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Nvidia's stock jumps on license plan; Wall Street eyes Apple

Nvidia Chief Executive and co-founder Jen-Hsun Huang speaks during the Reuters Global Technology Summit in San Francisco June 18, 2013. REUT
Nvidia Chief Executive and co-founder Jen-Hsun Huang speaks during the Reuters Global Technology Summit in San Francisco June 18, 2013. REUT

By Noel Randewich

(Reuters) - Shares of chipmaker Nvidia surged nearly 6 percent on Wednesday after the company said it plans to license its graphics technology, opening the door to new business with Apple, Samsung Electronics and other mobile device makers.

Chief Executive Officer Jen-Hsun Huang told the Reuters Global Technology Summit in San Francisco on Tuesday that licensing graphics cores and visual patents would help Nvidia take greater advantage of the booming market for smartphones and tablets and tap markets it could not reach through selling its own chips.

"If there was ever a way for Nvidia to get into Apple, the IP (intellectual property)licensing angle is likely it," Raymond James analyst Hans Mosesmann wrote in a note to clients.

With its core PC market struggling, Nvidia in recent years has established itself in the fast-growing mobile market, creating its Tegra line of processors for tablets that take advantage of its graphics expertise.

But Nvidia has faced tough competition from the much larger Qualcomm, limiting its success. Apple designs its own processors for the iPhone and iPad, and top Android smartphone maker Samsung increasingly uses its own processors in its devices.

Nvidia will also be competing against UK-based ARM Holdings, which licenses processor technology to chipmakers including Nvidia and is increasingly targeting graphics as well. ARM's stock was down more than 1 percent.

Nvidia plans to start by licensing its Kepler architecture that it uses to make high-end graphics chips for PCs.

Some analysts said Nvidia's plan to license its cutting-edge graphics technology could undermine its own mobile chip sales.

"Why buy Tegra when you can license the best part for a fraction of the price? On the flip side, this would also allow management to monetize previously unaddressable markets," Evercore analyst Patrick Wang wrote.

Nvidia's stock was up 5.62 percent at $15.21. ARM's stock was down 1.17 percent at $39.05 on Nasdaq.

(Reporting by Noel Randewich; Editing by Phil Berlowitz)

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