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Late last week Information Week got everyone in a tizz by highlighting this final paragraph in the ‘risk factors' category of NVIDIA's latest 10-Q quarterly report filing, submitted on 27 May. This was also brought to our attention by a HEXUS reader.
"Under the agreement, if an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA."
Obviously this is an intriguing revelation as it puts Microsoft in the front seat when it comes to any potential take-over of NVIDIA. Given Microsoft's struggles in the phone and tablet markets, and the ascendance of NVIDIA's Tegra chip in both of those, it posed the possibility of Microsoft acquiring NVIDIA and making itself self-sufficient in mobile chips, much the way Apple has.
But for some reason the author chose to omit the first sentence of that paragraph, which went as follows: "On March 5, 2000, we entered into an agreement with Microsoft in which we agreed to develop and sell graphics chips and to license certain technology to Microsoft and its licensees for use in the Xbox."
The same paragraph appeared, also as the last of the risk factors, in the 10-K annual report filing in March. According to All Things D, which did a bit of sniffing around, this information has appeared in every quarterly and annual filing since the deal was struck - an estimated 55 times. So it's old news, but only to anyone who cares to read the entirety of these lengthy documents.
That doesn't mean it's not intriguing, given how very different things are now to when the deal was struck. NVIDIA was a much smaller company back then, and this was part of a deal in which Microsoft paid NVIDIA a $200 million advance to make graphics chips for the original Xbox. The clause in question was to protect Microsoft against one of its competitors - in this market mainly Sony and Nintendo - from acquiring NVIDIA and scuppering its Xbox plans.
Eleven years later Xbox is nicely established, but the big thing is mobile now. WP7 is exclusively a Qualcomm affair chip-wise right now, but that might change. But the bigger picture concerns Windows 8 and its ARM support. NVIDIA was the first to announce it would be designing a CPU specifically for this new OS back as CES.
The Project Denver chip will presumably be a cornerstone of Microsoft's strategy to prove Windows is every bit as relevant as iOS and Android in the mobile device era, and Microsoft will be reassured to know that none of its deep-pocketed rivals can acquire the graphics outfit without it having a decisive say in the matter.
