August 16, 2011

Will Google Buy Nvidia Next?

Yesterday’s big news was Google buys Motorola. Will Google buy Nvidia next?

Google said the Motorola acquisition was primarily to get access to Motorola’s mobile patents, which helps Android in the ongoing patent wars.

But, Google’s Motorola acquisition is not just for patents. And not just to defend the Android ecosystem in the patent wars. And, it is definitely not to just improve Google TV. With Motorola, Google can now offer both the mobile OS and mobile devices – a more complete solution like Apple.

In the Q3-2007 to Q2-2011 period, while Google’s revenues grew an impressive 2.1x ($4.2B to $9B), Apple’s revenue grew an incredible 4.6x ($6.2B to $28.5B). Most of Apple’s growth came from selling the iPhone and iPad mobile devices.

Offering a complete solution, similarly, will enable Google to capture more revenue and profits from the mobile market and also improve the overall quality of its mobile products.

So, what is missing from this “complete solution” picture for Google?  Homegrown silicon.

Apple designs its own ARM cpu and by doing so, can optimize the performance at the hardware level and gets the edge over Android devices. Google Android devices, in contrast, depend on ARM cpu’s designed by 3rd parties such as Nvidia, Qualcomm and others. While Nvidia and others are competent designers, having the software and hardware designed separately results in a somewhat disjointed solution.

To compete with Apple (and upcoming Intel), sooner than later, Google will need to start designing its own silicon. With no silicon expertise of its own Google will need to acquire a cpu designer. And, Nvidia, one of the most successful ARM cpu designers, is a natural fit.

Nvidia, getting squeezed in the PC market by Intel is facing a stagnant future. Looking for growth, Nvidia is staking their future on Android with their Tegra and Kal-El chips. Nvidia will be very motivated to get acquired by Google.

So, when does Google buy Nvidia?  Time will tell.