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The heart of the dispute involved the pricing of components within the Xbox, with Microsoft being keen to drive costs down to make its console more competitive but Nvidia being squeezed on its margins.

Specifically, Microsoft's pricing for Xbox GPU (graphics) and MCP (audio and networking) chipsets led both companies to enter an arbitration process. This has now been resolved.

In an official statement, Nvidia states that the companies have reached a settlement on all

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issues. Does this mean Nvidia has resisted further Xbox cost cuts? It seems not. Nvidia's statement says that 'the two companies have agreed to collaborate on future cost reductions for the Xbox'.

Nvidia expressed itself as satisfied with the resolution. 'This is a win for both companies, and we couldn't be more delighted with the results,' said Jen-Hsun Huang, president and CEO at Nvidia. 'Nvidia and Microsoft can now take our partnership to the next level and focus our substantial resources to maximize the full potential of Xbox game console.'

As for Microsoft, the company is looking to turn its attention away from the dispute and back to the Xbox. 'We look forward to continuing the partnership between Microsoft and Nvidia and turning our focus to building on the great success of the Xbox platform,' stated Robbie Bach, a senior VP of Microsoft who revels in the title of Chief Xbox Officer.

Full details of the agreement, and the impact of the Xbox on Nvidia's revenue, will be revealed when Nvidia announces its quarterly results, 13 February.