<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549


                                     FORM 10-Q



(MARK ONE)
            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACTS OF 1934.

                  FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                         OR

              [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934.   FOR THE TRANSITION PERIOD FROM
                                    TO        .


                          COMMISSION FILE NUMBER 000-24487


                              MIPS TECHNOLOGIES, INC.
               (Exact name of registrant as specified in its charter)

           DELAWARE                             77-0322161
(State or other jurisdiction of                 (I.R.S. Employer
Incorporation or organization)                  Identification Number)


                1225 CHARLESTON ROAD, MOUNTAIN VIEW, CA  94043-1353
                      (Address of principal executive offices)


        Registrants' telephone number, including area code:  (650) 567-5000

     __________________________________________________________________________


               Indicate by check mark whether the registrant (1) has filed 
all reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter 
period that the registrant was required to file such reports), and (2) has 
been subject to such filing requirements for the past 90 days. Yes [X]   No [ ]

               The number of outstanding shares of the Registrant's Common 
Stock,  $.001 par value, was 37,265,000 as of October 31, 1998.

<PAGE>

<TABLE>
<CAPTION>
                           PART 1 -- FINANCIAL INFORMATION
<S>            <C>                                                         <C>
Item 1.        Financial Statements (Unaudited):
                                                                           Page
               Condensed Balance Sheets ...............................    3
               Condensed Statements of Operations......................    4
               Condensed Statements of Cash Flows .....................    5
               Notes to Condensed Financial Statements.................    6

Item 2.        Management's Discussion and Analysis of Results of
                  Operations and Financial Condition...................    10

Item 3.        Quantitative and Qualitative Disclosures About
                     Market Risk.......................................    18

                            PART II -- OTHER INFORMATION

Item 1.        Legal Proceedings.......................................    19

Item 6.        Exhibits and Reports on Form 8-K........................    19

Signatures.............................................................    20

Index to Exhibits......................................................    21
</TABLE>

                                      2
<PAGE>

                           PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                              MIPS TECHNOLOGIES, INC.
                             CONDENSED BALANCE SHEETS
                         (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,     JUNE 30,
                                                         1998           1998(1)
                                                     -------------     --------
                            ASSETS                   (unaudited)
<S>                                                  <C>               <C>
Current assets:
     Cash and cash equivalents ...............          $21,043        $    45
     Accounts receivable .....................            1,309            250
     Prepaid expenses and other current assets              585            618
                                                     ----------        --------
          Total current assets ...............           22,937            913
Equipment and furniture, net .................            2,549          2,787
Other assets .................................            1,081            996
                                                     ----------        --------
                                                        $26,567        $ 4,696
                                                     ----------        --------
                                                     ----------        --------

              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

     Accounts payable .......................           $ 3,083        $ 3,087
     Accrued liabilities ....................             4,711          2,356
                                                     ----------        --------
          Total current liabilities .........             7,794          5,443
Deferred revenue, less current portion ......               375             --
Total stockholders' equity (deficit) ........            18,398           (747)
                                                     ----------        --------
                                                        $26,567        $ 4,696
                                                     ----------        --------
                                                     ----------        --------
</TABLE>

The balance sheet at June 30, 1998 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

                              See accompanying notes.

                                       3
<PAGE>

                              MIPS TECHNOLOGIES, INC.
                   CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                             SEPTEMBER 30,
                                                       ------------------------
                                                        1998              1997
                                                       -------          -------
<S>                                                    <C>              <C>
Revenue:
     Royalties ....................................    $11,611          $14,287
     Contract revenue .............................        650              750
                                                       -------          -------
          Total revenue ...........................     12,261           15,037
Costs and expenses:
     Cost of contract revenue .....................         --              375
     Research and development .....................      4,552           17,338
     Sales and marketing ..........................      1,289            1,448
     General and administrative ...................      1,135            1,257
                                                       -------          -------
          Total costs and expenses ................      6,976           20,418
                                                       -------          -------
Operating income (loss) ...........................      5,285           (5,381)
Interest income (expense), net ....................        170               (7)
                                                       -------          -------
Income (loss) before income taxes .................      5,455           (5,388)
Provision for income taxes ........................      2,182               --
                                                       -------          -------
Net income (loss) .................................    $ 3,273          $(5,388)
                                                       -------          -------
                                                       -------          -------

Net income (loss) per share -- basic and diluted ...   $  0.09          $ (0.15)
                                                       -------          -------
                                                       -------          -------

Common shares outstanding -- basic .................    37,250           36,000
                                                       -------          -------
                                                       -------          -------

Common shares outstanding -- diluted ...............    38,009           36,000
                                                       -------          -------
                                                       -------          -------
</TABLE>
                              See accompanying notes.

                                       4
<PAGE>

                              MIPS TECHNOLOGIES, INC.
                   CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                  (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                   ----------------------------
                                                                                     1998                1997
                                                                                   ---------          ---------
<S>                                                                                <C>                <C>
Operating activities:

     Net income (loss) ......................................................      $  3,273           $ (5,388)
     Adjustments to reconcile net income (loss) to cash provided by (used
        in) operations:
           Depreciation .....................................................           523              1,531
           Other non-cash charges ...........................................            42                 58
           Changes in operating assets and liabilities:
              Accounts receivable ...........................................        (1,059)               381
              Prepaid expenses and other current assets .....................            33               (767)
              Other assets ..................................................          (127)               (10)
              Accounts payable ..............................................            (4)               (27)
              Accrued liabilities ...........................................         2,322               (885)
              Deferred revenue ..............................................           408                 --
                                                                                   ---------          ---------
              Net cash flow provided by (used in) operating activities,
                 excluding Silicon Graphics financing .......................         5,411             (5,107)

Investing activities -- capital expenditures .................................         (285)              (180)
Financing activities:
     Net proceeds from issuance of common stock .............................        15,872                 --
     Payments on capital lease obligations ..................................            --               (109)
     Financing provided from Silicon Graphics ...............................            --              5,396
                                                                                   ---------          ---------
          Net cash provided by financing activities .........................        15,872              5,287
Net increase in cash ........................................................        20,998                 --
Cash and cash equivalents, beginning of period ..............................            45                 --
                                                                                   ---------          ---------
Cash and cash equivalents, end of period .....................................     $ 21,043           $     --
                                                                                   ---------          ---------
                                                                                   ---------          ---------
Supplemental disclosures of cash flow information:
     Interest paid ..........................................................      $     --           $      7
                                                                                   ---------          ---------
                                                                                   ---------          ---------
</TABLE>

                              See accompanying notes.

                                       5
<PAGE>

                              MIPS TECHNOLOGIES, INC.

