On the heels of a March 18 DigiTimes report which supposed that NVIDIA (NASDAQGS: NVDA) was in negotiations to acquire VIA Technologies (TAI: 2388.TW), it has been announced today that NVIDIA has moved ahead with the rumored acquisition plans to assume ownership of VIA.

For VIA, an acquisition from one company or another has seemed inevitable. VIA was once a strong contender in the IT world with critically-important chipsets such as the KT266A or KT333. Eight years on, the firm has lost much of its relevance and faltered in providing serious competition to Intel’s chipset business. A confluence of critical missteps substantially damaged the company’s market share in both the Pentium 4 and AMD segments, leaving Intel to capture the sum of the former and NVIDIA the vast majority of the latter. Today VIA’s flagging chipset division exists only to produce parts for its marginally popular Nano products.

These losses have had a significant impact on VIA’s revenues. In 2008, VIA was reporting sales revenues of $241.6 million–less than a quarter of the company’s net revenue of $1 billion just 5 years ago. VIA’s own EPIA product line — including its Nano chip — have evolved in both presentation and architecture, and the mini-ITX form factor has found some niche success, but neither effort has come close to restoring the company’s old profits.

Financially, NVIDIA was best prepared to assume control of VIA’s assets. VIA has a market cap of just $675 million and an enterprise value of $510 million after accounting for liquidity and debt balances. NVIDIA made a net income of $797.6 million in 2008 and has some $1.8 billion in debt-free cash on hand. The famed GPU firm has plenty of room to accept any price that VIA could reasonably demand.

Strategically, NVIDIA has already been seen as a strong contender in a potential VIA acquisition. It is accepted that NVIDIA stands to lose substantial revenues if it loses its Nehalem chipset license in the increasingly icy NVIDIA/Intel relationship. The firm has also been accused of spinning its wheels in the GPU market to compensate for a lack of real innovation. Given the downturn of the discrete GPU market and NVIDIA’s impending losses, it makes sense that the firm would look to other avenues to cushion the blow. Adding intellectual property from VIA Technologies would immediately enhance NVIDIA’s portfolio in the netbook, UMPC and MID markets–three fields which NVIDIA has been eyeing with innovations like the Ion and the Tegra platforms. Given that NVIDIA may receive no support from Intel with the Ion — and may be fighting Intel FUD in the channels — providing a complete solution would serve the firm well.

Alternatively we need to look at NVIDIA’s aspirations for x86. The firm has previously expressed interest in eventually developing an x86 part for integrated or embedded markets. We need only look back to the March 4 Morgan Stanley Technology conference to witness NVIDIA’s x86 aspirations:

“Well I think some time down the road, um, it makes sense to take the same level of integration that we’ve done with Tegra, because Tegra is by (unclear) definition a complete computer on a chip, and the requirements of that market are such that you have to be very low power, very small, but highly efficient. So in that particular space it made a lot of sense to take that approach. And some day it’s going to make sense to take the same approach in the, uh, x86 markets as well. Not for every SKU, though. If you look at the high end of the PC market, I think it’s going to stay fairly discrete. Cause it needs to be the best of all worlds. I think when you get into the low cost, you know (unclear) on the MID or netbook type space, um, a highly integrated system on chip is going to make sense. Um, so the question is when. Not so much, I think, um, you know, um, if. I think the question is when.”

Acquiring VIA Technologies gives NVIDIA immediate access to an x86 license in a manner that complies with the transferrence clauses littered throughout the contract.

The market is rough, VIA is flagging and NVIDIA must obtain new market angles to reconcile the GPU downturn. Acquiring VIA Technologies is a solution that many have suspected over the years, and has finally come to fruition to the benefit of both firms over the long term.

Here’s your press release:

SANTA CLARA, CA — MARCH 31, 2009—NVIDIA (Nasdaq: NVDA), the world leader in visual computing technologies and the inventor of the GPU, today announced that it has signed a definitive agreement to acquire VIA Technologies Inc., an industry leader power efficient x86 platforms. VIA’s technologies are widely adopted with more than 276 million shipped small form factor and embedded platforms.

“The VIA team is world class, and is passionate about the same thing we are—creating the most amazing mobile experience,” stated Jen-Hsun Huang, president and CEO of NVIDIA. “By combining the teams that created the world’s most pervasive high definition mobile brands, we can now deliver mobile performance that hundreds of millions of users around the world demand.”

“NVIDIA is the perfect fit for us. They have the world’s most robust system-on-chip design and vast mobile experience. We are united by a common culture based on a passion for innovating and driving the consumer experience,” said WenChi Chen, President and CEO of VIA.

“The computer industry is moving towards smaller and more mobile products, combining a robust SoC platform with low voltage processing will create a new generation of smaller, more powerful devices,” continued Mr. Huang. “NVIDIA’s ION™ technology, which is rapidly becoming a leading UMPC platform, broadens the performance profile of ultra-mobile products into territories as yet untapped by our competitors.”

VIA was founded in 1987 and has offices in Silicon Valley, Texas, China, Taiwan and Germany.

The acquisition remains subject to customary closing conditions.

More details about the acquisition will be provided during NVIDIA’s quarterly conference call, to be held on Friday, April 3, 2009 at 2:00 PM, Pacific Time. The Company’s prepared remarks will be followed by a question and answer period, which will be limited to questions from financial analysts and institutional investors. To listen to the conference call, please dial 212-231-2901; no password is required. The conference call will also be webcast live (listen-only mode) at the following Web sites: www.nvidia.com and www.streetevents.com.

Replay of the conference call will be available via telephone by calling 800-633-8284 (or 402-977-9140), passcode 21354792, until April 19, 2009. The webcast will be recorded and available for replay until the company’s conference call to discuss its financial results for its first quarter, fiscal 2009.

About VIA
VIA Technologies, Inc. is the foremost fabless supplier of power efficient x86 processor platforms that are driving system innovation in the PC, client, ultra mobile and embedded markets. Combining energy-saving processors with digital media chipsets and advanced connectivity, multimedia and networking silicon enables a broad spectrum of computing and communication platforms, including its widely acclaimed ultra compact mainboards. For more information visit http://www.via.com.tw

About NVIDIA
NVIDIA is the world leader in visual computing technologies and the inventor of the GPU, a high-performance processor which generates breathtaking, interactive graphics on workstations, personal computers, game consoles, and mobile devices. NVIDIA serves the entertainment and consumer market with its GeForce® products, the professional design and visualization market with its Quadro® products, and the high-performance computing market with its Tesla™ products. NVIDIA is headquartered in Santa Clara, Calif. and has offices throughout Asia, Europe, and the Americas. For more information, visit www.nvidia.com.