NVIDIA's acquisition of PortalPlayer could be iPod-driven
NVIDIA Corp's bid to acquire PortalPlayer, Inc. is surprising and the motives behind the decision, while possibly iPod-related, are not exactly clear, according to one Wall Street analyst.
On Monday, the graphics technology heavyweight said it has agreed to buy the San Jose, Calif.-based iPod chipmaker in a cash-for-stock transaction worth $357 million.
"This deal comes as a surprise to us as we believe there are other semiconductor firms that offer more technology for less money," Wedbush Morgan Securities analyst Craig Berger wrote in a research note to clients following the announcement.
The analyst, who maintains a "hold" rating on shares of PortalPlayer, said he believes the firm's intellectual property portfolio is limited when compared to other semiconductor makers in similar market segments.
"There are so many beaten-down chip stocks" whose shares are trading at just 1x sales, he wrote, "including Genesis Micro, Zoran, Pixelworks, and SigmaTel."
Berger concluded that "there may be some attractive new product technology in PortalPlayer's roadmap (wireless, next generation processor) that interests NVIDIA" that he is not fully aware of, or NVIDIA "thinks it has a better chance of penetrating Apple iPod (video) products if it owns and integrates PortalPlayer’s technology."
The analyst made no change to his estimates for PortalPlayer but raised his price target on shares of the company to $13.50 from $11.00, in line with NVIDIA's bid.
On Monday, the graphics technology heavyweight said it has agreed to buy the San Jose, Calif.-based iPod chipmaker in a cash-for-stock transaction worth $357 million.
"This deal comes as a surprise to us as we believe there are other semiconductor firms that offer more technology for less money," Wedbush Morgan Securities analyst Craig Berger wrote in a research note to clients following the announcement.
The analyst, who maintains a "hold" rating on shares of PortalPlayer, said he believes the firm's intellectual property portfolio is limited when compared to other semiconductor makers in similar market segments.
"There are so many beaten-down chip stocks" whose shares are trading at just 1x sales, he wrote, "including Genesis Micro, Zoran, Pixelworks, and SigmaTel."
Berger concluded that "there may be some attractive new product technology in PortalPlayer's roadmap (wireless, next generation processor) that interests NVIDIA" that he is not fully aware of, or NVIDIA "thinks it has a better chance of penetrating Apple iPod (video) products if it owns and integrates PortalPlayer’s technology."
The analyst made no change to his estimates for PortalPlayer but raised his price target on shares of the company to $13.50 from $11.00, in line with NVIDIA's bid.
Comments
That's why, commenting on the previous article today, I thought this deal was an interesting combination. It isn't all that obvious as to how the two companies add up to more than either alone.
If PortalPlayer loses the last chip contract it has with Apple, what value, as a company, is there left? The technology itself isn't worth that much without sales.
Does Nvidia see some chance that combining their chips will result in something better than either alone? Will that possibility give them a better chance with Apple in the future? Samsung has far greater resources, and we can see why a company should never rely on one big client. It's a rule in business.
speculation...
Now I know this is a totally crazy thought, but could it be that Nvidia is after designing its own iPod rival? No?
That would be a pretty radical change from their current model, a lot more radical than Apple's introduction of a consumer electronics product. nVidia doesn't have an end-user product right now. You can't buy an nVidia branded hardware product, you buy products with someone else's name on it that has an nVidia chip on the board.
Now I know this is a totally crazy thought, but could it be that Nvidia is after designing its own iPod rival? No?
No, of course not.
They don't even make their own video cards. They leave that to others. Why then, would they want to make an entire player?
PortalPlayer's chips were all lack lustre compared to those from Cambridge, Broadcom and it would appear, NVidia even so what NVidia sees in them remains a mystery. Perhaps they've some IP and patents that would be valuable? Perhaps they've some as yet unannounced chips? I doubt it's Apple related.
Apple seem to have gone wholesale over to a SOC ARM solution from Samsung on everything but the hard disk based iPods. I'd guess the next big iPod is also ARM based giving Apple one reduced cost development platform.
PortalPlayer's chips were all lack lustre compared to those from Cambridge, Broadcom and it would appear, NVidia even so what NVidia sees in them remains a mystery. Perhaps they've some IP and patents that would be valuable? Perhaps they've some as yet unannounced chips? I doubt it's Apple related.
Perhaps they are looking to more advanced phones with both video and music capability.
Apple seem to have gone wholesale over to a SOC ARM solution from Samsung on everything but the hard disk based iPods. I'd guess the next big iPod is also ARM based giving Apple one reduced cost development platform.
That wouldn't be an earth-shattering projection, all the hard drive iPods were ARM-based, from the first generation.
Perhaps they are looking to more advanced phones with both video and music capability.
I think you mean Nokia.
I think you mean Nokia.
I don't know what you think I mean. But, if you are thinking that Nokia might be a customer for them, that could be right.
Apple seem to have gone wholesale over to a SOC ARM solution from Samsung on everything but the hard disk based iPods. I'd guess the next big iPod is also ARM based giving Apple one reduced cost development platform.
