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Analyst pooh-poohs Intel-Nvidia merger

Nvidia stock perked up Wednesday on rumors Intel might buy the graphics chip maker to counter rival Advanced Micro Devices' acquisition of ATI Technologies, but Merrill Lynch analyst Joe Osha doubts the idea.

"We think it's wrong to assume that Nvidia must be a potential target for Intel just because AMD is buying ATI Technologies. What AMD wanted out of its deal was a workable platform strategy. Intel has that already," Osha said in a report published Thursday.

Indeed, Intel already has a strong business selling chipsets, the chips that support central processors, that have built-in graphics. However, Intel's integrated graphics aren't up to the demands of top-end graphics tasks such as computer-aided design or video games.

Osha also thinks Intel and Nvidia are poorly aligned when it comes to manufacturing. "Intel's whole manufacturing process is tuned to very high volume and relatively slow product cycles, whereas GPU (graphics processor unit) product cycles are usually quicker," Osha said.

Another factor is Microsoft's Windows Vista operating system, which taxes graphics cards and is likely to spur sales of add-in graphics cards, he said, giving Nvidia a boost and encouraging managers and shareholders to keep the company independent.