quote:A dispute between graphics chipmaker Nvidia Corp. and Microsoft Corp. over chips for the Xbox video game console was partially resolved earlier this week, when during an arbitration panel hearing, Nvidia was ordered to continue supplying chips for the console. In April of this year, Microsoft filed for arbitration of a dispute over a March 2000 agreement with Nvidia Corp. Under the terms of that agreement, Nvidia was to supply certain graphics and processing chips for Microsoft's game console. The agreement covers the price Microsoft pays for the Xbox chips and the quantities in which they are produced. Although Nvidia did not reveal precisely when the ruling was issued, a quarterly report filed with the U.S. Securities and Exchange Commission, Nvidia stated: "The arbitration panel has issued an interim ruling that the company must supply Microsoft's reasonable requirements of chipsets, but no minimum or maximum amount has been set overall or for any particular period." Nvidia also raised Q4 wafer orders, presumably to satisfy the increased demand for the Xbox chips. The real blow for the graphics chipmaker could come when the arbitration panel issues a ruling on Microsoft's request for damages and lower prices on the supplied chips. Nvidia could, if Microsoft prevails, be forced to produce Xbox chips at a loss. Furthermore, increased demand for Xbox chips could reduce production of other Nvidia chips and delay shipments of new products. Earlier this week, Reuters reported that Nvidia has been recording the difference between what Microsoft is paying and what the software giant claims it should be paying as deferred revenue. The deferred amount, according to Nvidia was $46.2 million on July 28, the end of its fiscal second quarter. The arbitration hearing over the price and damages is being conducted in New York, and should be concluded by June 30, 2003.
