RealTime IT News

NVIDIA, Microsoft Settle Xbox Fight

The legal battle over graphic chips in Microsoft's Xbox game console is over.

Santa Clara-based NVIDIA Thursday said the two sides have "settled all issues related to pricing of the Microsoft Xbox GPU (graphics) and MCP (audio and networking) chipset and have ended the arbitration between them."

Specific details of the legal settlement were not disclosed. NVIDIA said it would talk about it a little more during its quarterly conference call on February 13.

"This is a win for both companies, and we couldn't be more delighted with the results," said Jen-Hsun Huang, president and CEO at NVIDIA. "NVIDIA and Microsoft can now take our partnership to the next level and focus our substantial resources to maximize the full potential of Xbox game console."

In addition to resolving this pricing dispute, the two companies said they would work together on "future cost reductions." A necessary move, considering the devices have not been flying off the shelves as much as the Redmond, Wash.-based software giant had hoped.

"With the arbitration resolved, we look forward to continuing the partnership between Microsoft and NVIDIA and turning our focus to building on the great success of the Xbox platform," said Microsoft senior vice president and chief Xbox officer Robbie Bach.

The legal battle started back in April 2002 when NVIDIA was asked to drop its prices after it became apparent that Microsoft was losing about $100 on every unit it sold. NVIDIA balked at the proposition claiming it deferred revenue on sales of the Xbox chips in an amount equal to the difference between what Microsoft has paid for the chips and what Microsoft claims it should be paying.

Microsoft's TV platform and PC games division (which includes Xbox) this month posted a quarterly operating loss of $348 million, compared with $180 million in the same period a year ago.

The loss grew as the Xbox became available around the world, driving up the division's revenue from $833 million to $1.28 billion. In the video game console industry vendors typically lose money on each console they sell, but try to earn that back when selling games, accessories, and services.

NVIDIA aside, the Xbox has an Intel 733MHz CPU with Streaming SIMD Extensions, 64MB of unified memory architecture DDR RAM, a 5x DVD drive with movie playback, an 8GB Hard Drive, an 8 MB memory card and 10/100 MBps Ethernet. It is "broadband enabled" and has an optional 56K modem (software modem is standard).