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IBM, Nintendo in $1B pact
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May 12, 1999: 5:23 p.m. ET
Tech giant to build custom chip for next-generation video game console
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NEW YORK (CNNfn) - IBM Corp. Wednesday announced a $1 billion multiyear pact to build a custom computer chip that will power Nintendo Co. Ltd.'s next-generation home videogame console.
Additionally, Nintendo said Matsushita Electric Industrial Co. will provide digital video disk (DVD) drives for Nintendo's new machine, which is due to ship by fall 2000.
The deals further heat up the battle to offer the fastest home videogame system - a fight that will be at its most contentious during the 2000 holiday season, when two eagerly awaited new systems will be available.
It could also mean new life for IBM's PowerPC venture, which has never fulfilled its promise as an alternative PC chip.
Big Blue powers "Dolphin"
Kyoto, Japan-based Nintendo's new console, code named "Dolphin," will be powered by a custom-built, 400-MHz IBM PowerPC chip. The processor will work with ArtX Inc.'s 3-D graphics chip.
Nintendo is locked in a fierce battle with Sony Corp. (SNE) and Sega Enterprises to provide the fastest home videogame system with the best graphics.
Sony began demonstrating its PlayStation II system last month, featuring a 300-MHz processor manufactured by Toshiba Corp. Sony plans to introduce PlayStation II worldwide in the fall of 2000.
Wednesday's deal also could turn out to be a coup for IBM. The PowerPC business, a joint venture with Motorola Inc. (MOT) and Apple Computer Corp. (AAPL), has never been able to make a dent in Intel Corp. 's (INTC) PC-chip dominance.
The PowerPC chip is most commonly known as the power behind Apple's Macintosh line of computers, but it never made a mark in the Windows-based PC market.
IBM's chip designed for the Nintendo system will run at 400 MHz, the same speed as Apple's PowerMacintosh G3 system, its high-end desktop computer.
IBM and Nintendo said they will explore uses of IBM technologies in other Nintendo products.
Combining games and movies
Nintendo's decision to use DVDs in its new console instead of its proprietary game cartridges should provide the company with additional arsenal against Sony's PlayStation, which currently uses games in DVD format.
Along with providing DVD drives for the next-generation Nintendo console, Matsushita will work with the company to develop products that will play both video games and DVD movies.
Matsushita sells products under the Panasonic, Technics and Quasar brands.
The companies made the announcement at a videogame convention in Los Angeles.
IBM shares climbed 4-1/2 to close at 225-1/2 in Wednesday trade. Shares of Sony American depositary receipts rose 3/4 to 93-3/4.
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