The story begins in late 1997, when a handful of top engineers and managers from Silicon Graphics Inc., many of whom had helped design the Nintendo 64 console, got an idea for a startup. They would cram high-end graphics into a PC chip set and leapfrog the giants of the mainstream desktop world by leveraging what they learned from designing a high-performance, low-cost game box.
The result was ArtX, which got initial funding from Taiwanese PC maker Acer Inc. About nine months later, old contacts from Japan came seeking a partner for their next-generation console, which later became the Nintendo GameCube.
"They had given up on SGI. The last of the people they trusted were gone, and they went looking for the people. It's not a company-to-company thing for them; it's a person-to-person thing," said Greg Buchner, at that time the head of ArtX.
The visit sparked a debate at the small startup. "We said we really didn't want to divert ourselves, but Nintendo can make a pretty compelling argument and it was a pretty huge opportunity, so we decided to go ahead in mid-'98," said Tim Van Hook, chief designer for the Nintendo 64 and a founder of ArtX. So ArtX forged a deal to develop the Flipper chip for the console code-named Dolphin in return for royalties. "We knew we couldn't take on the [chip] manufacturing. That would require as many more people as we had in the whole company at that time," said Joe Macri, another SGI veteran who became the 23rd person to join ArtX. He is now a director of technology at ATI.
At Comdex/Fall in 1999, the startup launched with some fanfare its ArtX1 PC chip set. By that time, the company had hired as its president David Orton, a hard-charging former manager of SGI's advanced-graphics division, who was keen to take ArtX public. However, an IPO looked risky. As it turned out, the Comdex splash brought the company lots of attention-and acquisition offers from ATI, Nvidia and S3.
It wasn't hard sorting out those bids. S3 was already in trouble and would break up in April 2000. "We could see the initial signs of that," said Buchner. As for Nvidia, "we didn't think it would work culturally or from a valuation perspective."
ATI was the clear fit. It was trying to get its own integrated-graphics program off the ground to catch up with Intel, which was wreaking havoc with the market. ATI had an Intel bus license, but it had no presence in the console space, no office in Silicon Valley and was badly in need of a makeover. Indeed, ArtX and ATI managers separately described ATI at the time of the acquisition as "a sea" or "a blob" of engineers without clear lines of responsibility. "They were a startup with one big organization," said Buchner.
In what turned out to be a case of the tail wagging the dog, ArtX's Orton was named president and chief operating officer of the merged entity from the outset. He reorganized ATI into separate business units and three major design teams under a handpicked set of managers who shared his drive to compete.
"He is someone who loves a good fight and he loves to win it," said Buchner, now one of two chief technology officers and four vice presidents of engineering at ATI.
Leveraging the ArtX team in Palo Alto, Orton created a Silicon Valley base for ATI just a mile down the road from Nvidia's sprawling green-marble headquarters in Santa Clara. Engineers at the ATI site finished the GameCube graphics chip, then led the design for the R300 graphics core, ATI's first to execute Microsoft's DirectX 9 application programming interface.