. . . Intel doesn't need to buy Nvidia, so it probably won't. Scotia Capital analyst Devan Moodley points out that Intel has more than 2,000 employees in-house that are working on graphics technologies. "[Intel] is more likely to enter the discrete graphics space themselves than buy Nvidia," Moodley said in a report Wednesday. . . .
There's also the fact that Intel has been streamlining its businesses, not expanding them. Jon Hykawy, an analyst at Research Capital in Toronto, points out that Nvidia's $2 billion in revenue and 40% gross margins are right in line with the revenues and margins of businesses that Intel has been getting rid of. "We believe this horse of a rumor is dead; stop flogging it," Hykawy wrote on Oct. 6. . . .
Another thing: Nvidia can afford to stay independent. When AMD decided to buy ATI, it basically opted to cut ATI's relationship with Intel, explains American Technology Research analyst Doug Freedman. A PC co-branded with Intel's Centrino almost certainly won't be carrying ATI graphics technology, he explains. That means a nice big pot for Nvidia, which can continue to do business with both chip giants.. . .
Nvidia is one of more than one hundred companies currently embroiled in the stock options backdating fiasco. The company volunteered to look into its past options-granting practices on its own. We have seen plenty of hairy things come out of these reviews. Important executives have left or have been pushed out of companies and thousands of billable hours from accountants and lawyers are piling up. Analysts like American Technology's Freedman think the risk to Nvidia's business is nominal. "From what I understand, the issues that Nvidia has sound very clerical in nature and not like attempts of high-level fraud," says the analyst.
Nevertheless, the review has caused a bit of a mess. Because of its options investigation, Nvidia delayed the filing of its fiscal 2007 second-quarter results. In an early August press release, Nvidia told Wall Street that it raked in $687.5 million in revenue during the three months ended July 30, (a 20% increase from the same period a year before), but it couldn't provide any further earnings guidance.
...buying the company's shares on that projection might be foolish. Freedman, who has a 12-month price target of $36 on Nvidia's shares, notes that at $33 recently, Nvidia's stock is clearly ahead of itself. "The stock is almost fully reflecting what I expect for the full year," he says. Freedman suggests that investors should wait until the stock dips below $30 a share before buying.
Nvidia may be single and attractive, with loads of prospects ahead of it, but right now it's one expensive date for investors. Could it make for a great catch at a lower valuation? Absolutely. But until it falls back, there are plenty of less pricey fish in the sea of technology stocks.
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