                      NOTES TO CONDENSED FINANCIAL STATEMENTS


NOTE 1.   FORMATION AND DESCRIPTION OF BUSINESS

   FORMATION OF MIPS TECHNOLOGIES, INC. (THE "COMPANY").  In June 1992, 
Silicon Graphics formed the Company following the merger of MIPS Computer 
Systems, Inc. into Silicon Graphics, which was accounted for as pooling of 
interests.  MIPS Computer Systems, Inc. was founded in 1984 and was engaged 
in the design and development of RISC microprocessors for the computer 
systems and embedded markets. Silicon Graphics adopted the MIPS architecture 
for its computer systems in 1988 and acquired MIPS Computer Systems, Inc. in 
1992.  Following the acquisition, Silicon Graphics continued the MIPS 
microprocessor business through its MIPS Group (a division of Silicon 
Graphics), which focused primarily on the development of high-performance 
microprocessors for Silicon Graphics' workstations and servers.  Until the 
last few years, cost considerations limited the broader use of these 
microprocessors.  However, as the cost to design and manufacture 
microprocessors based on the MIPS technology decreased, the MIPS Group sought 
to penetrate the consumer market, both through supporting and coordinating 
the efforts of the MIPS semiconductor partners and most notably, by 
partnering with Nintendo in its design of the Nintendo 64 video game player 
and related cartridges. Revenues related to sales of Nintendo 64 game players 
and related cartridges currently account for the substantial majority of the 
Company's revenue.  In order to increase the focus of the MIPS Group on the 
design and development of microprocessor applications dedicated to the 
embedded market, in December 1997, Silicon Graphics initiated a plan to 
separate the business of the MIPS Group from its other operations.

   In April 1998, the Board of Directors of the Company approved a 
transaction, pursuant to which, Silicon Graphics transferred to the Company 
the assets and liabilities related to the design and development of 
microprocessor intellectual property for embedded market applications (the 
"Separation").  In connection with the Separation, the Company and Silicon 
Graphics entered into a Corporate Agreement that provides for certain 
pre-emptive rights of Silicon Graphics to purchase shares of the Company's 
capital stock, registration rights related to shares of the Company's capital 
stock owned by Silicon Graphics and covenants against certain actions by the 
Company for as long as Silicon Graphics owns a majority of the Company's 
outstanding Common Stock.  Furthermore, the Company and Silicon Graphics 
entered into a Management Services Agreement pursuant to which Silicon 
Graphics provides certain services to the Company followed the Separation on 
an interim or transitional basis.

   As of the closing of the Company's initial public offering (the 
"Offering"), on July 6, 1998, the Company was a majority owned subsidiary of 
Silicon Graphics.

   BASIS OF PRESENTATION.  The accompanying financial statements, through 
June 30, 1998, reflect the operations of the Company's predecessor, the MIPS 
Group. Subsequent to June 30, 1998, the Company operated as a stand-alone 
company, MIPS Technologies, Inc.

   The accompanying balance sheets have been prepared using the historical 
basis of accounting and include all of the assets and liabilities 
specifically identifiable to the Company and, for certain liabilities that 
are not specifically identifiable, estimates have been used to allocate a 
portion of Silicon Graphics' liabilities to the Company. Through June 30, 
1998, cash management for the Company had been done by Silicon Graphics on a 
centralized basis and all cash provided by Silicon Graphics has been recorded 
as interest-free financing from Silicon Graphics. The statement of operations 
for the three months ended September 30, 1998 and 1997 include all revenue 
and costs attributable to the Company, including a corporate allocation of 
the costs of facilities and employee benefits. Additionally, incremental 
corporate administration, finance and management costs are allocated to the 
Company based on certain methodologies that management believes are 
reasonable under the circumstances.

                                       6
<PAGE>

                              MIPS TECHNOLOGIES, INC.

                NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)


     The unaudited results of operations for the interim periods shown herein 
are not necessarily indicative of operating results for the entire fiscal 
year. In the opinion of management, the condensed financial statements 
include all adjustments (consisting only of normal recurring accruals) 
necessary to present fairly the financial position, results of operations and 
cash flow for each interim period shown.

      The condensed financial statements have been prepared in accordance 
with the rules and regulations of the Securities and Exchange Commission 
(SEC) applicable to interim financial information.  Certain information and 
footnote disclosures included in financial statements prepared in accordance 
with generally accepted accounting principles have been omitted in these 
interim statements pursuant to such SEC rules and regulations. The unaudited 
condensed financial statements included in this Form 10-Q should be read in 
conjunction with the audited financial statements and notes thereto, for the 
fiscal year ended June 30, 1998, included in the Company's 1998 Annual Report 
on Form 10-K.

NOTE 2.  COMPUTATION OF EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted 
earnings per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                                                                       Three months ended
                                                                         September 30,
                                                                ----------           ----------
                                                                   1998                 1997
                                                                ----------           ----------
<S>                                                             <C>                  <C>
Net income (loss)...............................................    $3,273              $(5,388)
                                                                ----------           ----------
                                                                ----------           ----------
Weighted-average shares outstanding -- basic....................    37,250               36,000
Effect of dilutive securities -- employee stock options.........       759                   --
                                                                ----------           ----------
Weighted-average shares outstanding -- diluted..................    38,009               36,000
                                                                ----------           ----------
                                                                ----------           ----------
Net income (loss) per share -- basic............................    $ 0.09              $ (0.15)
                                                                ----------           ----------
                                                                ----------           ----------
Net income (loss) per share -- diluted..........................    $ 0.09              $ (0.15)
                                                                ----------           ----------
                                                                ----------           ----------
</TABLE>

                                       7
<PAGE>

                              MIPS TECHNOLOGIES, INC.

                NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3.   NEW ACCOUNTING PRONOUNCEMENTS

     During fiscal 1999, the Company adopted Statement of Financial 
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). 
There was no impact to the Company as a result of the adoption of SFAS 130, 
as there is no difference between the Company's reported net income (loss) 
and the comprehensive net income (loss) under SFAS 130 for the periods 
presented.

     In June 1997, the Financial Accounting and Standards Board issued 
Statement of Financial Accounting Standards No. 131 "Disclosures about 
segments of an Enterprise and Related Information" ("SFAS 131").  SFAS 131 is 
effective for the fiscal year ending June 30, 1999 and establishes standards 
for disclosure about products, geography and major customers.  The adoption 
of SFAS 131 will have no impact on the Company's results of operation and 
financial condition. The Company expects that implementation of this standard 
will not have material effect on its annual financial statement disclosures.

