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NVIDIA Licensing Is Good News For Investors

Chris Lau, Kapitall: In the technology space, intellectual property (or IP) helps protect the company from litigation, but does not generate any cash flow. But w hen a company takes a step in monetizing those kinds of assets, the move bodes well for investors.  NVIDIA (NVDA) did just that. The graphics company said on its blog that it would license its GPU cores and visual computing patent portfolio to device manufacturers.

[Read more from Chris Lau:  Is Netflix Disrupting Traditional Television?]

NVIDIA pointed out that licensing was not something new for the company. Its earlier GPU was licensed to Sony (SNE) for the PlayStation 3. And visual computing patents generated $250 million annually from Intel (INTC).

Gain in Developer Support

Licensing will help grow the NVIDIA platform, through support for developers. Kepler is used in GeForce, Quadro, and Tesla GPUs. It is also the basis for NVIDIA’s mobile processor, next-generation Tegra processor, Logan. Developers will now have greater incentive to work primarily with the NVIDIA integrated graphics processing platform. Still, ARM Holdings (ARMH) will not need to worry. ARM licenses Mali, which is also a competitor to Imagination Technologies. The unit is not a big contributor to revenues for ARM Holdings.

Worries Still Remain

One of the main reasons NVIDIA shares are being held back is that the company is fighting to gain a spot in the Soc (system on a chip) market. This is a growing segment, thanks to the popularity of mobile devices, but the market is dominated by Qualcomm (QCOM).

NVIDIA is launching a SHIELD console. The price cut, ahead of the June 27 launch, suggests that demand will be weak. This negative perception could hurt shares, but NVIDIA may reduce its focus on the launch if interest declines.

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