Apple’s Cart: Should Nvidia Be Apple’s Next Acquisition?

Last quarter, Apple blithely announced that it held close to $29 billion dollars in cash reserves, an amount greater than most silicon valley giants, including Microsoft.

As Mel Brooks once said, “It’s good to be the king!”

The question is, aside from providing a hedge in these dark economic times, what should Apple do with all this money? There have been lots of ideas about which companies that would best compliment Apple’s core business and to that lengthy list, I’d like to add another name, Nvidia . With a market cap of just over $5 billion and their stock at a 3 year low, the time might never be better for Apple to quietly make a strategic acquisition.

Why should Apple want Nvidia? For the same reason it wanted P.A. Semi last year, for the talent. The acquisition of P.A. Semi gave Apple a complete team of engineers and designers who specialized in designing high performance, high efficiency processors. Such a group would be the very people you would need to build a new mobile CPU from scratch or design custom chips to add a unique blend of features not found elsewhere. Adding Nvidia to the mix would also add expertise with high-end graphics processors, mobile GPU’s and even system-on-a-chip designs like the Tegra. Together, these teams would form the collective expertise necessary to create a new generation of chips exclusively for Apple’s use. Such a move would give Apple a tactical advantage in the marketplace as would serve Apple’s well-known desire for secrecy.
In the last few years, we’ve seen the once clear-cut division of labor between the central processor and the graphics subsystem starting to blur. Tasks once reserved for the CPU like decoding video are now being offloaded onto the graphics subsystem. OpenCL, a new technology in Apple’s forthcoming OS, is a way for developers to tap into the processing power of the GPU within their own applications. Even Windows 7 uses the GPU to help drive its new GUI. Everywhere you look, the importance of graphics performance is growing. And that growth isn’t reserved for desktop systems. The incredible popularity of the iPod touch and iPhone as gaming platforms is made possible, in part, by the raw graphics capabilities of the hardware.

Nvidia and Apple

Purchasing Nvidia would not only serve Apple in the mobile/handheld space but could potentially help them in the pro market as well. Traditionally Apple has been a bit player in areas like 3D and CAD and one of the reasons why has been the a series of performance limitations, especially in the graphics subsystems. In fairness, this situation has gotten better in recent years but with the debut of OS X 10.6 on the horizon, there is an opportunity to take Mac performance to a whole new level. A true 64bit kernel will mean that Macs will finally be able to access vast amounts of RAM as well as handle their multi-core processors more efficiently. Adding a state of the art custom GPU that was available only on the Mac would not only boost the performance of Apple’s pro apps that utilize GPU offloading like Final Cut Studio, but would also give developers of high-performance apps a new reason to support the Mac. It’s been a long time since the Macworld keynote address has contained a performance “bakeoff” between Windows and Macs. It would be great to be able to add performance as another talking point in the Mac ROI discussion.

Apple is well aware that any processors they can buy from intel or Samsung are chips their competition can buy as well. The only way to gain a measure of competitive advantage in the hardware arena is to have something inside that your competition does not. I can think of no more compelling arena for Apple to invest in than graphics technology. It drives the iPhone and its success in gaming. It drives high-end computing and helps to provide more features for handheld and portable computing devices. It sounds like everywhere Apple wants to be right now. They have the money.

I say it’s time to go shopping for the future.