What a bizarre week it has been for Intel .
It started with news that the company would mysteriously and indefinitely delay (read: Cancel!) its anticipated new graphics microprocessor chip code-named Larrabee.
This was surprising on many levels. I can probably count on one hand the number of times a project has graduated to code-named status and is tracked for release that doesn't make it to market. So then the question was why. Why would Intel cancel such a high profile product?
Could it be part of a tacit agreement with rival Advanced Micro Devices , itself with a graphics chip initiative, and the two just recently settling a 5-year long bitter anti-trust battle that would ultimately cost Intel $1 billion?
Or, could it be as a result of the ongoing — some say "expanding" — Federal Trade Commission investigation into Intel's marketplace behavior as it relates to competitor nVidia , the industry leader when it comes to graphics microprocessor innovation?
nVidia shares climbed dramatically on Intel's decision to cancel Larrabee. But they also jumped in part because of renewed speculation that the company would buy nVidia. The rumor generated lots of coverage, and led to a new avalanche of speculation.
Which all sounds good until you truly understand the competitive environment in which Intel is trying to operate. Facing numerous investigations by State, Federal and international authorities, Intel would be hard pressed to embark on any acquisition right now. I mean, if CEO Paul Otellini bought a pack a cigarettes, it would probably spur speculation that the company was getting into the tobacco business.
An Intel source told me he appreciated the nVidia speculation, and that execs had a good laugh about it, determining a deal like that would not have passed muster under the Bush Administration, let alone under a new and emboldened Obama regime when it comes to anti-trust.
Sure, anything's possible. But investors ought to spend more time focused on the probabilities, not the possibilities. That's not to say nVidia doesn't make a play for AMD (that would be interesting!) But an Intel/nVidia get-together, Intel insiders tell me, isn't even a long-shot. More like a shot in the dark at worst, and wishful thinking at best by nVidia longs looking for some upside.
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