Enormous changes at the last minute

Posted: 08.23.03

Nvidia buys MediaQ and boards the fast train to handheld devices 

Nvidia is buying MediaQ? Now that's a good use for all that dough Nvidia has had lying around. MediaQ has a line of controllers for handhelds with a range of features for every class of handheld including low-cost parts that enable video and MP3 playback. In addition, the company has just introduced the MQ9000 line, codenamed Katana, an SOC that combines ARM processor, graphics processing, video, and Java processing to take on mighty Intel, TI, and ST. Even more impressive, the company has delivered on their promises time after time.

The cell phone market is already huge and the companies enabling advanced graphics, games, camera apps, and MP3 are going to get an increasing share of it. Furthermore, this reckoning does not include PDAs, a segment that many believe will become revitalized with new products and improved communications capabilities, and the handheld game device, an emerging market with plenty of potential (consider the GameBoy).

It's just as important sometimes to see what a company does when it has a setback, and MediaQ weathered a big one a couple of years ago when Infineon, a fab cut them off. MediaQ managed to satisfy their commitments with the last of the Infineon parts coming off the line and switched fabs (they are working with UMC), and they introduced a new part for an even ASPs and new customers.

Nvidia has been planning to build a chip for handhelds for some time, but their competitors probably didn't lose too much sleep over it. How could Nvidia, a company with a genius for building big, powerful processors, scale down to the requirements of the handheld market? ATI has had the Imageon chip in the market for a couple of years now and it's just now making headway. How can Nvidia catch up?

Well, now we know how Nvidia is going to catch up in the handheld market—by buying the company that is, it can be argued, the top contender in the market. The company already has major wins in the market. In PDAs they have the Sony Clie (although Sony has announced plans to build their own processor) and also products from HP and Toshiba. MediaQ is also well positioned in the telephone hand-set with wins in Japan that ATI can only dream about. With this acquisition, Nvidia has leapfrogged ATI. And there are a lot of people losing sleep all over the world.

Okay, so here's the part we don't get. Aside  from $70 million and one hell of a powerful parent company, what's in it for MediaQ? MediaQ's revenues are estimated to be in the range of $30 million, and the company expects to grow quickly as features such as video come into wide demand. And MediaQ stands at the ready with a part that can compete very effectively against higher priced options from Intel and TI and head to head with Epson—MediaQ's most direct and most viable competitor in the market. MediaQ is very well positioned to go public and could have expected a much bigger infusion of cash than it gets from Nvidia. The advantage, looked at from here, seems to be all on Nvidia's side.

The merger certainly makes good sense in the industry, and one place it makes spectacular good sense is in the wild blue yonder of handheld gaming. There is big promise here. Nokia is putting the full force of its resources into N-Gage, Nintendo has been supported during lean times by GameBoy, and Tapwave's new machine, code-named Helix (and sporting an ATI chip), is on the way and so is the potential killer shark in the water, Sony and the PSP. Furthermore, what if the thing plays video as well as games? How 'bout MP3? Messaging?

There are challenges here as well, and those too are all on the Nvidia side. Will the company stand back and let MediaQ do what they've already proven they can do? Can it continue MediaQ's marvelous record of meeting its customers' requirements and its internal goals?

This is a field we've been covering with increasing frequency. It's pretty obvious why.