3DO exits multimedia hardware field

Electronic News, Feb 3, 1997 by Andrew MacLellan

Redwood City, Calif.--Five months after it reached a decision to either sell its hardware business or look for a development partner (EN, Sept. 23, 1996), The 3DO Company last week signed a joint development agreement with Samsung Electronics to design, market and sell custom semiconductors.

Under terms of the agreement, Samsung will provide approximately $30 million to the venture as well as a six-year preferential semiconductor fabrication agreement, some of its engineering workforce, and access to its multimedia signal processor (MSP) technology. The joint venture will focus on delivering graphics, audio and video devices for use in personal and network computers, logic devices, and other home consumer electronics applications, said Hugh Martin, president of 3DO. "Samsung is the right partner to have for this kind of agreement and after four months of intense negotiations, we are looking forward to seeing the first part being rolled out as well as the benefits we will receive from the deal. We will receive 49 percent of the profits made from the joint venture," said Mr. Martin. "Samsung wants to be number two in the logic business--right behind Intel--and they want to use this joint venture as the means to making the parts and hardware needed to get them to that point."

The agreement will combine 3DO's 80 hardware engineers with 40 employees from Samsung's San Jose-based SSI division to begin work on the venture. 3DO will also contribute to the joint development its interactive 3-D, digital video and audio technologies and a half-million dollars worth of capital equipment. Mr. Martin said he expects to see the first products from the joint venture come out within the next 12-15 months manufactured in Samsung's fab.

"In a typical guaranteed capacity deal nowadays you need to put down a fairly sizable amount of money," said Mr. Martin. "Here 3DO does not have to put any money down and the joint venture will receive very favorable pricing and access to advanced process technology which in the long term will be much more profitable." 3DO's R&D will now strictly focus upon its software and gaming business since it is now out of the hardware business, he added.

The joint venture will have access to Samsung's multimedia and memory technology, however 3DO will not be able to take advantage of the technology at all. "The establishment of the joint venture will complete the transformation of 3DO into a software business," said Trip Hawkins, chairman and CEO of 3DO. "Management will now be able to focus on conserving our cash and on publishing only the best software titles." Last September, the company made the decision to sell its chip business or try and find a partner to take it over in a joint venture. The company reduced the size of its workforce from 450 to 300 employees and began focusing on PC game development. Since that time the company has been in development of various software titles including: "The Price of Loyalty," "Army Men," "Uprising," and the Internet-based "Meridian 59."