NINTENDO 64 PROMISES GAME PLAYERS BEEFED-UP GRAPHICS.

Byline: Tom Abate San Francisco Examiner 

In a tiny conference room at the Mountain View, Calif., headquarters of Silicon Graphics Inc., engineers were taking turns test driving the latest Nintendo machine.

``We have to make sure the software works,'' joked Stephen Anderson.

But seriously, Anderson and colleague Tony DeLaurier are part of a 30-person team of Silicon Graphics engineers who have spent three years working with Nintendo to jam the graphics power of a high-priced scientific workstation into a 64-bit video game box.

Although the project took a year longer than expected, the U.S. debut in September of the Nintendo 64 - at $249.95 - is already putting pressure on competing game boxes like the Sony PlayStation and Sega Saturn.

``From the consumer standpoint, this is great,'' said Patrick Ferrell, president of GamePro magazine in San Mateo, Calif.

``Competition has already driven down prices,'' he said. ``Software is plentiful on the Sony, reasonably plentiful on the Sega, and the pent-up demand for the Nintendo is such that the early adopters will blow it off the shelves.''

That was apparently the case in Japan, where the Nintendo 64 debuted June 24. Perrin Kaplan, spokeswoman for Seattle-based Nintendo of America, the U.S. subsidiary of the Japanese parent, said 850,000 machines had been shipped during the first month the machine was available in Japan.

``When Sony launched the PlayStation in Japan (in 1995) it took about four months to reach that amount,'' Kaplan said.

Nintendo is gearing up to manufacture 500,000 boxes a month to meet Japanese and U.S. demand, which it will stimulate with a $54 million marketing budget targeted at American consumers.

In anticipation, Sony recently cut the price of its PlayStation below $200, and is rumored ready to slash prices again if the Nintendo 64 starts to blunt its sales momentum. GamePro's Ferrell said Sega's response to the Nintendo challenge was less clear because the company was in the midst of a management makeover.

Whatever business issues lurk beneath the surface, it is what consumers see, on the screen and on the price tag, that will drive buying decisions in the Christmas retail season.

Thanks to the Silicon Graphics technology inside, the Nintendo 64 delivers what may be the most vivid colors and three-dimensional animations ever seen in a video game.

``This is the first game box with the ability to render any viewpoint in three dimensions at any point in the game,'' said David Bagshaw, Silicon Graphics' vice president for marketing.

Silicon Graphics is best known for making high-powered computers used to create animations for movies like ``Jurassic Park.'' The animation power of its machines is a function of the MIPS microprocessors inside them. These chips are designed by MIPS Technologies Inc., a Silicon Graphics subsidiary.

In the Nintendo project, Silicon Graphics had to put as much of the power of the MIPS chip as possible into the cheapest chip that could be designed. Derek Meyer, international marketing director for MIPS, said the result was a pair of custom-designed microprocessors that would be made by NEC Corp.

``Our mission at MIPS is to bring to market a high-volume application that makes the best use of our technology,'' he said.

Meyer said MIPS was one of the best-kept secrets in the chip business, selling millions of processors each year to power devices like the routers that direct traffic on the Internet. Since 1992, when Silicon Graphics acquired MIPS, its chip sales have grown from 500,000 to over 5 million in 1995, Meyer said.

``In 1996, we expect to ship between 10 million and 12 million units,'' he said.

Achieving those volumes is critical to the long-term success of Silicon Graphics, which needs to find other clients to use the MIPS technology in order to create a sufficient economic base to continue developing its chip architecture.

And winning volume wars means getting into the trenches with partners like Nintendo, which could ship millions of game boxes - if the trendy teen-age boys who drive the game market decide the Nintendo 64 is cool.

According to game expert Ferrell, however, the retail battle won't be won with hardware alone. Indeed, software and pricing tactics have been the keys to victory in past game wars. Nintendo will launch its new machine with three titles, a game based on its popular Mario character, a flight simulator title and a third game yet to be decided.

Nintendo has promised to have more than a dozen titles out by Christmas, but they aren't ready yet. Meanwhile, Sony has good software on the shelves and shows every willingness to sacrifice margins to preserve market share, Ferrell said.

Silicon Graphics has provided Nintendo with a developer's tool kit to help it win allies in the battle to create software that appeals to the adolescent males.