DailyTech - NVIDIA Not a Good Fit for Intel Say Analysts

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IT NVIDIA Not a Good Fit for Intel Say Analysts
Anh Tuan Huynh (Blog) - October 6, 2006 2:02 PM

28 comment(s) - last by crystal clear.. on Oct 9 at 2:04 AM

Other companies interested in NVIDIA instead

DailyTech previously reported analysts believed NVIDIA was a prime candidate for an Intel acquisition. Other analysts predict Intel is unlikely to acquire NVIDIA. Nevertheless, there’s interest in NVIDIA from other tech companies. Joe Osha, an analyst for Merril Lynch stated “We don't think there's a solid rationale for a deal and we don't think it's going to happen." According to sources it would appear other industry players were interested in NVIDIA, though no formal negotiations have occurred.

Craig Barret, Intel Chairman had this to say about the rumors "We treat investments and things of that sort like fine wine and we never discuss them before their time, so we don't comment on rumors of that sort.” Other analysts such as Doug Freedman from American Technology Research remain skeptical over a possible Intel acquisition.

Speculation of a NVIDIA purchase rumors began popping up shortly after the AMD and ATI merger.

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RE: never going to happen

By kilkennycat on 10/6/2006 6:30:24 PM , Rating: 2

Er, excuse me. It seems that nVidia is perfectly capable of surviving on their own -- in fact, far better than AMD/ATi, now to be a billion or so in debt to the banks. Remember that the AMD offer for ATi per share is $16 in CASH and the balance in AMD stock. Meanwhile nVidia makes money hand over fist on GRAPHICS products -- the motherboard chipsets help sell nVidia graphics ( think SLI ), but have far lower margins per chip than ANY of their graphics offerings, except the sub-$75 bottom-of-the-barrel video cards. Now nVidia has the freedom to be THE ONLY advanced-graphics company on the planet. Investment by ATi in advanced graphics development will be hampered by the huge debt-load of the merger --- with Intel aggressively cutting prices left right and center include Core2, there will be little profit for AMD to pay down the debt, since they also have 65nm (and smaller) process development and manufacturing to simultaneously finance. The ATi/AMD merger is a very badly-timed mistake. As it is, both AMD and Ati now seem to be 9 months behind the ball - read the articles on the G80, Kentsfield and the recent AMD CPU schedules all here on your friendly Anandtech Daily News, and judge for yourselves. A great pity. I switched from exclusive-Intel in all my personal-use PC-builds to AMD X2/nForce4/SLI in my most recent; the most stable and trouble-free system that I have ever built. I expect to build my next personal machine around the middle of next year, quad-core/Dx10 etc, of course; sadly, the prospects of it being AMD again are rapidly waning.

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RE: never going to happen

By dwalton on 10/7/2006 3:55:20 AM , Rating: 1

Unlike Nvidia, AMD has the ability to sell you the CPU, GPU and chipset to go with them.

While AMD acquired debt it also increased its revenue and market cap which often offset that increased debt since it worth 15 billion (?) instead of 10 billion (?).

It all comes down to AMD ability to execute. AMD can flounder in its cpu business for the next few years if it's able to flourish with its newly founded chipset and gpu business.

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RE: never going to happen

By DallasTexas on 10/7/2006 9:30:43 AM , Rating: 2

"..As it is, both AMD and Ati now seem to be 9 months behind the ball...

I actually have (had) great admiration for ATI to the extent I bought ATI excluseivly. They had the best (compatible) drivers and stable. Unfortuneatly, like all acquiistions (mergers), a loss of focus will ensue. I'm araid that what remains of the once great ATI will be distracted as a chipset function to AMD to compete with Intel's mature platform strategy. It's sad but AMD needed to do this.

"...I switched from exclusive-Intel in all my personal-use PC-builds to AMD X2/nForce4/SLI in my most recent;.."

I'm sorry about your loss but I'm sure AMD will soon come out with something to make your investment worthy again. The K8L is rumored to be a worthy competitor to the Core 2
family - hopefully here before Intel again lowers the boom on 45nm Nehalem.

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RE: never going to happen

By akugami on 10/8/2006 3:39:16 AM , Rating: 2

I'm going to agree on the debt taken by AMD buying ATI. However, I'm going to disagree on your assumption that ATI does poorly in the market. There is no question in my mind nVidia does better however, ATI still makes a pretty penny and has about 35-45% of the discreet GPU market as well as a higher percentage of the integrated chipset market. Their share is usually in the upper 30's range and at times has reached the mid 40's and assuming they don't screw things up, it should remain similar. Granted nVidia does better but it's not like ATI is a company perennially in the red.

In fairness, ATI is going to lose a lot of integrated GPU/chipset sales on the Intel side of things but they should gain some sales in the AMD side to offset things. This actually has the potential to hurt nVidia as their integrated GPU and motherboard chipset business is mostly based on the AMD side of things. You can laugh about the profits for integrated chipsets and GPU's but when you consider the volume of such sales, it's a pretty penny indeed.

ATI does make a profit on discreet GPU's and there is absolutely no reason for AMD to shut this part of ATI's business down. I truly don't see how some people can predict nVidia having the discreet video card market to itself. Likely we will see the end of the "Built by ATI" cards but companies like ASUS, Sapphire, etc will pick up the slack. It basically comes down to why AMD would kill a cash cow? ATI likely doesn't have a positive cash flow, considering expenses spent, in it's discreet GPU business every quarter but at the end of the year, they usually come out with positive revenue after all.

As for how far behind ATI is to nVidia, last I heard from the rumor mill, they're set to release their next GPU in roughly Feb'07, give or take a bit. The G80 is set to be released in mid Nov so that would put ATI roughly 3 months behind assuming a Feb launch and if it's a March launch, they'd only be 4 months behind and not 9 months as you claim. Of course, this is based on assumptions on when AMD is going to launch their video card. If going by your schedule it'd be July of next year before ATI releases their next video card. I highly doubt that ATI will release their next video card in July'07.

Believe it or not, I don't think AMD buying out ATI will affect the discreet GPU market by any large amount. ATI will be following their own roadmaps for the next year to two years. I think AMD buying out ATI is more for their chipset business to sell to OEM's like Dell, HP, Sony, etc much like what Intel does now with their low end GPU's, motherboard chipsets as well as CPU's.

The other area is the specialized markets like servers, high end gaming, CAD, video special effects processing, or other high calculation intensive task that can take advantage of some of the designs of ATI's GPU's for tasks that today use the CPU. One example is the Folding@Home's newly released client that uses ATI GPU's for data processing.

There is also ATI's budding cell phone chipset business which if successful can pay huge dividends considering the increasingly powerful nature of smartphones and the increasing use of such smartphones in the place of PDA's and likely portable video and audio players.

Is it a huge risk for AMD? Absolutely, but ATI is trying to grow itself so it can better compete with Intel. It is not going to do it by relying only on people to switch to AMD chips. It has to go out and either create new markets for it's products or innovate enough in exhisting markets to make their products more compelling.

As for Intel, I don't see nVidia benefiting them much either. They are not interested in the discreet GPU business. Their aims are similar to some of the ones I outlined as reasons for ATI being bought by AMD. However, I think they are doing this with a combination of thier own in house GPU's and technology from lesser known companies. In that respect, it makes more sense for Intel to spend a few hundred million to a billion on lesser companies and funding it's existing departments rather than overspending for nVidia.

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