Microsoft has an option to buy Nvidia

first_imgBeyond making a few peripherals, Microsoft isn’t a company that produces hardware. It has always been about the software and working with hardware partners to get that software on to devices.In the future that may not remain the case as Microsoft has a very interesting, and possibly market-changing option to buy a hardware company. That company is Nvidia.It may sound surprising to hear, but Microsoft is interested in Nvidia and doesn’t want to see it bought by anyone else. However, at the same time they are in no rush to acquire the company for themselves and are happy to see it remain independent. The option to buy only kicks in if some other potential buyer offers at least $3.4 billion for 30% of Nvidia’s shares, at which point Microsoft can decide to step in and purchase for more.With Skype just acquired for double what Google and Facebook were considering spending, it’s clear Microsoft isn’t afraid of paying big bucks for important partners. But this shouldn’t be viewed as a definite future acquisition for Microsoft, as it could be equally viewed as an option to ensure the independence of the graphics company. Effectively, no one company can purchase 30% or more of Nvidia without Microsoft’s approval.If Microsoft took that option to acquire a large percentage of Nvidia’s stock it would gain control of some key technology going forward. As well as a thriving graphics card business for PCs, there’s also the well-received Tegra platform for tablet computers.This agreement with Microsoft was discovered in a SEC filing and was actually stamped out back when Microsoft started using Nvidia GPUs in the original Xbox console. Today Nvidia don’t actually see it as a positive, rather a potential way for any acquisition talks to be “delayed or prevented.” This is therefore an agreeement that suits Microsoft much more than it does Nvidia.Read more at InformationWeekMatthew’s OpinionI don’t think Microsoft would hesitate for very long if someone like Apple decided they wanted to buy Nvidia. Microsoft would block that deal and probably try to take control of the company. It does have a lot of very good technology and IP, and getting Tegra chipsets as an exclusive for Windows tablets and smartphones would certainly benefit Microsoft.Taking control would be very expensive, though. The agreement only kicks in if someone tries to get a 30% stake for $3.4 billion. That means buying Nvidia outright would cost at least $11.3 billion and be Microsoft’s most expensive acquisition to date, eclipsing the $8.5 billion it paid for Skype.Saying that though, no company is going to approach Nvidia knowing this Microsoft agreement is in place. It would just be a waste of their time, and this is clearly what worries Nvidia at the moment.last_img

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