Deals Under $25 Spotify Wrapped Apple's 2022 App Store Awards Neuralink Brain Chips: Watch Today Kindle Scribe Review World Cup: How to Stream '1899': Burning Questions Immunity Supplements for Winter
Want CNET to notify you of price drops and the latest stories?
No, thank you

Zelda helps MIPS beat estimates

Sales of The Legend of Zelda and other games allows MIPS Technologies to beat analysts' earnings expectations for its second fiscal quarter.

The Legend of Zelda helped MIPS Technologies beat analysts' earnings expectations today as the microchip designer benefited from continuing royalties of Zelda and other Nintendo game sales.

MIPS reported net income of $4.1 million, or 11 cents per diluted share for its second fiscal quarter of 1999, which ended December 31, 1998. This compares to $7.4 million, or 19 cents per diluted share, for the same quarter a year ago. Analysts expected earnings of 8 cents per diluted share, according to First Call.

"It was a very solid report," said Scott Nirenberski, an analyst with Credit Suisse First Boston. Much of the income, he said, comes from royalties MIPS gets from sales of Nintendo 64 game cartridge sales, including the last quarter's hot-selling The Legend of Zelda title.

"You go and buy Legend of Zelda and MIPS rings the cash register," Nirenberski said.

MIPS has seen its stock price steadily increase from $14 during its initial public offering in June 1998 to its current price of 33.125.

Nintendo, now stronger, may be moving on. The company has chosen not to go with MIPS for the graphics of its upcoming game machine. Nintendo, however, hasn't yet chosen who will make the central processor, though Credit Suisse First Boston is assuming MIPS won't win that job.

The competition includes NEC, Toshiba, and a vendor of PowerPC chips, he said. Interestingly, Artx, the company that won the graphics contract from Nintendo, was founded by former SGI employees. A suit filed by SGI against Artx has been temporarily suspended.

MIPS, meanwhile, is focusing its strategy on licensing its chip designs for use in electronic devices such as handheld computers, DVD equipment, set-top boxes, smart phones, and networking equipment.

MIPS-designed chips are used in handheld computers from Vadem and NEC, and NEC uses MIPS for a chip designed to run Windows CE machines. In addition, Philips Semiconductors has a MIPS-based set-top box for Internet TV or Windows terminals, MIPS said.

As Nintendo royalty revenues taper off, Nirenberski expects Windows CE revenue to help MIPS out.

Silicon Graphics currently owns about 85 percent of MIPS stock, but SGI announced today it plans to completely divest of MIPS by September 30, 2000.

"The recapitalization establishes a path for MIPS Technologies to achieve full business independence," MIPS Chief Executive John Bourgoin said in a statement. The gradual divestiture will be "both tax- and market-efficient," said SGI CEO Rick Belluzzo, allowing SGI stockholders to benefit from the "unlocking of the value inherent in MIPS Technologies."