NOTE 4.   CONTINGENCIES

On April 6, 1998, the Company and Silicon Graphics filed an action against 
ArtX, Inc. and certain employees of ArtX, Inc. in the Superior Court of the 
State of California alleging, among other things, misappropriation of trade 
secrets and breach of contractual and fiduciary duties in connection with the 
defendants' actions in developing graphics technology for Nintendo's next 
generation video game system.  On April 23, 1998, Nintendo notified Silicon 
Graphics and the Company of its belief that the disclosure in the Company's 
registration statement filed with the Securities and Exchange Commission on 
April 21, 1998 of certain information regarding the contract for the 
development of the Nintendo 64 video game system constituted a breach of that 
contract.  Silicon Graphics and the Company strongly disagree that any such 
breach has occurred.  On May 27, 1998, Silicon Graphics, the Company, 
Nintendo and ArtX, Inc. entered into a memorandum of understanding pursuant 
to which the companies have engaged in discussions relating to a possible 
mutually beneficial business relationship. On the basis of this 
understanding, Silicon Graphics and the Company have dismissed without 
prejudice the pending lawsuit against ArtX, Inc., and Nintendo has agreed 
that, in the absence of a lawsuit against Nintendo or ArtX, Inc., it will not 
assert any claim that the Nintendo 64 contract has been breached in 
connection with the filing of the Company's registration statement.

          On April 10, 1998, the Company filed an action against Lexra, Inc., 
a Massachusetts company ("Lexra"), in the United States District Court for 
the Northern District of California, asserting claims for false 
advertisement, trademark infringement, trademark dilution and unfair 
competition.  This lawsuit arose out of Lexra's claim that its newly 
introduced product offering is "MIPS compatible."  Lexra does not have a 
license from the Company to use its intellectual property in connection with 
any Lexra products.  In the suit, the Company sought injunctive relief as 
well as monetary damages.  In May 1998, Lexra filed an answer and 
counterclaim seeking to cancel certain of the Company's trademarks.  In 
September 1998, the Company has entered into a memorandum of understanding 
(MOU) with Lexra, Inc.  In the MOU, among other things, Lexra will no longer 
state that its products are "MIPS compatible".  Lexra's counterclaims has 
also been dismissed.  The Company is continuing to evaluate possible patent 
infringement claims against Lexra and will assert such claims if appropriate.

          In February 1998, the Company received a notice asserting that the 
R10000 microprocessor and potentially other microprocessors designed by the 
Company allegedly infringe a patent originally assigned to Control Data 
Corporation. The Company is evaluating these claims.

     From time to time, the Company receives communications from third 
parties asserting patent or other rights covering the Company's products and 
technologies. Based upon the Company's evaluation, it may take no action or 
it may seek to obtain a license. There can be no assurance in any given case 
that a license will be available on terms the 

                                       8
<PAGE>

Company considers reasonable, or that litigation will not ensue.

     Management is not aware of any pending disputes that would be likely to 
have a material adverse effect on the Company's business, results of 
operations or financial condition.

NOTE 5.  RELATED PARTY TRANSACTIONS

     At September 30, 1998, accounts payable includes approximately $1.4 
million payable to Silicon Graphics relating to payments made by Silicon 
Graphics to vendors on behalf of the Company.

     At September 30, 1998 accrued liabilities includes approximately $1.1 
million taxes payable to Silicon Graphics in accordance with the tax sharing 
agreement pursuant to which the Company and Silicon Graphics will make 
payments to each other such that, with respect to any period, the amount of 
taxes to be paid by the Company, subject to certain adjustments, will be 
determined as though the Company were to file separate federal, state and 
local income tax return.

     During the quarter ended September 30, 1997, the Company was operating 
as a division of Silicon Graphics and was utilizing its centralized cash 
management services and processes relating to accounts payable and accrued 
liabilities. The Company's net cash requirements then were funded by Silicon 
Graphics.

                                       9

<PAGE>

ITEM  2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

   THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE UNAUDITED 
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. 
Except for the historical information contained in this quarterly report on 
Form 10-Q, the matters discussed herein may contain forward-looking 
statements that are subject to certain risks and uncertainties that could 
cause the Company's actual results to differ materially from those expressed 
or implied by such forward-looking statements.  Factors that could cause such 
differences include, but are not limited to, Year 2000 compliance and other 
risks identified herein under "Factors That May Affect Our Business," and 
other risks included from time to time in the Company's other Securities and 
Exchange Commission ("SEC") reports and press releases, copies of which are 
available from the Company upon request.  The forward-looking statements 
within this Quarterly Report on Form 10-Q are identified by words such as 
"believes", "anticipates", "expects", "intends", "may" and other similar 
expressions. However, these words are not the exclusive means of identifying 
such statements. The Company assumes no obligation to update any 
forward-looking statements contained herein.

RESULTS OF OPERATIONS

   REVENUE. The Company's revenue consists of royalties and contract revenue 
earned under contracts with its licensees. The Company generates royalties 
from the sale by semiconductor manufacturers of products incorporating the 
Company's technology. The Company also receives royalties from Nintendo 
relating to sales of Nintendo 64 video game players and related cartridges.  
Royalties may be calculated as a percentage of the revenue received by the 
seller on sales of such products or on a per unit basis. Contract revenue 
includes technology license fees and engineering service fees earned 
primarily under contracts with the Company's semiconductor manufacturing 
partners.

   Total revenue decreased by $2.8 million to $12.3 million for the three 
months ended September 30, 1998 from $15.0 million for the comparable period 
in 1997.  The decrease in revenue was attributable to the absence of 
royalties from the graphics chip included in the Nintendo 64 game player, 
which reached its cap in the first half of fiscal 1998.  The decrease was 
offset in part by an increase in royalties generated from game cartridge 
sales by Nintendo.  Contract revenue consisted principally of license fees 
for the three months ended September 30, 1998 and 1997 and remained 
relatively flat quarter over quarter.

   COST OF CONTRACT REVENUE.  Cost of contract revenue decreased to zero for 
the three months ended September 30, 1998 from $375,000 for the comparable 
period in 1997. Cost of contract revenue in the first quarter of fiscal 1998 
was attributable to sublicense fees, such fees were not payable in the first 
quarter of fiscal 1999.

   RESEARCH AND DEVELOPMENT.  Research and development expenses decreased by 
$12.8 million to $4.6 million for the three months ended September 30, 1998 
from $17.3 million for the comparable period in 1997. The decrease in 
research and development expenses was primarily due to the reduction in the 
Company's research and development staff to 43 persons at September 30, 1998 
from 258 persons at September 30, 1997. This reduction reflects the transfer 
from the Company to Silicon Graphics of employees engaged in the development 
of next generation microprocessors for Silicon Graphics' systems as well as 
other staff reductions associated with the Company's change in strategic 
direction. See "Risks Associated with Recent Shift in Strategic Direction".  
The Company expects research and development expenses to increase in fiscal 
year 1999 as it develops new designs for the digital consumer products market.

