Rumours are circulating that chip giant Intel is looking to buy rival Nvidia, but analysts say the move is unlikely.
Tech columnist Robert X. Cringely stirred up quite a bit of talk earlier this week when he posted a blog saying that Intel dropped plans last week to launch its long-anticipated graphics processor Larrabee because the upcoming chip was a stumbling block to Intel's secretive plans to buy Nvidia, which leads the GPU. Since launching Larrabee would have moved Intel into the GPU market and upped the chip maker's competition against Nvidia, it had to scrap the graphics chip to save a potential deal.
"There is a funky dance going on right now between chip giants Intel and Nvidia and I just want to cut through the crap and tell you that no matter what the companies are saying, it is likely to end with Nvidia being purchased by Intel," Cringely wrote on Tuesday. "Both parties know it and the only thing that hasn't been determined yet is the price, which is what all this posturing is about."
Both Intel and Nvidia said they would not comment on rumours.
Analysts, however, were quick to comment, and nearly all of them said that although Intel was looking at possibly buying Nvidia a year ago, there's very little chance that it would ever happen.
Several issues stand in the way of such a major acquisition. First, the European Union and US government might have antitrust reservations about a purchase of this magnitude. Secondly, it's well known that, with legal and openly verbal clashes between the two companies, there is little love lost, and it would take impressive negotiations to reach an agreement that would satisfy both companies.
"There are some cultural concerns. They are fairly antagonistic to each other. Getting everyone under one roof would be a challenge," said Dean McCarron, principal analyst at Mercury Research.
Several analysts noted that both companies are so big that combining them would be prohibitive.
"No, this wouldn't happen," said Rob Enderle, an analyst with the Enderle Group. "Nividia is too large and the execs hate Intel. And Intel doesn't have the merger competency to do a big one and the culture conflicts would critically damage both firms... Though that would be the best Christmas present that AMD could imagine - critically damage both of those companies."
While most industry watchers don't see the rumour as having any real legs, Dan Olds, an analyst with The Gabriel Consulting Group, said that if the acquisition went through and the dust settled, Intel would be an even greater force to reckon with.
"This would essentially give Intel control over most of the more profitable pieces of the personal computer - the main processor and the graphics processor," Olds said. "Of course, there is still AMD/ATI, but with Nvidia, Intel would have the lion's share of the market. It would put Intel in the driver's seat in terms of control over the personal computing platform. It would also give it much more control in a very important segment of the scientific/technical high performance computing market."
And if the buyout went through, AMD would be put in a tough position.
AMD, even though it's been boosted by its purchase of ATI, had been ahead of Intel several years ago but lost its momentum and its top position in the chip market. Plagued with financial issues and roadmaps that were behind Intel's faster pace of big chip releases, AMD has had its feet to the flame for quite some time.
While such a major purchase might trip up Intel financially for several years and give AMD a chance to regain lost momentum, facing down a bigger, more complex Intel down the road isn't a position that AMD would relish in the long term.
However, Jim McGregor, an analyst with In-Stat, said debating how AMD would respond is largely a mute point. The acquisition simply won't happen.
"I just don't believe that this will ever happen," McGregor said. "Intel already has a large graphics group and three graphics architectures in production or development. That's in addition to the fact that the two companies don't get along and there are outstanding legal issues. It just won't happen."
Agam Shah of the IDG News Service contributed to this article.