ATI, the market leader in the 3D graphics acceleration market, has bought chip developer ArtX for $400 million, to be funded by a mixed of stock and options. ArtX emerged out of Nintendo's partnership with SGI to develop the graphics sub-system for the N64 console. SGI's interest in the deal -- it soon decided it would rather be associated with 'serious' servers than mass-market games devices -- cooled, leading staff to clear off and form their own company, ArtX. The connection with Nintendo has never been lost, and ArtX is working on the graphics technology that will form the basis for Nintendo's next-generation PowerPC-based console codenamed Dolphin. Dolphin is likely to be closer to the PlayStation 2 than previous Nintendo consoles in that it will be as much an information appliance as a games machine. ATI has been attempting to move into the info appliance market for the last year or so, through its acquisition of system-on-a-chip specialist Chromatic Research and its promotion of a reference platform based on its DVD playback technology and Rage 128 3D graphics chip. The purchase allows ATI to claim the Nintendo Dolphin as its key information appliance partner, and gain access to ArtX's own system-on-a-chip expertise. That project has seen ArtX working with Acer Labs to build ArtX's Aladdin graphics engine into Acer's North Bridge chip-set. Aladdin sports a full transform and lighting engine, which ATI could use to provide its next Rage chip with features only found in rival graphics vendor Nvidia's GeForce 256 chip. In short, it's a damn smart move on ATI's part, and given it's a stock-swap acquisition, a cheap one, too. ®