Apple acquisition is a disappointment: Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential

Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential.

24 November 13 14:41, Shmulik Shelach

On March 5, 2000, graphic chipset vendor Nvidia Corporation (Nasdaq: NVDA) broke through the glass ceiling. It signed a contract to supply graphic processing units (GPUs) to Microsoft Corporation (Nasdaq: MSFT) for its Xbox game consoles. Nvidia received a down payment of $200 million (30% of turnover that year), strongly contributing the jump in its sales from $735 million to $1.91 billion.But the Nvidia-Microsoft deal had a dark and draconian side. Nvidia stated in its financial reports over the years that Microsoft had the right of first refusal should any third party want to buy a substantial bloc of shares in the company. It is difficult to know whether Microsoft ever exercised this condition, which could have harmed rivals’ strategies for graphic processors, but it might explain why Nvidia has never been acquired.

If the deal with Nvidia was draconian, then Microsoft had the means to affect the future ofPrimeSense Ltd.

, at least from the moment the companies signed a contract. The agreement with the Israeli company, which supplied Microsoft with gesture recognition hardware and software for the Xbox, was less dramatic, but at least once, PrimeSense had to obtain Microsoft CEO Steve Ballmer’s permission for a deal: the $50 million private equity investment by Silver Lake Partners in late 2010.

An urban legend about PrimeSense says that Microsoft made an offer to acquire PrimeSense that was hard to refuse, but when PrimeSense refused it, Microsoft moved on, acquiring the technology of a rival and developing it in-house. Whether or not any such offer was actually made, it seems that the convoluted history of the technology world did not allow PrimeSense to become the Israeli Nvidia. Both achieved breakthroughs in the same way for the same product by the same company, but the two companies then went down different roads.

PrimeSense’s acquisition by Apple Inc. (Nasdaq: AAPL) resembles its acquisition of another Israeli company – Anobit Technologies in early 2012. In that case, too, the acquisition was the less desirable option by a successful technology company that had promised great value, but ended with an acquisition at a merely reasonable price.

In late 2010, PrimeSense was en route to become another Nvidia, but the PrimeSense of 2013 is headed to become a sexy feature in the Apple ecosystem. Such a development might be the dream of every start-up, but PrimeSense had hoped for more. After all, it was already part of the ecosystem of the company that (still) operates almost all of the world’s computers, providing a solution that users dream of, and with enough cash reserves to finance its next move. But as often happens, things went wrong. Over the past two years, PrimeSense lost part of its motivation and capabilities, and however respectable the end, it was far from its potential.