Nvidia Paid a Fair Price for Icera

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Nvidia ( NVDA ) recently agreed to acquire Icera, which offers baseband processors for smartphones and tablets. Below we examine the price that Nvidia paid for Icera, and conclude that Nvidia probably paid a fair price for the company. The acquisition gives Nvidia the chance to strengthen its chipset business, and compete against Qualcomm ( QCOM ), Broadcom ( BRCM ), Marvell ( MRVL ), Infineon (now acquired by Intel ( INTC )) and Texas Instruments (TXN).

Nvidia Will Need to Lift Mobile Chip Revenues to $1.3 Billion

Nvidia is paying $367 million for the acquisition and the business is going to impact its revenues for mobile chips . We currently estimate that mobile & game console computing chips constitute close to 15% of Nvidia's stock value. We expect fast growth in these revenues aided by Nvidia's Tegra processor series and estimate that these revenues will hit the $1 billion mark by the end of our forecast period. However, to justify the acquisition price of $367 million, Nvidia will need to lift these revenues to at least $1.3 billion instead of $1 billion. Given that the market for baseband is growing fast and is estimated at $15 billion in annual revenues, Nvidia shouldn't have too much trouble achieving this target. Consequently, we think that Nvidia is paying the right price for Icera.

Our price estimate for Nvidia stands at $21.29 , implying a premium to market price.

See our complete analysis for Nvidia's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: BRCM , INTC , MRVL , NVDA , QCOM

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