Sega to 3Dfx:Hit the Road

In a statement released late Tuesday, it became official that 3Dfx Interactive's Voodoo Graphics chipset - in development for Sega's next console - is not going to be used. This comes on the heels of reports, stemming from the July 14th issue of Microprocessor Report that NEC had in fact been chosen as the technology Sega's new machine would use.

3Dfx responded to the news by passing off the decision as not as important as it seems. Greg Ballard, president and CEO of 3Dfx Interactive said in a statement Tuesday, "It is important to remember that Sega is only a fraction of our business, representing less than 10 percent of our projected 1998 revenue." That contradicts an earlier statement made in the company's Initial Public Offering filing with the SEC, which stated that "the timely development of the Sega/3Dfx Chipset by and the successful introduction and sale of the New Sega Game Console by Sega will be critical factors affecting the Company's future business, financial condition and results of operations."

Ballard went on to say "Our base business of selling 3-D accelerator chips into the PC market remains strong and is even strengthening. We will release our earnings after the market closes on Thursday, July 24, and anticipate that they will be consistent with analysts' expectations. In addition, the rest of 1997 already looks to be very positive."

Also in the statement released Tuesday, 3Dfx says that it plans to explore all its options, including taken legal action against Sega. The company believes that Sega's decision goes against the contract between the two companies. 3Dfx has been developing a chipset based on their Voodoo Graphics technology for use in Sega's new game console (codenamed Black Belt) since March, and Sega has invested nearly US$2 million for development to date.

Sega released a statement responding to 3Dfx, which is very noncommittal on the important issues of the situation. Sega acknowledged they are no longer using the 3Dfx-developed chipset, but would not comment further on the development of any new gaming platform. It is believed the 3Dfx-developed chipset was part of the Black Belt project, and it would seem now that development on that system has lost to the Dural prototype that was being developed separately.

Eyes now focus squarely on NEC, whose PowerVR technology was reportedly 3Dfx's main competition for the spot in Sega's new gaming platform.