Silicon Graphics Inc will this week sell 5.5 million shares in its MIPS Technologies Inc subsidiary for between $12 and $14 per share. Given the success of recent microprocessor offerings, such as ARM Holdings, the stock should fly. But it’s being propelled largely on the fortunes of the Nintendo 64 game console which use its […]
Silicon Graphics Inc will this week sell 5.5 million shares in its MIPS Technologies Inc subsidiary for between $12 and $14 per share. Given the success of recent microprocessor offerings, such as ARM Holdings, the stock should fly. But it’s being propelled largely on the fortunes of the Nintendo 64 game console which use its RISC and graphics processors, as well as Nintendo game cartridges on which MIPS also gets a royalty. Although the games contain no MIPS intellectual property it’s thought MIPS cleverly negotiated for a piece of Super Mario’s success. If Nintendo does not choose MIPS to supply the chip design for its next-generation device then MIPS has a problem as 80% of its revenue for the last nine months to the end of March were derived from Nintendo sales. During that period MIPS lost $4.2m on sales of $45.81m. It may reach 90% in the first quarter to the end of September, thinks Microprocessor Report. One potential hurdle is Artx Inc, a start- up founded by ex-SGI employees to build MIPS-compatible parts, which is to develop the graphics hardware for Nintendo’s next- generation game console. It’ll also play a role in selecting a CPU for the device (CI No 3,420). MIPS has agreed to shelve a lawsuit against Artx, at least for the time being. 67% of MIPS’ 1997 $37.1m revenue is attributed to Nintendo – MIPS lost $44.03m that year; and 22% of 1996’s $35.54m – when MIPS lost $28.26m – are also down to the gamer. The book numbers filed with the SEC show MIPS parent Silicon Graphics Inc has been losing money hand over fist on MIPS for years. However, the numbers belie the reality as MIPS bears all the costs of development and yet all royalties from the sale of workstations and servers using the chip are pocketed and accounted for by SGI. The spin-out sees the majority of MIPS research and development team – 185 out of 221 – move over to SGI to work on the design of mainstream MIPS CPUs. SGI will still hold 85.2% of MIPS after the IPO. The Report figures MIPS, which will henceforth develop chips for the embedded market while SGI takes over development of mainstream CPUs, gets around $10 for every Nintendo system or game sold, of which the CPU accounts for between $1 and $3. NEC Corp supplies Nintendo with the MIPS parts, on which MIPS gets a royalty. Although a MIPS chip built by LSI Logic is also used in Sony Corp’s more popular PlayStation, MIPS gets very little revenue because LSI designed the part and Sony doesn’t pay a royalty on game sales, meaning MIPS only gets a royalty on the license to LSI. That said, 48 million MIPS chips were sold last year, more than any other except Motorola Inc’s 680×0 line. The Report says there’s potentially a very lucrative upside to the smaller, publicly-traded MIPS. It’s heading for other kinds of consumer electronics markets and embedded applications. Even if it loses its Nintendo revenue stream the company’s other contracts would still bring it in some $1m a month. To help it keep the contract and develop a new product roadmap for the digital consumer and embedded chips, MIPS has hired former director of National Semiconductor Corp’s technologies unit Gideon Intrater to be its new vice president of product marketing.