Nvidia wants some iPod magic, buys PortalPlayer

Posted Nov 6th 2006 2:22PM by Tom Taulli
Filed under: Deals

Nvidia Corp. (NASDAQ: NVDA) is a top developer of graphics chips for the PC market. But now the company wants to move into a new, hot market: chips for portable devices.

So today, Nvidia agreed to pay $13.50 per share for PortalPlayer (NASDAQ: PLAY).

It's a good move for PortalPlayer, whose stock has plunged this year – from $30 to as low as $8.50. Basically, in April, the company's marquee customer, Apple Computer, Inc. (NASDAQ: AAPL), said it would not use the company's chips in some of its iPods.

Now, with a much bigger backer (i.e., Nvidia), PortalPlayer should have lots of leverage. And, of course, Nvidia will get a footprint in a fast-growing market. In fact, on news of the deal, Nvidia's stock increased $1.03 to $33.63, over 3%.

It looks, however, like the deal was fairly leaky. That is, over the past couple weeks, the stock price of PortalPlayer surged about 25%. Were some people buying on insider information?

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

Tags: aapl, apple, Buyout, ipod, nvda, Nvidia, play, PortalPlayer