Slash LaneNVIDIA 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.
"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.
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21 Comments
""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.
Now I know this is a totally crazy thought, but could it be that Nvidia is after designing its own iPod rival? No?
Apple is known for keeping their products secret until as close to release as possible. If Nvidia is buying PortalP today it might mean that a new iPod product is just around the corner that already has a joint Nvidia/PortalP product in it. Apple is probably pushing all their partners to act as casual as possible to keep all secrets secret as long as possible.
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?