NVIDIA settles with Intel for $1.5 billion and cross-licensing

Subject: Processors | January 10, 2011 - 02:37 PM |
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It has been an interesting evening in the world of high tech business as the post-CES silence was broken by two news-worthy stories.  AMD's CEO gets kicked to the curb and now this: NVIDIA is settling its legal issues with Intel for $1.5 billion paid over five annual payments in exchange for a cross-licensing deal during that time.  For all the talk from each company's respective CEOs over the years of this dispute, it all comes down to some simple payments and we'll likely not hear of it again until the renewal season is met. 

The patents are really going one way here - Intel gets access to NVIDIA's portfolio of goodies in exchange for this payment.  Does NVIDIA get access to Intel information?  Likely, but it doesn't look like the green team has any plans to use it:

"We have said many times that we have no intentions to develop chipsets for Intel processors," said NVIDIA CEO Jen-Hsun Huang.  "We have no intentions of building x86 processors." 

Well there you go - NVIDIA doesn't plan on to work on a processor compatible with x86 technology and instead is going to push forward with its Project Denver that will attempt to bring the ARM architecture to larger platforms like tablets, notebooks and even desktops.  That much I have always believed - x86 is big, complex and not the best tool for the job in terms of mobile devices. 

What we might have expected was a return of NVIDIA to the world of Intel platform core logic design, but that sounds like its out as well.  I am guessing that restarting the division inside the company would take longer than it is worth and with the continued rise of Intel's desktop-class processor graphics, going down that road is less and less profitable.

Intel to Pay NVIDIA Technology Licensing Fees of $1.5 Billion

New Six-Year Cross-License Renews Previous Agreement

SANTA CLARA, CA, Jan 10, 2011 (MARKETWIRE via COMTEX) --

NVIDIA announced today that it has signed a new six-year cross-licensing agreement with Intel.

For the future use of NVIDIA's technology, Intel will pay NVIDIA an aggregate of $1.5 billion in licensing fees payable in five annual installments, beginning Jan. 18, 2011.

NVIDIA and Intel have also agreed to drop all outstanding legal disputes between them.

"This agreement signals a new era for NVIDIA," said Jen-Hsun Huang, NVIDIA's president and chief executive officer. "Our cross license with Intel reflects the substantial value of our visual and parallel computing technologies. It also underscores the importance of our inventions to the future of personal computing, as well as the expanding markets for mobile and cloud computing."

Under the new agreement, Intel will have continued access to NVIDIA's full range of patents. In return, NVIDIA will receive an aggregate of $1.5 billion in licensing fees, to be paid in annual installments, and retain use of Intel's patents, consistent with its existing six-year agreement with Intel. This excludes Intel's proprietary processors, flash memory and certain chipsets for the Intel platform.

The existing agreement is to expire March 31, 2011.

Pursuant to U.S. GAAP, a portion of the proceeds will be accounted for and attributed to the settlement of prior legal claims. This amount, which NVIDIA anticipates to be less than $100 million, will be included in the company's fourth-quarter results.

The balance of the licensing fees will be accounted for on a straight-line basis over the six-year term of the agreement. Accordingly it is anticipated that this would amount annually to approximately $233 million of operating income and an increase in net income of $0.29 per diluted share, on a full year basis.

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