Rumour is that Microsoft will buy Nvidia

The dark satanic rumour mill has manufactured a hell on earth yarn which claims that the shy and retiring Microsoft CEO Steve “there’s a kind of hush” Ballmer is thinking of buying the GPU maker Nvidia.

The rumours go back to May when in a Securities and Exchange Commission filing Nvidia talked of an agreement with Microsoft. Under the agreement, if anyone offers to buy shares equal to or greater than 30 percent of the outstanding shares of Nvidia stock, Microsoft may have first and last rights of refusal to buy it. This move would stop anyone other than Microsoft buying Nvidia.

The question is, why would such a deal be signed if Microsoft was not in an advanced state of negotiations with Nvidia to buy it.

There are some good reasons for Microsoft to buy Nvidia. Firstly Steve Ballmer has a lot of cash of shore which he can’t bring into the US otherwise he will have to pay tax on it. However this cash is great for buying foreign outfits such as Skype.

Nvidia is starting to make inroads into the tablet component market and manufactures parts for personal computers. Last week we saw Windows 8 tablets running on chips made by Nvidia. Samsung and Motorola are also big fans of Nvidia.

For a while it had been suspected that Apple may have been interested in buying Nvidia, for the same reasons that Microsoft might be interested. However any deal beteween Microsoft and Nvidia would pour cold water on that plan.

By adding up the numbers and dividing by their shoe size, the analysts have worked out that Microsoft would have to write a cheque for $3.4 billion for a third or more of Nvidia.

But with the agreement in place, Microsoft does not actually have to buy the company, since it could stop Jobs’ Mob or anyone else disrupting the supply chain for components for its new Windows 8 tablets. However if Microsoft got its claws into the company it would have control over Nvidia’s supply chain.

So far there is little on the grapevine to suggest that Steve Ballmer is rushing to buy Nvidia –  neither Microsoft, nor Nvidia have said a dicky bird about it, but there is much to suggest that something is afoot between the two outfits.