Earlier this year, a medium-sized computer hardware company based in Mountain View, California, sold off a software subsidiary to venture capitalists for a little over $50 million. Not the kind of deal to set tongues wagging in Silicon Valley's rarefied mergers-and-acquisitions atmosphere, one might think.

Except that the seller was Silicon Graphics Inc (SGI), once the undisputed king of high-performance workstations, and the software group was Alias Systems, the leader in three-dimensional screen graphics whose customers include every major special-effects and animation studio worldwide.

Any movie you have seen recently will almost certainly have had Alias in its credits. Unprecedentedly, it won an Oscar in 2003 for its software.

SGI and Alias together - the two tied the knot in 1995 - had seemed the perfect match of hardware and software supplier for a small but fast-growing and highly visible industry. But times change.

Doug Walker, Alias president, explains the rationale for the divorce: "We were no longer strategic to the long-term interests of SGI while at the same time we wanted to find ways to become better capitalised to do more for our customers and do it faster."

The disposal represents perhaps the most tangible evidence of a technical revolution sweeping through the entertainment business, which is already seeing the rate at which computer-generated entertainment can be created - everything from feature films to video games - hugely speeded up.

Costs, meanwhile, are being slashed.

Steve Canepa, vice-president for global media and entertainment at IBM, one of the principal beneficiaries of the revolution, vividly recalls a conversation with Tim Sarnoff, president of Sony Pictures Imageworks, a visual-effects company whose credits include Stuart Little, Spider-Man and Seabiscuit.

Mr Sarnoff told him: "We've seen a 50-fold improvement in the amount of content (computer-generated or enhanced scenes) we can produce in a given time compared with the early days of Imageworks.

"In one week, we can produce the number of sequences for a movie that typically used to take us a year - and with the same or better quality."

According to IBM's analysis, production costs are being slashed by up to 40 per cent. But what has all this about IBM? What has "Big Blue" got to do with Hollywood?

The world's largest computer maker, after all, is traditionally associated with back-office data processing, with the kind of nuts-and-bolts hardware and software used for running the enterprise, not with the creation of characters such as Shrek, or Gollum from Lord of the Rings.

Two factors, however, are contributing to the new ease and the considerably lower costs of screen animation: first, commodity hardware of unprecedented power; and second, the Linux operating system - the open-source software customers increasingly favour over proprietary systems.

Mr Walker explains that when Silicon Graphics bought the Toronto-based Alias, then called Alias/Wavefront, SGI Unix workstations were the only hardware powerful enough to drive advanced computer graphics.

As a result, the US company seemed to have secured an invulnerable position in the animation business.

But as Apple, Microsoft and others pumped up the power of their desktop offerings, SGI saw its market fall away dramatically. Now it is returning to its roots in high-performance computing markets such as manufacturing and research.

Only 10 per cent of its business today is in media, while government, defence and scientific computing provides 65 per cent of its revenues.

IBM, meanwhile, has been steadily moving into the media and entertainment business. While it refuses to release figures for the individual parts of the business, Mr Canepa says the division, while small compared to the company's traditional markets in government and finance, is growing quickly.

He claims 75 animation and special-effects houses worldwide have opted for the combination of IBM equipment and Linux software in the past few months, including Warner Brothers and Threshold Digital Research Laboratories in the US, Moving Picture Company in the UK, Attitude Studios in France, Oniria Pictures in Luxembourg and Weta Digital, the company behind the special effects in Lord of the Rings in New Zealand.

Few if any of these are household names.

They are what used to be, and frequently still are, called post-production houses. Yet today they have become hugely important in the movie world as digital animation and special effects take over from their analogue equivalents.

Typically today, a production team shoots the scenes for a movie on conventional 35mm film. The post-production house takes the film and digitises it, either scene by scene or as the complete movie.

Once in digital form, the film can be manipulated in ways limited only by the animators' imagination and the software available. Alias's Maya family, for example, is used by virtually every animation company in the world to create photo-realistic 3D creatures such as Gollum.

Apple's Shake software is used for two-dimensional modelling and combining the real life and computer-generated images.

From a computing point of view, the hard work is rendering - creating a complete digital image after the animators and graphic designers have done their work. Mr Walker of Alias says: "What is cool about the animation business to a computer supplier is the way our software stresses the hardware - to a greater extent than any other software."

So post-production houses build 'render farms': rack upon rack of servers running 24 hours a day, every day of the week, to compute the digital images ready for transfer back to celluloid.

The Moving Picture Company, currently London's largest post production house, has some 1,000 central processing units in its farm.

Weta, of Lord of the Rings fame, has more computing power than any other in the southern hemisphere, research and defence establishments included.

This is where the combination of IBM servers and Linux is beginning to make an impact.

Nick Cannon, in charge of production systems for the Moving Picture Company, says Linux has become the operating system of choice for media companies: "It's the way the industry is moving. All the post-production houses seem to make the change at about the same time.

"It's pure economics. The industry was coming from an SGI background for which it was paying a premium. But for technical workstations and servers, Linux is a fabulous environment."

Attitude Studios, France's largest post-production house, specialises in capturing live motion on film and used to build its own renderers. Laurent Guilleminot, chief information officer, says: "When we started, we did not have a lot of money so we built our own. Now they are old and out of date."

They are being replaced by IBM servers. Attitude is the post-production house for Renaissance, an innovative French movie by Christian Volckman that is being shot entirely in black and white.

As Mr Guilleminot makes clear, a major problem for animation houses, most of which are still poorly capitalised cottage industries, is how much to invest in technology and when.

A $2 million server bought at the wrong time could be a disaster.

Mr Canepa says the advent of low-cost servers means that extra processing power can be acquired in small, affordable chunks.

He accepts that the combination of low-cost servers and Linux is by no means unique to IBM. Hewlett-Packard, Apple and others all see rich pickings in the media business: "Customers can buy this piecemeal but we have managed to integrate the two."

Alias's Mr Walker thinks IBM is on the right path. "Everybody believes that multimedia, including three-dimensional imaging, will become more important in the broader marketplace over the next five years.

"If you can be at the front end of that process, you should be able to parlay that into future market success." - (Financial Times Service)