3Dfx Interactive Announces That Sega Enterprises Ltd. Has Terminated the Contract for 3D Graphics Processor.

SAN JOSE, Calif.--(BUSINESS WIRE)--July 22, 1997--3Dfx Interactive has learned from Sega Enterprises LTD. today that Sega will not use the 3Dfx 3D graphics processing chipset for the next generation Sega home gaming console.

This announcement comes despite an existing contract for 3Dfx Interactive to develop the 3D graphics engine for Sega's next video game system.

"We are disappointed with this notification, and believe that it is without legal justification," said Greg Ballard, President and CEO, 3Dfx Interactive. "However, it is important to remember that Sega is only a fraction of our business, representing less than 10 percent of our projected 1998 revenue. Our base business of selling 3D 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."

3Dfx Interactive has been working under contract with Sega since March of this year to develop and license a proprietary chipset for use in the new Sega game console. Sega has an equity investment of nearly $2 million in 3Dfx Interactive, and has funded development of the chipset to date.

3Dfx Interactive believes that, under the terms of its contract with Sega, this decision by Sega requires the Company to explore its options, including legal recourse.

3Dfx Interactive, a publicly traded company (Nasdaq:TDFX), develops high performance, cost-effective 3D media processors, software and related technology that are designed to enable a highly immersive, interactive and realistic 3D experience across the three primary interactive electronic entertainment platforms -- the personal computer, the home game console and the coin-operated arcade system -- as well as location-based entertainment ("LBE") systems. Current 3Dfx Interactive products include the Voodoo family of accelerator chipsets, Voodoo Graphics and Voodoo Rush.

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Note to Editors: This news release contains forward-looking statements that are based on current expectations. A wide variety of risks and uncertainties could cause actual results to differ materially. These include, but are not limited to, the growth rate of the interactive electronic entertainment industry and the related requirements for graphics systems, continued demand and market acceptance for the company's existing products, new product announcements or product introductions by the company's competitors and other competitive pressures, as well as 3Dfx Interactive's continued ability to develop and successfully market new products. Additional risks are described in the company's SEC report on Form S-1. This document is available upon request to the Company's Investor Relations Department and is posted on the SEC's home page on the World Wide Web. -0-

3Dfx Interactive, Voodoo Graphics and Voodoo Rush are trademarks of 3Dfx Interactive.

CONTACT: 3Dfx Interactive

Chris Kramer, 408/935-4322 (editorial contact)

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or

Laura Onopchenko, 408/935-4312 (investor contact)

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