Notice comments on graphics chip company (?)
Wednesday May 12, 10:29 pm Eastern Time
Nintendo's new video game system to feature IBM brain
(Updates with Nintendo exec quotes, grafs 4, 17, 18, analyst comment graf 6)
By Scott Hillis
LOS ANGELES, May 12 (Reuters) - Japan's Nintendo Co. on Wednesday said it has enlisted International Business Machines Corp. to make a powerful new chip for its next-generation game system in a $1 billion deal that heats up the race for dominance in the video game market.
Under the agreement, to be implemented over several years, computer giant IBM (IBM - news) is to design and manufacture the ''Gekko,'' a 400-megahertz custom version of its PowerPC microprocessor.
Nintendo said its next-generation gaming console, dubbed the ''Dolphin,'' will hit the market in time for the 2000 holiday season and would boast the fastest and most realistic action yet in an industry where blistering speed is everything.
''In a nutshell, Dolphin hardware and software will be fast, powerful and inexpensive,'' Howard Lincoln, chairman of Nintendo America, told a news briefing.
Analysts said the announcement puts Nintendo firmly back in the race with rivals Sony Corp. and Sega Enterprises Ltd. , which are both loudly touting the speed and performance of their upcoming next-generation machines.
''It makes it very interesting now that all three of them are in there,'' said Jeremy Schwartz, a senior analyst with Forrester Research in Cambridge, Mass. ''Everybody had been wondering what they (Nintendo) were up to.''
For IBM, the deal is a chance to show off its latest microprocessor technology that uses smaller, copper wiring that is more efficient than traditional aluminum connections.
It marks a branching out of the PowerPC chip -- best known as the brains of Apple Computer Inc. (AAPL - news) computers -- into high-powered gaming devices.
News of the deal helped send IBM stock to $225.125, up $4 on Wednesday.
The chip will be paired with a special graphics processor designed by ArtX, a Silicon Valley computer chip designer that has set the de facto standard for realistic graphics in the gaming industry.
The Dolphin will succeed the Nintendo 64 console. Nintendo 64 hardware and software held a 28 percent slice of the $5 billion 1998 U.S. video game market. That trailed the Sony PlayStation's 54 percent, according to research firm PC Data.
Intent on keeping its market lead, Sony says it will launch its PlayStation II next year, powered by a custom Toshiba processor.
Third-place Sega, seeking to regain its once-lofty perch in the market, is set to beat its rivals to the punch by launching its Dreamcast machine in September, backing it with a $100 million marketing blitz.
Both Sega and Sony will feature chips capable of processing up to 128 bits of data at the same time, double the current 64-bit machines. It was unclear if Nintendo's new chip would offer 128-bit performance.
Hoping to gain a competitive edge, the companies are packing the devices with new features. For instance, Sega's Dreamcast will be able to connect to the Internet.
Earlier in Tokyo on Wednesday, Nintendo and Matsushita Electric Industrial said they had struck a deal in which Matsushita will make a digital versatile disc (DVD) player through its Panasonic brand for the machines.
Lincoln said the partnership with Matsushita also would lead to other consumer devices using the Dolphin technology. But he declined to reveal details, saying only that it would bolster Nintendo in its fight with Sony and Sega.
''I'm quite confident we will do quite well in the coming battle. In fact, I can hardly wait,'' Lincoln said.
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