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NVIDIA will buy PortalPlayer, a company best known for making chips for the iPod, for $357 million in an all-cash deal. PortalPlayer went public nearly two years ago with their November 2004 IPO. The $357 million price works out to $13.50 per share, giving PortalPlayer shareholders a modest premium over its Friday close at $13.36
Until this past April, 90 percent of PortalPlayer's sales were to Apple. When Apple switched suppliersapparently unhappy about product delaysPortalPlayer's stock took a beating, dropping over nine dollars in a single day. The company still has customers among the other digital music player manufacturers and is aggressively pursuing the sub-$100 player market, but losing Apple was a huge blow. PortalPlayer is also designing secondary Vista laptop LCDs such as the one on the
Asus W5Fe
under its PortalPlayer Preface technology brand.
PortalPlayer will give NVIDIA access to two markets it currently does not compete indigital audio players and secondary laptop LCDs. NVIDIA also gets the company's expertise in designing chips for small devices. "With this acquisition, we are combining the two essential technologies of next-generation PMPs, PDAs, portable game players, and phones: PortalPlayer's innovative Application Processor technology and NVIDIA's industry-leading GPU technology," said NVIDIA CEO and president Jen-Hsun Huang. "With the products created through this combination, we intend to drive the next digital revolution, where the mobile device becomes our most personal computer."
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Although NVIDIA is about to roll out its 8800-series graphics cards with its new G80 GPU, its future doesn't look as bright as it did at this time last year. AMD and ATI have
combined forces
and are working on Fusion, a technology that will eventually integrate the CPU and GPU on a single piece of silicon. Long known for its integrated graphics chipsets, Intel appears to have taken an
interest in 3D graphics
as well. That said, NVIDIA
may have scored a major win
in July when it reportedly secured a contract to supply chips for Apple's long-anticipated
widescreen iPod
.
With the competitive landscape changing, NVIDIA needs to adapt quickly, and buying PortalPlayer is a step in that direction. NVIDIA does make some products for the handheld device market, including graphics chips used in some Motorola and Samsung phones, but snapping up PortalPlayer gives the company a chance to diversify further away from its core business into mobile devices. It also allows NVIDIA to hedge its bets should it get squeezed in its core graphics business.
