NVIDIA and PortalPlayer, Not Intel and NVIDIA

Includes: INTC, NVDA, PLAY
by: Steven Towns

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Nvidia Bulks Up [TheStreet.com]

Summary: NVIDIA agreed to acquire PortalPlayer for $357 million ($161 million adjusting for PortalPlayer's cash), or $13.50 a share in cash. PortalPlayer's shares lost 1 cent yesterday on the news, to close at $13.35 -- the deal meant little premium for shareholders compared to last Friday's close. NVIDIA's shares meanwhile, gained 3% to close at $33.59. NVIDIA CEO Jen-Hsun Huang commented, "With the products created through this combination, we intend to drive the next digital revolution, where the mobile device becomes our most personal computer." Some are viewing the merger as one of necessity, following AMD's acquisition of NVIDIA rival ATI Technologies, which was completed last month. Note that Wedbush Morgan analyst Craig Berger questioned the NVIDIA-PortalPlayer deal saying it "... comes as a surprise to us as we believe there are other semiconductor firms that offer more technology for less money." Pacific Growth Equities analyst Satya Chillara said PortalPlayer isn't damaged goods despite the likelihood of PortalPlayer losing its remaining business with Apple. Instead, analysts (including Berger, somewhat) see NVIDIA having a better chance of finding its graphics chip in the next iPod, utilizing PortalPlayer's system-on-a-chip technology. PortalPlayer also supplies chips and software to SanDisk, for its Sansa portable music players.
Related links: Nvidia press release. Additional coverage: BusinessWeek, Reuters and WSJ. Seeking Alpha commentary: NVIDIA Buying Portalplayer; Who Knew Last Week?Analysts Shoot Down Rumors of Intel NVIDIA Acquisition. Earnings conference call transcripts: NVIDIA Q2 2007PortalPlayer Q3 2006
Potentially impacted stocks and ETFs: NVIDIA (NASDAQ:NVDA), PortalPlayer (NASDAQ:PLAY), Advanced Micro Devices (NYSE:AMD), Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), SanDisk (SNDK) • ETFs: SPDR Semiconductor (NYSEARCA:XSD), streetTRACKS Morgan Stanley Technology (NYSEARCA:MTK), First Trust NASDAQ-100-Tech Index (NASDAQ:QTEC), Rydex S&P 500 Pure Growth (NYSEARCA:RPG)

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