   SALES AND MARKETING, GENERAL AND ADMINISTRATIVE.  Sales and marketing and 
general and administrative expenses decreased by $281,000 to $2.4 million for 
the three months ended September 30, 1998 from $2.7 million for the 
comparable period in 1997. The decrease was primarily due to a decrease in 
advertising and promotional spending. The Company expects sales and marketing 
and general and administrative expenses to increase in fiscal year 1999 as 
the Company places additional resources into marketing its technology and 
operating as a public company.

                                      10
<PAGE>

   INTEREST INCOME (EXPENSE).  Interest income (expense) increased by 
$177,000 to an interest income of $170,000 for the three months ended 
September 30, 1998 from an interest expense of $7,000 for the comparable 
period in 1997.  The increase was primarily due to interest income earned 
from investment of the proceeds of approximately $15.9 million from the 
Company's initial public offering, which closed on July 6, 1998.

   INCOME TAXES.  Subsequent to the closing of the initial public offering, 
the Company, while still a part of Silicon Graphics' consolidated group for 
federal income tax purposes, is responsible for its income taxes through a 
tax sharing agreement with Silicon Graphics.  Therefore, to the extent the 
Company produces taxable income, losses or credits, it will make or receive 
payments as though it filed separate federal, state and local income tax 
returns.  The Company will be included in Silicon Graphics' consolidated 
group for federal income tax purposes for so long as Silicon Graphics 
beneficially owns at least 80% of the total voting power and value of the 
outstanding common stock.

   The Company recorded a provision for income taxes of $2.2 million for the 
three months ended September 30, 1998 compared to zero for the comparable 
period in 1997. The provision for the three months ended September 30, 1998 
was based on an estimated federal and state combined rate of 40% on income 
before taxes. The net losses incurred for the three months ended September 
30, 1997 are primarily attributable to the operations of the Company as a 
division of Silicon Graphics and were included in the income tax returns 
filed by Silicon Graphics.  In light of both historical losses incurred, as 
well as the fact that, by operation of a tax sharing agreement, the Company 
will not receive any benefit for losses incurred or have any tax liability 
for any income earned up to the closing of the initial public offering, no 
income tax provision or benefit has been reflected for the three months ended 
September 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

   At September 30, 1998 the Company had cash and cash equivalents of $21.0 
million and total working capital of $15.1 million, including a short-term 
component of deferred revenue of $33,000.

   The Company's operating activities provided net cash of $5.4 million for 
the three months ended September 30, 1998 compared to net cash used in 
operating activities of $5.1 million for the comparable period in 1997.   In 
the three months ended September 30, 1998, net cash provided by operating 
activities consisted mainly of net income, depreciation and an increase in 
accrued liabilities and deferred revenue partially offset by an increase in 
accounts receivable.  The increases in accounts receivable and deferred 
revenue were due to a new license agreement completed during the quarter. The 
increase in accrued liabilities was the result of accrued compensation and 
income tax provision recorded for the three months ended September 30, 1998.

   Net cash used in investing activities was $285,000 and $180,000 for the 
three months ended September 30, 1998 and 1997, respectively. Net cash used 
in investing activities in both periods presented consisted of equipment 
purchases.  Capital expenditures have been, and future expenditures are 
anticipated to be, primarily for facilities and equipment to support 
expansion of the Company's operations.  The Company expects that its capital 
expenditures will increase slightly as its employee base grows.

   Net cash provided by financing activities was $15.9 million for the three 
months ended September 30, 1998 compared to $5.3 million for the comparable 
period in 1997.  Net cash provided by financing activities for the three 
months ended September 30, 1998, consisted primarily of cash received in 
connection with the issuance of common stock through the Company's initial 
public offering, which was completed in July 1998.  Financing activities for 
the three months ended September 30, 1997, consisted primarily of funds 
provided from Silicon Graphics.

   The Company's future liquidity and capital requirements are expected to 
vary greatly from quarter to quarter, depending on numerous factors, 
including, among others, the cost, timing and success of product development 
efforts, the cost and timing of sales and marketing activities, the extent to 
which the Company's existing and new technologies gain market acceptance, the 
level and timing of contract revenues and royalties, competing technological 
and market

                                      11
<PAGE>

developments and the costs of maintaining and enforcing patent claims and 
other intellectual property rights. The Company believes that cash generated 
by its operations, together with the net proceeds to the Company from its 
initial public offering, will be sufficient to meet its projected operating 
and capital requirements. The Company may elect to raise additional funds 
through public or private financing, strategic relationships or other 
arrangements. Additional equity financing may be dilutive to holders of the 
Common Stock, and debt financing, if available, may involve restrictive 
covenants. Moreover, strategic relationships, if necessary to raise 
additional funds, may require that the Company relinquish its rights to 
certain of its technologies. As long as Silicon Graphics desires to maintain 
its percentage ownership interest in the Company, the Company may be 
constrained in its ability to issue Common Stock in connection with 
acquisitions or to raise equity capital.

FACTORS THAT MAY AFFECT OUR BUSINESS

   RISKS ASSOCIATED WITH RECENT SHIFT IN STRATEGIC DIRECTION.  The Company's 
research and development efforts historically focused primarily on the 
development of high-performance microprocessor and related designs for 
Silicon Graphics' workstations and servers.  However, as the cost to design 
and manufacture microprocessors based on the Company's technology decreased, 
the Company has sought to penetrate the market for high-volume, 
high-performance embedded applications by supporting and coordinating the 
efforts of its semiconductor partners in that area. In connection with the 
Separation and the Offering, the Company has formulated a new strategic 
direction in which its primary focus is the development of microprocessors 
and related designs for applications in the embedded market, including 
digital consumer products such as video game products, handheld personal 
computers and digital set-top boxes.  The design and development of 
high-performance microprocessors for the next generation Silicon Graphics' 
product line is carried out by persons who have been transferred to Silicon 
Graphics in connection with the Separation.  The Company's shift in strategic 
direction involves several risks, including (i) increased reliance on the 
evolving and highly competitive digital consumer products industry; (ii) the 
need for the Company to refocus its research and development efforts from 
microprocessors primarily for high-performance computer systems to 
microprocessors and related designs for use in a wide range of digital 
consumer products; and (iii) increased importance of the Company's sales and 
marketing activities and its limited experience in this area. Any failure by 
the Company to adequately address any of these risks could have a material 
adverse effect on the Company's business, results of operations and financial 
condition.

