US Report: Windows CE lands its Sega dream machine

Delivering on one of the worst-kept secrets of the gaming community, troubled Sega unveiled its latest gaming system in Japan on Thursday. The new game console, called Dreamcast, is Sega's chance to reclaim its respectability in the video-game industry after the spectacular failure of the Saturn. Yet the public announcement of the new console - due out in Japan this Autumn and in the U.S. a year later (no details were given for the UK) is arguably more important for Sega's partner, Microsoft and its operating system for consumer devices, Windows CE.

"For Microsoft, this is great," said Gerry Kaufhold, principal analyst for technology watcher In-Stat. "The Sega machine will get developers creating content for Microsoft's OS."

Despite some doubts that Windows CE can deliver high performance, Sega's newest brainchild seems ready to set the standard for computer games. Able to display 3 million polygons per second, Dreamcast will leap ahead of Sony's PlayStation (at 150,000 polygons per second) and Nintendo's N64 (at 300,000 polygons per second). The machine even surpasses the most powerful PCs available today as well as next year's high-end machines.

"Dreamcast is not designed as a loss leader," said Lee Caraher, vice president of communications for Sega. "We intend to make money off the bat by offering better than PC power at one-tenth the price." Windows CE has been optimised to allow the machine to reach its full potential, said Kevin Dallas, product manager for Microsoft's Windows CE group. "(Any implication that Windows CE is slow) could not be further from the truth," he said. "We stripped Windows CE down to the essentials ... Sega is pleased with the performance."

The double-capacity CD-ROMs used by Dreamcast will have the most current version of Windows CE on the disk, rather than in the machine itself. This strategy helps extend the longevity of the machine, said Dallas.

This also helps developers speed development and cut costs. At present, according to market researcher Forrester Research, the average cost of developing and marketing a high-end console game is $5m (£3m) far higher than the "paltry" $2m (1.2m) required for PC games. "Dreamcast and Windows CE give the publisher a whole new business model," said Microsoft's Dallas. "Developers get a whole new pool of experienced Windows programmers as well." And that means publishers can leverage content and deliver games to both the PC and console much more easily than today. "This will open up the genre," said Sega's Caraher. "Until now, there hasn't been a lot of crossover between PCs and consoles."

Despite the large advantages of a common platform, In-Stat's Kaufhold warns that Windows CE is by no means a sure thing. "Sega came close to bankruptcy and that could affect who is willing to play with them," he said, adding that Windows CE looks like a good solution in the handheld market, but hasn't caught on yet. Last year, 3Com's shipments of its electronics organiser the PalmPilot surpassed all shipments of handheld computers that use Windows CE.

In addition, Windows CE is not the only game in town. Interactive TV software maker Network Computer could make a surprise announcement in the near future. "Nintendo, Sega, and Sony have all invested in our company," said Randy Broscher, spokesman for NCI. "We are definitely looking at this market."