NVIDIA to acquire 3dfx graphics assets

Oh my goodess, this is big news. NVIDIA just announced they will be acquiring 3dfx's "core graphics assets." From the press release:
SANTA CLARA, CA – DECEMBER 15, 2000 – NVIDIA® Corporation (Nasdaq: NVDA) today announced that it has signed a definitive agreement to acquire certain graphics related assets of 3dfx Interactive (Nasdaq: TDFX), a pioneer and a recognized leader in graphics technology. These graphics related assets include, but are not limited to, patents, pending patent applications, trademarks, brand names, and chip inventory related to the graphics business of 3dfx. In addition, 3dfx and NVIDIA have agreed to stay the patent infringement litigation between them through the closing of the transaction, at which time it will be jointly dismissed with prejudice.

Under the terms of the agreement, NVIDIA will pay to 3dfx a total consideration of $70 million in cash and 1 million shares of common stock. The asset acquisition has been approved by the board of directors of each company and is subject to 3dfx shareholder approval, the satisfaction of regulatory requirements and other customary closing conditions. This acquisition will be accounted for as a purchase and is expected to be complete in the first quarter of NVIDIA's fiscal year 2002.

You can read it for yourself right here at NVIDIA's web site. There's also a Q&A posted here. The deal is apparently structured so NVIDIA doesn't acquire any of 3dfx's liabilities, hence the talk about "graphics assets." This is the effective end of 3dfx. From the Q&A:
2. Why is NVIDIA purchasing these assets? What is the business reason for this?

NVIDIA believes that 3dfx has a tremendous amount of resident expertise in graphics technology. 3dfx, with its patented and award-winning technology, has been recognized for its ability to bring some of the world's finest games, educational content, interactive entertainment and media-rich business applications to life.

NVIDIA as the worldwide leader in graphics processors and media communications devices has been on a phenomenal growth path over the past few years. From $29 million in revenues in 1997, the Street expects us to reach over $700 million in revenues by 2001. We continue to see more opportunities in our business as we extend our product offerings and expand our target market.

Upon closing, this purchase of assets will also dissolve the cross litigation with 3dfx.

The agreement should get both companies out of a bind. 3dfx gets to maximize the value of their sagging stock once and for all, and NVIDIA dodges some purportedly solid patents 3dfx held of basic graphics techniques like multitexturing.

It's up to 3dfx to liquidate what remains of the company, including—near as I can tell—the jobs held by 3dfx's employees. If NVIDIA is to "acquire" any of 3dfx's employees, it appears that would have to happen outside the range of this agreement.

Update: 3dfx's Scott Sellers has posted a letter to 3dfx's customers, in addition to its own press release and its financial results for the third quarter. Sellers writes:

It's no secret that 3dfx has been in a very poor financial state for some time. Although we've done our best to avoid taking drastic action, we have finally been forced to admit that there is no possible way we can continue in our current state. As such, we have negotiated an agreement with nVidia that will allow us to provide the best possible result to our creditors, investors, employees and customers.
'tis sad to see it happen.
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