   UNPREDICTABLE AND FLUCTUATING OPERATING RESULTS.  The Company experiences 
significant fluctuations in its quarterly operating results due to a variety 
of factors, many of which are outside of its control.  Moreover, because many 
of the Company's revenue components fluctuate and are difficult to predict 
and the Company's expenses are largely independent of its revenue in any 
particular period, it is difficult for the Company to accurately forecast 
operating results.  The Company's revenue in any particular quarter is 
dependent on a number of factors, including the demand for and average 
selling prices of semiconductor products that incorporate the Company's 
technology, the financial terms of the Company's contractual arrangements 
with its semiconductor partners (which may require significant up-front 
payments or payments based on the achievement of certain milestones), the 
relative mix of contract revenue and royalties, and competitive pressures 
resulting in lower contract revenue or royalty rates.  In addition, contract 
revenue may fluctuate significantly from period to period and any increase or 
decrease in such revenue will not be indicative of future period-to-period 
increases or decreases.  Because the Company's expense levels are based, in 
part, on management's expectations regarding future revenue, if revenue is 
below expectations in any quarter, the adverse effect may be magnified by the 
Company's inability to adjust spending in a timely manner to compensate for 
any such revenue shortfall.

   Factors that may adversely affect the Company's quarterly operating 
results include the Company's ability to develop, introduce and market new 
microprocessor intellectual property, the demand for and average selling 
prices of semiconductor products that incorporate the Company's technology, 
the establishment or loss of strategic relationships with semiconductor 
manufacturing partners or manufacturers of digital consumer products, the 
timing of new products and product enhancements by the Company and its 
competitors, changes in the Company's and digital consumer product 
manufacturers' development schedules and levels of expenditures on research 
and development and product support and general economic conditions.  As a 
result, the Company's total revenue and operating results in any future 
period cannot

                                      12
<PAGE>

be predicted with certainty, and its operating results in any quarter may not 
be indicative of its future performance.  Moreover, the Company expects to 
experience seasonal fluctuations in its revenue and operating results.

   REVENUE CONCENTRATION.  The Company is subject to revenue concentration 
risks at both the product and semiconductor manufacturing partner levels.  To 
date, a substantial portion of the Company's total revenue has been derived 
from contract revenue and royalties earned on sales of video game products 
that use the Company's RISC-based microprocessor technology.  In particular, 
royalties and contract revenue from Nintendo and NEC relating to sales of 
Nintendo 64 video game players and related cartridges accounted for 79% and 
78% of the Company's total revenue for the three months ended September 30, 
1998 and 1997, respectively.

   The Company anticipates that royalties related to sales of Nintendo 64 
video game cartridges will represent a substantial portion of its total 
revenue for the next several years.  However, competition in the market for 
home entertainment products is intense and the introduction of new products 
or technologies, as well as shifting consumer preferences, could negatively 
impact Nintendo 64 video game cartridge sales.  There can be no assurance as 
to the amount and timing of sales of Nintendo 64 video game players and 
related cartridges and, consequently, there can be no assurance as to the 
royalty stream to the Company from such sales.  In particular, the eventual 
introduction of the next generation Nintendo video game system is expected to 
result in declining sales of Nintendo 64 video game players and related 
cartridges, although sales of video game cartridges would be likely to 
continue for some time.  In the near term, factors negatively affecting sales 
of Nintendo 64 video game cartridges could have a material adverse effect on 
the Company's results of operations and financial condition.

   Although the Company expects that an increasingly significant portion of 
its future revenue will be related to sales of digital consumer products such 
as handheld personal computers and set-top boxes as well as other video game 
products, there can be no assurance that the Company's technology will be 
selected for design into any such products.  Accordingly, the Company may 
remain significantly dependent on revenue related to sales of video game 
products.  The identity of significant products may vary from period to 
period depending on the addition of new contracts and the number of designs 
using the Company's technology.

   A significant portion of the Company's total revenue has been and is 
expected to continue to be derived from a limited number of semiconductor 
manufacturers. For the three months ended September 30, 1998 and 1997 NEC 
accounted for approximately 10% and 16%, respectively, of the Company's total 
revenue.  The Company believes that NEC will continue to represent at least 
10% of its total revenue for at least the next several years, although NEC is 
not obligated to continue using the Company's technology in its current or 
future products.  Because there is a relatively limited number of 
semiconductor manufacturers to which the Company could license its technology 
on a basis consistent with its business model, it is likely that the 
Company's revenue will continue to be concentrated at the semiconductor 
manufacturing partner level.  This revenue concentration for any given period 
will vary depending on the addition or expiration of contracts, the nature 
and timing of payments due under such contracts and the volumes and prices at 
which the Company's partners sell products incorporating its technology. 
Accordingly, the identity of particular manufacturing partners that will 
account for any such revenue concentration will vary from period to period 
and may be difficult to predict.

   SEASONALITY.  Because revenue related to sales of Nintendo 64 video game 
cartridges is expected to represent a substantial portion of the Company's 
total revenue over the next several years, the Company expects to experience 
seasonal fluctuations in its revenue and operating results.  The Company 
records royalty revenue from Nintendo in the quarter following the sale of 
the related Nintendo 64 video game cartridge.  Because a disproportionate 
amount of Nintendo 64 video game cartridges are typically sold in the 
Company's second fiscal quarter (which includes the holiday selling season), 
a disproportionate amount of the Company's revenue and operating income is 
expected to be realized in its third fiscal quarter.  In addition, as the 
Company increases its focus on microprocessor intellectual property for 
high-volume digital consumer products, the Company can be expected to 
continue to experience similar seasonal fluctuations in its revenue and 
operating results.

   INTELLECTUAL PROPERTY MATTERS.  The Company regards its patents, 
copyrights, mask work rights, trademarks, trade secrets and similar 
intellectual property as critical to its success, and relies on a combination 
of patent, trademark, copyright, mask work and trade secret laws to protect 
its proprietary rights.  Any failure of the Company to obtain or

                                      13
<PAGE>

maintain adequate protection of its intellectual property rights for any 
reason could have a material adverse effect on its business, results of 
operations and financial condition.  Subject to the grant of a license to 
Silicon Graphics, the Company owns approximately 51 U.S. patents on various 
aspects of its technology, with expiration dates ranging from 2006 to 2015, 
approximately 24 pending U.S. patent applications as well as all foreign 
counterparts relating thereto.  There can be no assurance that patents will 
issue from any patent applications submitted by the Company, that any patents 
held by the Company will not be challenged, invalidated or circumvented or 
that any claims allowed from its patents will be of sufficient scope or 
strength to provide meaningful protection or any commercial advantage to the 
Company.  In addition, there can be no assurance that third parties will not 
assert claims of infringement against the Company or against the Company's 
semiconductor manufacturing partners in connection with their use of the 
Company's technology.  Such claims, even those without merit, could be time 
consuming, result in costly litigation and/or require the Company to enter 
into royalty or licensing agreements.  Such royalty or licensing agreements, 
if required, may not be available on terms acceptable to the Company, or at 
all.  Moreover, the laws of certain foreign countries may not protect the 
Company's intellectual property to the same extent as do the laws of the 
United States and, because of the importance of the Company's intellectual 
property rights to its business, this could have a material adverse effect on 
its business, results of operations and financial condition.

