MIPS Technologies Inc priced its secondary public offering of 6 million shares at $34.50 each on Friday. All of the shares are being offered by parent Silicon Graphics Inc. The Mountain View, California RISC chip designer’s stock has taken a serious hit recently, plunging from $69 just six weeks ago to Friday’s close of $34.6875, and the arrival of the new shares only makes matters worse.
The sale will net SGI $207m and leave the company with 25.8 million shares, roughly equal to a 69% stake. Goldman, Sachs & Co, Credit Suisse First Boston Corp and BancBoston Robertson Stephens Inc are acting as the lead underwriters of the offering. The shares are expected to be delivered to the underwriters on May 19.
Besides the glut of shares on the market, the news last week that IBM Corp has won the contract to supply a PowerPC processor for Nintendo’s next generation console (CI No 3,660) is hardly encouraging for investors in MIPS, which derived 75% of revenue last year from Nintendo 64 video game players. To add insult to injury, Nintendo will use a graphics processing chip from ArtX Inc, a company set up by former SGI staff. SGI took legal action against ArtX, claiming the company was designed to take the Nintendo graphics business away from SGI.
But the action was halted when Nintendo claimed that certain disclosures in the registration statement for its IPO constituted a breach of the confidentiality obligations contained in its Nintendo contract. Though SGI and MIPS denied any breach had occurred, the threat of action forced them to agree a truce in any further legal proceedings.
However, the Nintendo revenue will not come to an immediate halt. In its SEC filing on the current share offer, MIPS says royalties related to sales of Nintendo 64 video game cartridges will continue to represent a substantial portion of total revenue for several more years.
