Microsoft/NVidia/Merger?

There have been some interesting developments recently on the NVidia front. It turns out that they have a deal in place with Microsoft that would effectively prevent any other company from acquiring them. This was a bit of a head scratcher at first but then I started thinking about it some more. Here is my current theory.

It's pretty clear that Microsoft and NVidia are getting very chummy. These kinds of close partnerships should only happen when there are mutual benefits to both sides. So what do these two companies gain from each other?

NVidia has three main focuses since they've gotten out of the chipset business. Desktop GPU's, Mobile computing and High Performance Computing via their General Purpose GPU efforts. Microsoft has at least a casual interest in all three of those markets but I suspect it's mobile computing that is the primary interest here.

Microsoft has been losing ground to Apple for awhile now and from a valuation perspective they lost the battle just over a year ago. Apple has superior products and a superior business model. If imitation is the sincerest form of flattery than I suspect Apple is about to feel very flattered.

If Microsoft wanted to move closer to Apple in terms of the way they are structured they would need to become much more involved on the hardware side of things. Acquiring NVidia would be a great way to move in that direction. Imagine NVidia's Tegra line combined with Windows 8. Assume that Microsoft executes well on the OS side. There is some real potential there. We already know that Microsoft will be supporting ARM in Windows 8 so the building blocks are already being put in place.

The big piece missing at this point is a proven track record of creating compelling products that people will buy. Microsoft has had a mixed record on that front with the Zune never really gaining significant traction while the Kinnect has been a huge success. You can't beat Apple with great technology alone. You have to know how to create compelling user experiences and communicate the excitement of those products to consumers.

Intel is pretty much left out in the cold in this scenario though they would likely gain traction in the Android market if NVidia and Microsoft were to merge. NVidia is a dominant player in the Android space but that would probably change if Microsoft owned NVidia as the business relationships would get complicated and messy for Microsoft and anyone wanting to use Tegra parts.

So, one possible scenario would be that a united Microsoft & NVidia create a credible competitor to Apple while Intel becomes the vendor of choice for Android based products. We would essentially end up with three major players and some number of also rans.

Image via Wikipedia

Related Articles

• Microsoft and Nvidia Have Acquisition Pact (hardware.slashdot.org)
• ARM, NVidia, Intel & Microsoft (emkey1.blogspot.com)
• Microsoft reveals ARM-powered Windows 8 prototypes (engadget.com)