   The Company also uses licensing agreements and employee and third party 
nondisclosure and assignment agreements to limit access to and distribution 
of its proprietary information and to obtain ownership of technology prepared 
on a work-for-hire basis.  There can be no assurance that the steps taken by 
the Company to protect its intellectual property rights will be adequate to 
deter misappropriation of such rights or that the Company will be able to 
detect unauthorized uses and take immediate or effective steps to enforce its 
rights.  There can also be no assurance that the steps taken by the Company 
to obtain ownership of contributed intellectual property will be sufficient 
to assure its ownership of all proprietary rights.  The Company also relies 
on unpatented trade secrets to protect its proprietary technology.  No 
assurance can be given that others will not independently develop or 
otherwise acquire the same or substantially equivalent technologies or 
otherwise gain access to the Company's proprietary technology or disclose 
such technology or that the Company can ultimately protect its rights to such 
unpatented proprietary technology.  In addition, no assurance can be given 
that third parties will not obtain patent rights to such unpatented trade 
secrets, which patent rights could be used to assert infringement claims 
against the Company.  From time to time the Company has entered, and in the 
future may enter, into cross licensing arrangements with others, pursuant to 
which the Company licenses certain of its patents in exchange for patent 
licenses from such licensees.  Although these types of cross licensing 
arrangements are common in the semiconductor and microprocessor industries, 
and do not generally provide for transfers of know-how or other proprietary 
information, such arrangements may facilitate the ability of such licensees, 
either alone or in conjunction with others, to develop competitive products 
and designs.

   The Company and Silicon Graphics have entered into arrangements pursuant 
to which certain intellectual property was assigned to the Company, subject 
to the grant of a license to Silicon Graphics; certain intellectual property 
was retained by Silicon Graphics, subject to the grant of a license to the 
Company; and certain intellectual property was retained by Silicon Graphics 
without any ongoing interest to the Company.  The Company's inability to use 
Silicon Graphics' intellectual property in the future could have a material 
adverse affect on its business and results of operations. In the past, the 
MIPS Group has benefited from its status as a division of Silicon Graphics in 
its access to the intellectual property of third parties through licensing 
arrangements or otherwise, and in the negotiation of the financial and other 
terms of any such arrangements.  As a result of the Separation, there can be 
no assurance that the Company will be able to negotiate commercially 
attractive intellectual property licensing arrangements with third parties in 
the future, particularly if the Company ceases to be a majority-owned 
subsidiary of Silicon Graphics.  In addition, in connection with any future 
intellectual property infringement claims, the Company will not have the 
benefit of asserting counterclaims based on Silicon Graphics' intellectual 
property portfolio, nor will the Company be able to provide licenses to 
Silicon Graphics' intellectual property in order to resolve such claims.

   YEAR 2000 COMPLIANCE.  The Company is currently examining the Year 2000 
issue. The Company believes its products are Year 2000 compliant; however, 
the Company is initiating a program to prepare its information technology 
("IT") and related non-IT and processes for the Year 2000 and plans to have 
changes to critical systems completed by the third quarter of calendar year 
1999 to allow time for testing.

                                      14
<PAGE>

   Management is assessing the Year 2000 project costs and expects the 
assessment to be complete by the end of the second quarter of fiscal 1999, 
but based on preliminary estimates, the costs of any necessary actions are 
not expected to be material to the Company's results of operations or 
financial condition.

   The Company intends to cooperate with its manufacturing partners and 
others with which it does business to coordinate Year 2000 compliance with 
operational processes and marketed products, although the Company is unable 
to evaluate the Year 2000 compliance of products and technology developed by 
third parties that incorporates the Company's technology.  To the extent that 
any such third-party product or technology fails to be Year 2000 compliant, 
the Company may be adversely affected due to its association with such 
product or technology.  The Company will also be contacting critical 
suppliers of products and services to determine that the suppliers' 
operations and the products and services they provide are Year 2000 capable 
or to monitor their progress toward Year 2000 capability.  The Company may 
develop contingency plans should the need arise. There can be no assurance 
that another company's failure to ensure Year 2000 capability would not have 
an adverse effect on the Company.

   LACK OF INDEPENDENT OPERATING HISTORY. The Company has never operated as a 
stand-alone company.  The Company continues to be a majority owned subsidiary 
of Silicon Graphics, however, Silicon Graphics will have no obligation to 
provide assistance to the Company.  The Company will be required to develop 
and implement the operational, administrative and other systems and 
infrastructure necessary to support its current and future business.  There 
can be no assurance that the Company will be able to develop the necessary 
systems and infrastructure and any failure to do so could have an adverse 
effect on the Company's business, results of operations and financial 
condition.

   NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE.  The Company's success 
is highly dependent on its ability to develop enhancements and new 
generations of its microprocessor intellectual property, introduce them to 
the marketplace in a timely manner, and have them incorporated into 
semiconductor products that are ultimately selected for design into the 
products of leading digital consumer product manufacturers.  There can be no 
assurance that the Company's development efforts will be successful or that 
the characteristics of its microprocessor intellectual property will satisfy 
those that may be critical to specific applications in the embedded market.  
To the extent that the Company's development efforts are unsuccessful or the 
characteristics of its microprocessor intellectual property are not 
compatible with the requirements of specific digital consumer product 
applications, its ability to achieve design wins may be limited.  Failure to 
achieve sufficient design wins could have a material adverse effect on the 
Company's business, results of operations and financial condition.

   Technical innovations of the type critical to the Company's success are 
inherently complex. Any failure by the Company to anticipate or respond 
adequately to changes in the requirements of digital consumer product 
manufacturers or in the semiconductor manufacturing process, or any 
significant delays in the development or introduction of new microprocessor 
intellectual property, could have a material adverse effect on the Company's 
business, results of operations and financial condition. Moreover, 
significant technical innovations generally require a substantial investment 
before their commercial viability is determined.  There can be no assurance 
that the Company will have the financial resources necessary to fund the 
future development of microprocessor and related designs.  In addition, there 
can be no assurance that any enhancements or new generations of the Company's 
technology, even if successfully developed, will generate revenue in excess 
of the costs of development or not be quickly rendered obsolete by changing 
consumer preferences, the introduction of products embodying new technologies 
or features or other technological developments in the semiconductor and 
digital consumer products industries.