PortalPlayer's chips were all lack lustre compared to those from Cambridge, Broadcom and it would appear, NVidia even so what NVidia sees in them remains a mystery. Perhaps they've some IP and patents that would be valuable? Perhaps they've some as yet unannounced chips? I doubt it's Apple related.
Come again? PortalPlayer's chips incorporate two ARM-7 cores. (yes, the HDD iPod was dual-core way before Apple's laptops!).
http://www.macworld.com/news/2006/11...idia/index.php
1) recall that larger displays require more powerful graphics cards to drive them (recall the 30" Apple Display.
2) Apple is supposedly developing an iPod with a larger display ("widescreen" iPod). Well, sure it doesn't need a full-fledged video card like the ones NVIDIA or ATI would produce, but they DO need something with high video-processing efficiency.
3) If I remember correctly from my circuits classes back in the day, the best way to minimize power consumption is to integrate functions in a single chip. In terms of Apple's iPod, the way to do this is to use one SOC that handles video well rather than the two-chip system that the current iPod+video uses now.
4) Battery Life IS going to be a huge concern with a full-screen iPod, and a widescreen iPod that could play 2 or 3 movies without a charge is going to be a very popular device and will distinguish it from the rest of the market.
5) So I say that any way that video technology can be merged with the iPod's already-existing hardware is going to help.
Now why NVIDIA, of all companies, stepped in and volunteered for that role... is still a bit of a mystery. Yet is Apple has approached them and asked to build a chip for them, acquiring PP might be easier than developing a SOC from scratch themselves.
-Clive
3) If I remember correctly from my circuits classes back in the day, the best way to minimize power consumption is to integrate functions in a single chip. In terms of Apple's iPod, the way to do this is to use one SOC that handles video well rather than the two-chip system that the current iPod+video uses now.
Bingo! I'm not sure if it's necessarily "the best" way*, but certainly integrating the system, audio and video processing of the iPod all on to one chip was something I was thinking/hoping could come out of this agreement.
* All the chips you are considering integrating would need to suit the target process (CMOS Vs BiCMOS, SiGe Vs Si, etc etc.)
Now why NVIDIA, of all companies, stepped in and volunteered for that role... is still a bit of a mystery. Yet is Apple has approached them and asked to build a chip for them, acquiring PP might be easier than developing a SOC from scratch themselves.
Wouldn't it be a little late to start developing an integrated video SOC now?
Wouldn't it be a little late to start developing an integrated video SOC now?
Late for 6G iPod, but probably still good for 7G or 8G. ICs take a while to develop.
""This deal comes as a surprise to us as we believe there are other semiconductor firms that offer more technology for less money," Wedbush Morgan Securities analyst Craig Berger wrote in a research note to clients following the announcement."
That's why, commenting on the previous article today, I thought this deal was an interesting combination. It isn't all that obvious as to how the two companies add up to more than either alone.
If PortalPlayer loses the last chip contract it has with Apple, what value, as a company, is there left? The technology itself isn't worth that much without sales.
Does Nvidia see some chance that combining their chips will result in something better than either alone? Will that possibility give them a better chance with Apple in the future? Samsung has far greater resources, and we can see why a company should never rely on one big client. It's a rule in business.
If Apple is in bed with Samsung and is leaving NVIDIA/PortalPlayer out in the cold, perhaps NVIDIA is looking for a new sugar daddy.
Perhaps Microsoft is looking for a partner to design it's next ZUNE???
Pehaps NVIDIA feels they are a stronger candidate for the job with PortalPlayer in house???
I doubt NVIDIA/PortalPlayer is going to be used for the iPhone.
Here to Samsung seems like a better partner.
They already have experience in making cell phones.
If we do see NVIDIA in an Apple product, it won't be in any of the current iPod form factors.
NVIDIA's chips are pretty high power and are focused on video and gaming.
We might seem them used in a larger format iPod or a smaller format Mac.
If Apple is in bed with Samsung and is leaving NVIDIA/PortalPlayer out in the cold, perhaps NVIDIA is looking for a new sugar daddy.
Perhaps Microsoft is looking for a partner to design it's next ZUNE???
Pehaps NVIDIA feels they are a stronger candidate for the job with PortalPlayer in house???
I doubt NVIDIA/PortalPlayer is going to be used for the iPhone.
Here to Samsung seems like a better partner.
They already have experience in making cell phones.
If we do see NVIDIA in an Apple product, it won't be in any of the current iPod form factors.
NVIDIA's chips are pretty high power and are focused on video and gaming.
We might seem them used in a larger format iPod or a smaller format Mac.
I don't think it would be for the iPhone either. But it could be sold, if good enough, to other phone manufacturers.
Come again? PortalPlayer's chips incorporate two ARM-7 cores. (yes, the HDD iPod was dual-core way before Apple's laptops!).
Yes, but they still had 3-4 other support chips from other manufacturers like Wolfson often duplicating and bettering the features on the PortalPlayer chip. With the latest iPods, they've dropped the other chips for one SOC.