The payoff could be millions of set-top boxes based on SGI technology. SGI is feverishly working to embed many of the graphics features of its Indy workstation into a $500 set-top box for Time Warner that will be manufactured by Scientific-Atlanta Inc. It's no easy job. In addition to chucking components such as monitors and disk drives, SGI must design in Scientific-Atlanta's technology and figure out how to shrink the whole thing into a few chips so that the boxes can be manufactured profitably. Already, SGI failed to meet a deadline for stripping down the Indy into a prototype for the set-top box, which helped push back the Orlando trial from April until at least October.
A success in set-top boxes would do more than open a new market. The added volume would help ensure the future of the microprocessors SGI uses. SGI wound up paying $231 million for chipmaker MIPS Computer Systems Inc. in 1992 after Compaq pulled out of a consortium called Advanced Computing Environment that was aimed at making MIPS-based PCs an industry standard. It was critical for SGI to ensure the future supply of MIPS chips, but the purchase led to an $118.4 million loss, its first since going public in 1986.
SGI's deals with videogame makers could also pump up the MIPS volume. Last August, Nintendo chose the chip for the forthcoming Ultra64 game machine, which will boast 3-D graphics. That deal could not only boost production of MIPS chips but also bring SGI $300 million in royalties by 1998, estimates Prudential Securities Inc. This spring, Sony Corp. announced plans to use a version of the MIPS chip built by LSI Logic Corp. to power its first videogame machine.
SGI technology is showing up on Main Street, too--in virtual-reality arcades where you can "ride" fighter jets, hovercraft, or prehistoric pteranodons. On July 1, Disney World's Epcot Center unveiled a virtual reality setup that lets you ride a magic carpet through Agrabah, the city in Aladdin.
For all the new efforts, SGI hasn't forgotten its traditional customers, which still account for most sales. For number-crunching scientists, SGI is pushing out ever more powerful computers such as the new Power Challenge servers, which perform as well as some multimillion-dollar supercomputers. And on July 11, it will introduce Challenge servers.
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