Microsoft and NVIDIA today announced the settlement of the legal dispute between two companies about pricing and volumes of the XBOX core-logic NVIDIA supplies to the Redmond, Washington-based software giant. The dispute started in April 2002 when Microsoft insisted on lowering prices and increasing volumes of the chips NVIDIA sells to Microsoft for the XBOX console.

In addition to resolving this pricing dispute, the two companies have agreed to collaborate on future cost reductions for the XBOX. More details will be provided during NVIDIA's quarterly conference call to be held February 13, 2003. Maybe it is the right time to collaborate about future price reductions, as Microsoft sees that its XBOX console expands its market presence very slowly, but we should remember that NVIDIA needs to earn money directly from XBOX core-logic selling, while Microsoft still intends to bring back the funds it invests in every console by selling games for the XBOX afterwards, so, any price reductions mean advantages for Microsoft, but not NVIDIA in terms of financials.

XBOX chips account for about 20% of NVIDIA's sales, according to Mercury News. We should keep in mind the fact that the XBOX is not a very successful console, for instance, Sony has managed to sell approximately 50 million of PlayStation 2 consoles since March 2001, while Microsoft has only succeeded in selling nearly 8 million of its XBOX devices since November 2001 globally and the trend is not really good for the Redmond, Washington-based software company.