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                                                                    EXHIBIT 10.4



                                AMENDMENT NO. 1

                        TO THE SMITH INTERNATIONAL, INC.
                           DIRECTORS' RETIREMENT PLAN

The SMITH INTERNATIONAL, INC. DIRECTORS' RETIREMENT PLAN  (the "Plan") is
hereby amended effective September 30, 1987 in the following particular only:

1.       Section 3.3 of the Plan is hereby amended to read as follows:

         Section 3.3 - Commencement of Benefits.   Benefits payable to a
Participant shall commence on the first day of the month following the later of
(a) his seventieth (70th) birthday and (b) if the Board of Directors has
consented to his service as a Director after the age seventy (70), the date he
ceases to serve as a Director.   Notwithstanding the foregoing, however, the
Board of Directors may specify an earlier commencement date for payment of a
benefit hereunder to a Participant whose service as a Director has ceased prior
to age seventy (70) but after age fifty-five (55); no reduction shall occur in
the amount specified in Section 3.1 above due to such earlier commencement
date.   Benefits payable to a surviving Spouse of a Participant shall commence
on the first day of the month following the date of death of the Participant.

     Executed at Newport Beach, California, this 4th day of December, 1987.


                                        SMITH INTERNATIONAL, INC.



                                        By:  /s/ R.M. GUBRUD                  
                                           -----------------------------------
                                                 R.M. Gubrud


                                        By:  /s/ VIVIAN M. CLINE             
                                           -----------------------------------
                                                 Vivian M. Cline
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                           SMITH INTERNATIONAL, INC.

                           DIRECTORS' RETIREMENT PLAN



         WHEREAS, SMITH INTERNATIONAL, INC. desires to provide retirement
income to certain of its outside directors through the maintenance of an
unfunded, nonqualified retirement plan;

         NOW, THEREFORE, effective January 1, 1984, SMITH INTERNATIONAL, INC.
does hereby adopt this, the SMITH INTERNATIONAL, INC. DIRECTORS' RETIREMENT
PLAN to provide as follows:


                                   ARTICLE I

                                  DEFINITIONS


Section 1.1 - General

         Whenever the following terms are used in this Plan, they shall have
the meaning specified below unless the context clearly indicates to the
contrary.

Section 1.2 - Board of Directors

         "Board of Directors" shall mean the Board of Directors of the Company.

Section 1.3 - Company

         "Company" shall mean Smith International, Inc., a Delaware
corporation.

Section 1.4 - Director

         "Director" shall mean a member of the Board of Directors.

Section 1.5 - Outside Director

         "Outside Director" shall mean each Director who is not an employee of
the Company on January 1, 1984, and each person thereafter elected a Director
who has never been an employee of the Company.

Section 1.6 - Participant

         "Participant" shall mean any Outside Director included in the Plan as
provided in Article II.





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Section 1.7 - Plan

         "Plan" shall mean the Smith International, Inc. Directors' Retirement
Plan.

Section 1.8 - Surviving Spouse

         "Surviving Spouse" shall mean the person to whom a Participant is
married as of the date of the Participant's death.


                                   ARTICLE II

                         ELIGIBILITY AND PARTICIPATION

Section 2.1 - Service Requirement

         Each Outside Director who has served as an Outside Director for an
aggregate total of ten (10) or more years shall become a Participant in the
Plan.

Section 2.2 - Designation

         Each other Outside Director who is designated by the Board of
Directors as eligible for the Plan shall participate in the Plan.

                                  ARTICLE III

                              RETIREMENT BENEFITS

Section 3.1 - Retirement Benefits

         The amount of the retirement benefit payable to a Participant under
the Plan shall be Twenty Thousand Dollars ($20,000.00) per calendar year,
prorated for portions thereof, payable monthly for the life of the Participant.

