Should Microsoft Make a Bid for Nvidia?

Paul Lilly

Much to the chagrin of Acer , Microsoft is making a run at hardware with its Surface RT and Surface Pro tablets, and those might be only the first of many more products to come. Microsoft's dancing a fine line with hardware in trying to set the bar for Windows 8 devices without completely ticking off its OEM partners, but it's also taken a big step towards an Apple-like business model. If Microsoft decides to go further, a major acquisition starts to make sense, and two names that have been thrown out there are Nokia and Nvidia.

Paul McDougall over at InformationWeek wrote a rather compelling piece on why Microsoft might look to acquire one of those companies. One of the points he makes is that there are already reports Microsoft is interested in building its own brand Windows Phone 8 device, along with smaller versions of its Surface tablet.

"Microsoft may be getting into the hardware game for keeps," McDougall argues, adding that Microsoft has grown tired of watching Apple garner so much attention over its products.

Microsoft could accelerate its move into the hardware game by acquiring a company like Nokia, which it already has an existing relationship with. It also so happens that Nokia's stock is relatively low these days, though Microsoft would still end up paying billions of dollars.

What I found more intriguing is the idea of acquiring Nvidia. McDougall points out that Microsoft still retains first and last rights of refusal to purchase Nvidia as part of an agreement the two hammered out when Nvidia was supplying Xbox components to Microsoft.

"If an individual or corporation makes an offer to purchase shares equal to or greater than 30 percent of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock," Nvidia stated in its 10-Q filing with the SEC earlier this year.

Of course, Microsoft could make a bid at any time, and even though Nvidia would probably cost around $15 billion, the Redmond giant has squirreled away $66.6 billion in cash, equivalents, and short-term investments, McDougall says.

Owning Nvidia might make things awkward in trying to balance Windows-based relationships with AMD, Intel, and ARM, but it wouldn't really matter if Microsoft's end game is to emulate Apple's business model. The question is, does that even make sense for Microsoft?

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