   DEPENDENCE ON DIGITAL CONSUMER PRODUCTS INDUSTRY.  The digital consumer 
products industry will be the primary market for the Company's microprocessor 
and related designs.  The Company's success will be dependent upon the level 
of consumer acceptance of the products that incorporate its technology, which 
may be affected by changing consumer preferences and the introduction of 
products embodying new technologies or features.  In addition, certain 
digital consumer products such as video game products may present limited 
opportunities for design wins due to a limited number of product 
manufacturers and the length of product life cycles. Many applications in the 
digital consumer products industry, such as handheld personal computers and 
set-top boxes, have only recently been introduced to the market and the level 
of consumer interest and acceptance is difficult to predict. Factors 
negatively affecting the digital consumer products industry and the demand 
for digital consumer products, such as the failure to develop industry

                                      15
<PAGE>

standards for hardware and software or to achieve adequate product cost 
reductions, could have a material adverse effect on the Company's business, 
results of operations and financial condition.  Moreover, to the extent that 
the performance, functionality, price and power characteristics of the 
Company's microprocessor designs do not satisfy those that may be critical to 
specific digital consumer product applications, the Company's dependence on 
the digital consumer products industry may be further confined to a limited 
segment of that industry.

   RELIANCE ON MANUFACTURING PARTNERS.  The Company does not manufacture or 
sell microprocessors containing its technology.  Rather, the Company licenses 
its technology to semiconductor manufacturers that incorporate the Company's 
technology into the products they sell.  In some cases, these manufacturing 
partners also add custom integration services and derivative design 
technologies to the Company's microprocessor designs.  Accordingly, the 
Company's success is substantially dependent on the adoption and continued 
use of its technology by semiconductor manufacturers.  The Company faces 
numerous risks in obtaining agreements with semiconductor manufacturers on 
terms consistent with its business model, including, among others, the 
lengthy and expensive process of building a relationship with a potential 
partner before there is any assurance of an agreement; persuading large 
semiconductor companies to work with, to rely for critical technology on, and 
to disclose proprietary manufacturing technology to, the Company; and 
persuading potential partners to bear certain development costs associated 
with the Company's technology and to make the necessary investment to 
successfully produce embedded microprocessors using the Company's technology. 
Moreover, none of the Company's manufacturing partners is obligated to 
license new or future generations of the Company's microprocessor designs.

   The Company is also subject to many risks beyond its control that 
influence the success of its semiconductor manufacturing partners, including, 
among others, the highly competitive environment in which its current and any 
future partners operate, the market for their products and the engineering 
capabilities and financial and other resources of its partners.  The Company 
also believes that its principal competition may come from semiconductor 
manufacturers, including its current manufacturing partners that internally 
develop products using similar or alternative technologies. Any such 
competition may adversely affect the Company's existing relationships and its 
ability to establish new relationships.  Moreover, the Company's 
relationships with certain of its existing partners may be negatively 
affected by its separation from Silicon Graphics, insofar as Silicon 
Graphics' status as a customer of such partners has been a factor in 
establishing and maintaining such relationships or in negotiating the 
financial and other terms of the contractual arrangements with such partners.

   The Company currently has seven semiconductor manufacturing partners.  
There can be no assurance that the Company will be successful in maintaining 
relationships with its current manufacturing partners or in entering into new 
relationships with additional partners.  Any failure by the Company to 
establish or maintain such relationships could have a material adverse effect 
on the Company's business, results of operations and financial condition.

   DEPENDENCE ON DIGITAL CONSUMER PRODUCT MANUFACTURERS.  The timing and 
amount of royalties received by the Company is directly affected by sales of 
consumer products incorporating the Company's technology.  Accordingly, the 
Company's success is substantially dependent upon the adoption of its 
technology by digital consumer product manufacturers.  The Company is subject 
to many risks beyond its control that influence the success or failure of a 
particular digital consumer product manufacturer, including, among others, 
competition faced by the manufacturer in its particular industry; market 
acceptance of the manufacturer's products; the engineering, marketing and 
management capabilities of the manufacturer; technical challenges unrelated 
to the Company's technology faced by the manufacturer in developing its 
products; and the financial and other resources of the manufacturer.  The 
process of persuading digital consumer product manufacturers to adopt the 
Company's technology can be lengthy and, even if adopted, there can be no 
assurance that the Company's technology will be used in a product that is 
ultimately brought to market, achieves commercial acceptance or results in 
meaningful royalties to the Company.  The failure of manufacturers in the 
digital consumer products industry to adopt the Company's technology for 
incorporation into their products could have a material adverse effect on the 
Company's business, results of operations and financial condition.  
Furthermore, because the Company does not control the business practices of 
its licensees, it has no ability to establish the prices at which the 
products incorporating its technology are made available to digital consumer 
product manufacturers or the degree to which its licensees promote the 
Company's technology to such manufacturers.

                                      16
<PAGE>

   COMPETITION.  Competition in the market for embedded microprocessors is 
intense. The Company believes that the principal competitive factors in the 
industry are performance, functionality, price, customizability and power 
consumption.  The Company competes primarily against ARM Holdings plc. and 
Hitachi Semiconductor (America) Inc. The Company also competes against 
certain semiconductor manufacturers whose product lines include 
microprocessors for embedded and non-embedded applications, including Intel 
Corporation, National Semiconductor Corporation, Advanced Micro Devices, Inc. 
and Motorola, Inc. In addition, the Company must continue to differentiate 
its microprocessor and related designs from those available or under 
development by the internal design groups of semiconductor manufacturers, 
including its current and prospective manufacturing partners.  Many of these 
internal design groups have substantial programming and design resources and 
are part of larger organizations, which have substantial financial and 
marketing resources.  There can be no assurance that internal design groups 
will not develop products that compete directly with those of the Company or 
will not actively seek to license their own technology to third-party 
semiconductor manufacturers.  Certain of the Company's competitors have 
greater name recognition and customer bases as well as greater financial and 
marketing resources than the Company, and such competition could adversely 
affect the Company's business, results of operations and financial condition.

