NVIDIA to acquire PortalPlayer for US$357M

Until April 2006 PortalPlayer sold 90 percent of their chips to Apple for use in iPods. Apple switch suppliers in April and dropped PortalPlayer, reportedly because of product delays, causing PortalPlayer stock to drop over nine dollars in one day.
According to EE Times:

PortalPlayer said that it has recently been advised that the follow-on to its PP5021 media processor chip has not been selected by Apple for use in its new mid-range and high-end flash-based iPods.... The chip company believes that the PP5021 will continue to be used in other members of the iPod family.

NVIDIA (NVDA) yesterday announced an agreement to acquire San Jose-based PortalPlayer (PLAY) for US$13.50 a share in cash, or US$357 million, or US$161 million net of PortalPlayer's cash position.
Craig Berger, an analyst with Wedbush Morgan Securities wrote that the deal is "part of NVIDIA's overall handheld product strategy, likely combining PortalPlayer's application processor with NVIDIA's graphic processor for mobile devices such as PDAs, game players and handphones."

The company still provides chips to other digital music player manufacturers and is reported to be pursuing the sub-$100 player market.

PortalPlayer chips are still used in the full-size 30 and 80GB hard drive-based iPods but are no longer used in the new second-generation (aluminum) iPod nano. If you're wondering if your iPod has a PortalPlayer chip scroll through the Settings > Legal menu.