Section 3.2 - Benefits to Surviving Spouse

         After the death of a Participant who has attained age seventy (70) and
who is survived by a Surviving Spouse, a benefit equal to Ten Thousand Dollars
($10,000.00) per calendar year, prorated for portions thereof, shall be payable
monthly for the following periods: (a) in the case of a Surviving Spouse who is
ten (10) or fewer years younger than the deceased Participant, for the life of
the Surviving Spouse; or (b) in the case of a Surviving Spouse who is more than
ten (10) years younger than the deceased Participant, for a period of the life
of the Surviving Spouse or ten (10) years, whichever is less.  Notwithstanding
the foregoing, however, the Board of Directors may determine that such a
benefit shall be payable to the Surviving Spouse of a Participant whose death
occurs prior to age seventy (70) but after age sixty-five (65); no reduction
shall occur in the amount specified herein due to such earlier commencement
date.





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Section 3.3      Commencement of Benefits

         Benefits payable to a Participant shall commence on the first day of
the month following the later of (a) his seventieth (70th) birthday and (b) if
the Board of Directors has consented to his service as a Director after the age
seventy (70), the date he ceases to serve as a Director.  Notwithstanding the
foregoing, however, the Board of Directors may specify an earlier commencement
date for payment of a benefit hereunder to a Participant whose service as a
Director has ceased prior- to age seventy (70) but after age sixty-five (65);
no reduction shall occur in the amount specified in Section 3.1 above due to
such earlier commencement date.  Benefits payable to a Surviving Spouse of a
Participant shall commence on the first day of the month following the date of
death of the Participant.


                                   ARTICLE V

                             ADMINISTRATION OF PLAN

Section 4.1 - Funding

         This Plan shall not be funded by the creation of a separate trust fund
or by the establishment of any alternative funding program.  Benefits shall be
paid from the general assets of the Company.  The Company shall be under no
obligation to segregate or earmark any cash or other property for the payment
of any benefits under this Plan, or to purchase insurance to provide any
benefits,  and if any cash or other property is segregated or earmarked by the
Company or insurance purchased for such purpose: no Participant shall have any
right whatsoever in any such cash or other property but the same shall remain
free for disposition for any purpose by the Company.  Participation in the Plan
will not give any person any right of claim to a retirement income or any other
benefit hereunder except to the extent that there are funds therefor as part of
the general assets of the Company.

Section 4.2 - Administration and Interpretation

         The Board of Directors shall have the sole authority to construe and
interpret this Plan in accordance with its terms and provisions and to make
rules relating to the administration thereof.  Tho decision of the Board of
Directors with respect to any issues relating to the interpretation of this
Plan shall be final, conclusive and binding on all parties.  The Board of
Directors may delegate any part of its duties hereunder to the Company's Vice
President Human Resources, subject to the final authority of the Board of
Directors.

Section 4.3 - Termination and Amendment

         The Board of Directors may terminate, suspend or amend this Plan in
whole or in part, at any time, as it may deem advisable, provided that no such
termination, suspension or amendment shall impair any rights which have already
accrued to a Participant under this Plan; provided, however, that to - the
extent that the Board of Directors approves any new benefit plan or improvement
to any existing benefit plan applicable to Directors it may terminate rights
which have already accrued to a Participant under this Plan if, in its sole





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discretion, it determines that the benefits payable to a Participant under such
new or improved plan adequately replace the benefits provided hereunder.

Section 4.4 - Assignment

         No Participant or Surviving Spouse, nor any other person shall have
any right or interest in this Plan or its continuance, or in the payment of any
benefit hereunder, unless and until all the provisions of this Plan, the rules
adopted hereunder, and restrictions and limitations on any benefit provided
herein have been fully satisfied.  No rights under this Plan, contingent or
otherwise, shall be assignable or subject to any pledge or encumbrance of any
nature.

Section 4.5 - Required Withholdings

         There shall be deducted from all payments of benefits under the Plan
any taxes or other amounts which may be required to be withheld by the Company
in respect of such payments.

Section 4.6 - Effective Date

         The effective date of the Plan shall be January 1, 1984. Service prior
to that date as an Outside Director of the Company or of its predecessor
California corporation, however, shall be taken into account for purposes of
Section 2.1.


Executed at Newport Beach, California, this 14th day of December, 1983.


                                    SMITH INTERNATIONAL, INC.



                                    By    /s/ JAMES R. HAUKE  
                                      ------------------------------
                                              James R. Hauke


                                    By    /s/  JOHN L. PRICE                 
                                      ------------------------------
                                               John L. Price





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