   DEPENDENCE ON KEY PERSONNEL. The Company's success depends in part on the 
continued contributions of its key management, technical, sales and marketing 
personnel, many of whom are highly skilled and difficult to replace.  In 
addition, the Company's business plan requires, and its future operating 
results depend in significant part upon, the identification and hiring of 
additional highly skilled personnel, particularly technical personnel for its 
anticipated research and development activities.  Competition for qualified 
personnel, particularly those with significant experience in the 
semiconductor and microprocessor design industries, is intense.  The loss of 
the services of any of the key personnel, the inability to attract and retain 
qualified personnel in the future or delays in hiring personnel, particularly 
technical personnel, could have a material adverse effect on the Company's 
business, operating results and financial condition.

   RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. A substantial portion of 
the Company's revenue is derived from outside the United States.  For the 
three months ended September 30, 1998  and 1997, revenue from customers 
outside the United States, primarily in Japan, represented approximately 87% 
and 91% respectively, of the Company's total revenue. The Company anticipates 
that revenue from international customers primarily in Asia, will continue to 
represent a substantial portion of its total revenue.  To date, substantially 
all of the Company's revenue from international customers has been 
denominated in U.S. dollars.  However, to the extent that sales to digital 
consumer product manufacturers by the Company's manufacturing partners are 
denominated in foreign currencies, royalties received by the Company on such 
sales could be subject to fluctuations in currency exchange rates.  In 
addition, if the effective price of the technology sold by the Company to its 
partners were to increase as a result of fluctuations in foreign currency 
exchange rates, demand for the Company's technology could fall which would, 
in turn, reduce the Company's royalties. The Company is unable to predict 
the amount of non-U.S. dollar denominated revenue earned by its licensees.  
Therefore, the Company has not historically attempted to mitigate the effect 
that currency fluctuations may have on its revenue, and does not presently 
intend to do so in the future.  The relative significance of the Company's 
international operations exposes it to a number of additional risks including 
political and economic instability, longer accounts receivable collection 
periods and greater difficulty in collection of accounts receivable, reduced 
or limited protection for intellectual property, export license requirements, 
tariffs and other trade barriers and potentially adverse tax consequences.  
Several countries in Asia are experiencing a severe economic crisis, 
characterized by reduced economic activity, lack of liquidity, highly 
volatile foreign currency exchange and interest rates and unstable stock 
markets.  Several of the Company's semiconductor partners sell products into 
Asia that incorporate the Company's microprocessor and related designs.  Any 
negative impact of the circumstances in Asia on its sales of such products by 
the Company's semiconductor partners could have a negative impact on its 
royalty revenue.  There can be no assurance that the Company will be able to 
sustain revenue derived from international customers or that the foregoing 
factors will not have a material adverse effect on the Company's business, 
operating results and financial condition.

   MANAGEMENT OF GROWTH. The Company has limited managerial, financial, 
engineering and other resources and may not be equipped to manage 
successfully any future periods of rapid growth or expansion.  In addition, 
the Company's business plan requires that it identify and hire additional 
highly skilled technical personnel during fiscal 1999 to staff its 
anticipated research and development activities.  Recruitment and integration 
of these additional employees, as well as

                                      17
<PAGE>

any future periods of rapid growth or expansion, can be expected to place 
significant strains on the Company's resources, which may be exacerbated by 
the Company's recent shift in strategic direction.  Digital consumer product 
manufacturers as well as the Company's semiconductor manufacturing partners 
typically require significant engineering support in the design, testing and 
manufacture of products incorporating the Company's technology.  As a result, 
any increase in the adoption of the Company's technology will increase the 
strain on the Company's personnel, particularly its engineers. The Company's 
future growth will also depend on its ability to implement operational, 
financial and management information and control systems and procedures 
necessary to operate as a stand-alone company and without the financial, 
operational, managerial and administrative support previously provided by 
Silicon Graphics.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     NOT APPLICABLE.

                                      18
<PAGE>

                            PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

   On April 6, 1998, the Company and Silicon Graphics filed an action against 
ArtX, Inc. and certain employees of ArtX, Inc. in the Superior Court of the 
State of California alleging, among other things, misappropriation of trade 
secrets and breach of contractual and fiduciary duties in connection with the 
defendants' actions in developing graphics technology for Nintendo's next 
generation video game system.  On April 23, 1998, Nintendo notified Silicon 
Graphics and the Company of its belief that the disclosure in the Company's 
registration statement filed with the Securities and Exchange Commission on 
April 21, 1998 of certain information regarding the contract for the 
development of the Nintendo 64 video game system constituted a breach of that 
contract.  Silicon Graphics and the Company strongly disagree that any such 
breach has occurred.  On May 27, 1998, Silicon Graphics, the Company, 
Nintendo and ArtX, Inc. entered into a memorandum of understanding pursuant 
to which the companies have engaged in discussions relating to a possible 
mutually beneficial business relationship. On the basis of this 
understanding, Silicon Graphics and the Company have dismissed without 
prejudice the pending lawsuit against ArtX, Inc., and Nintendo has agreed 
that, in the absence of a lawsuit against Nintendo or ArtX, Inc., it will not 
assert any claim that the Nintendo 64 contract has been breached in 
connection with the filing of the Company's registration statement.

   On April 10, 1998, the Company filed an action against Lexra, Inc., a 
Massachusetts company ("Lexra"), in the United States District Court for the 
Northern District of California, asserting claims for false advertisement, 
trademark infringement, trademark dilution and unfair competition.  This 
lawsuit arose out of Lexra's claim that its newly introduced product offering 
is "MIPS compatible."  Lexra does not have a license from the Company to use 
its intellectual property in connection with any Lexra products.  In the 
suit, the Company sought injunctive relief as well as monetary damages.  In 
May 1998, Lexra filed an answer and counterclaim seeking to cancel certain of 
the Company's trademarks.  In September 1998, the Company has entered into a 
memorandum of understanding (MOU) with Lexra, Inc.  In the MOU, among other 
things, Lexra will no longer state that its products are "MIPS compatible".  
Lexra's counterclaims has also been dismissed.  The Company is continuing to 
evaluate possible patent infringement claims against Lexra and will assert 
such claims if appropriate.

   From time to time, the Company receives communications from third parties 
asserting patent or other rights covering the Company's products and 
technologies.  Based upon the Company's evaluation, it may take no action or 
it may seek to obtain a license.  There can be no assurance in any given case 
that a license will be available on terms the Company considers reasonable, 
or that litigation will not ensue.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS

     27.1      FINANCIAL DATA SCHEDULE.

(b)  REPORTS ON FORM 8-K.

     None.


ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.

                                      19
<PAGE>

                                     SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

                              MIPS Technologies, Inc.
                              a Delaware corporation

                              By:         /s/ KEVIN C. EICHLER
                                 -------------------------------------------
                                            Kevin C. Eichler
                                  Vice President and Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

Date:  November 16, 1998

                                      20