Santa Clara, Calif.-based Nvidia Corp. today announced that it had settled legal arbitration with Microsoft Corp. that first came to light last year. The legal row involved the money Microsoft was paying Nvidia for the custom-designed graphics chips used in Microsoft’s Xbox video game console, which Microsoft buys in bulk.
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Nvidia makes the graphics chips that power video systems from many graphics card makers and computer companies, including Apple. Nvidia’s chips can be found in Apple’s flat-panel iMacs, eMacs and some Power Mac G4s, and most recently in the new 12 and 17 inch PowerBook G4 models.
What’s more, Nvidia also announced that it has agreed to collaborate with Microsoft on future Xbox cost reductions, paving the way for Microsoft to see improved manufacturing costs on the struggling video game system. Calling the news “a win for both companies,” Nvidia CEO Jen-Hsun Huang said that his company is delighted with results.
“Nvidia and Microsoft can now take our partnership to the next level and focus our substantial resources to maximize the full potential of Xbox game console,” Huang added.
The news comes at a good time — Microsoft has struggled to create a market niche for the Xbox in the wake of Sony’s dominance with its PlayStation 2 console and competition from Nintendo with its own, less expensive GameCube offering. Industry analysts have been disappointed with Xbox sales, which have tracked lower than what Microsoft has expected.
Microsoft revealed last week that the business unit responsible for Xbox lost a staggering US$348 million during the company’s second financial quarter — $168 million more than the home and entertainment unit lost for the same quarter a year ago. The stock prices of Nvidia and other independent Xbox component manufacturers fell in the wake of the news and indications from Microsoft that it would look for ways to improve manufacturing costs.
Nvidia’s stock was up on the settlement news, trading a dollar higher in early trading Thursday at $11.04.