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Founders' Club

3dfx's Dream is Cast Aside
Suggested by Chris W.

3dfx once owned the PC hardware accelerator market -- now the company doesn't even exist. What happened? Well, everyone knows that the inroads that NVIDIA made into the PC market were eventually so crippling that 3dfx more or less disintegrated. But another huge problem that contributed to 3dfx's downfall is less well-known, but perhaps more destructive in the end. And the worst part? It was completely unnecessary.

In 1997, 3dfx had entered into an agreement with Sega to produce the graphics chip for Sega's next generation console -- or one of its potential designs, anyway. For whatever reason, Sega had a U.S. team and a Japanese team working on competing console designs. The U.S. team had selected 3dfx as a hardware partner thanks to its utter domination of the PC gaming scene.

Fact: 3dfx's logo is still better than nVidia's.

Unfortunately, 3dfx made a ridiculous mistake that cost it the deal. In a filing with the Securities and Exchange Commission regarding its IPO (initial public stock offering), 3dfx completely disclosed the details of its pending deal with Sega, which would have it powering the graphics of Sega's next-generation console. Of course, when filing for an IPO, a company is expected to release every detail of its business so the stock can be appropriately valued. However, it's perfectly legal to conceal any sensitive information so long as a few key parties know exactly what's going on. So, it's unclear why 3dfx did something very foolish: In its filing it reproduced the entire contract it had drawn up with Sega and was very close to signing.

Bad move.

When word got back to Japan that the complete terms of the agreement had been disclosed in a public filing you can still read on the web, the deal began a downward spiral that resulted in the selection of the Japanese team's design. The Japanese design included the less well-known PowerVR2 chipset from NEC and VideoLogic, and the U.S. design team's vision for the company's new console was rejected. 3dfx spiraled downward and was eventually gobbled up by NVIDIA, providing a sad ending to an important chapter in computer gaming history.

ferricide: Even as a diehard console gamer who's barely ever touched a PC with a Voodoo card in it, I was well aware of 3dfx, and totally confused by its rapid ascension and downfall in a period of a few years. Well, this sheds light on one important facet, doesn't it? One of the oddest bits of the tale has to be that Sega was actually pitting teams in different countries against each other in the design of the Dreamcast. It seems like it must have been a colossal waste of money. The funny thing about the 3dfx IPO filing is that it possibly mentions Sega more than it mentions 3dfx, yet as we know now, the deal completely crashed and burned.

Who knows where 3dfx would be today if it had provided the technology for the Dreamcast? Given the system's fate, nowhere special on the strength of that alone. But it'd quite possible still be around, which is more than it is now. Given how touchy Japanese companies typically are and how prone they are to stick with Japanese technology when possible -- the Dreamcast ended up with a Hitachi processor and an NEC graphics chip -- it was a big mistake to mouth off about the deal. 3dfx obviously didn't know what it had, and that was proven elsewhere, not just by this botched agreement.

Ben: I'm not sure what happened to 3dfx. It was everyone's darling for a few years there. Ignoring the Voodoo Rush, and despite its products' lack of 32-bit color support, 3dfx's 3D graphic cards were the industry standard for gaming. Still, I guess it was always at least a little rotten inside, as the crucial blunder described above happened all the way back in 1997. I wonder if the U.S.-developed Sega console would have been as technically impressive and elegant as Dreamcast turned out to be? We'll never know now, but I'll wager that it wouldn't have been. The Dreamcast was a very smartly designed little system.

Next: Nintendo's Mortal Mistake »
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