low-power design methodologies and system-on-chip designs, as well as in the Microsoft Pocket PC, Microsoft SmartPhone, Palm and Symbian operating systems.