While Silicon Graphics has faltered in the workstation business--sales are off, earnings are disappointing, and it needs a new strategy and CEO--the Mountain View (Calif.) company has one success story: the MIPS microprocessor division. Thanks to strong sales of MIPS chips for Nintendo 64 game machines and other noncomputer uses, MIPS has nearly half the market for RISC chips.
Now, SGI is preparing to spin off MIPS into a publicly traded company. In coming months, SGI wants to sell a 20% stake of MIPS in an IPO and ultimately sell the rest in hopes of raising $500 million, say insiders. The move may be best for both SGI and MIPS. Analysts say SGI can no longer justify the $60 million it spends yearly to fund new MIPS chips--given the rising power of Intel technology, on which new SGI machines will be based. MIPS can focus on chips for consumer gizmos. Says analyst James Turley of MicroDesign Resources: "MIPS would be very successful as a stand-alone company." Can SGI say the same?