NVIDIA announced today that it would be entering into a new cross-licensing agreement with Intel lasting for the next six years. Intel will be paying NVIDIA a total of $1.5 billion dollars in licensing fees through five annual installments, beginning on January 18, 2011. In addition, all outstanding legal disputes have been dropped between the two hardware leaders. NVIDIA believes that this agreement is a sign of a new era for the company. Both companies believe that this agreement will make it much easier for them to move into the future of computing, including the expansion into mobile and cloud computing. Intel will have continued access to NVIDIA’s complete range of patents while under the new agreement, and NVIDIA will retain the use of Intel’s patents. How ever, this excludes Intel’s proprietary processors, particular chipsets for the Intel platform, and flash memory. The current existing agreement will expire March 31, 2011.
A portion of the proceeds are going to be accounted for and attributed to the settlement of any prior legal claims. NVIDIA anticipates this amount to be less than $100 million, and expects that it will be included in the company’s fourth-quarter results. The licensing fees balance will be accounted for over the six-year agreement term on a straight-line basis. It’s currently estimated that this will amount to approximately $233 million dollars annually, including operating income as well as an increase in net income of $0.29 per diluted share, over the course of an entire year. A conference call will be conducted to discuss the license agreement.