The deal comes as AMD prepares to launch its quad-core "Barcelona" processor in August.
Advanced Micro Devices is placing a $7.5 million bet on Transmeta.
On July 6, AMD, in Sunnyvale, Calif., announced that it is investing $7.5 million in Transmeta in exchange for preferred stock from the Santa Clara, Calif., company.
In a statement, the two companies said the multimillion dollar investment would go toward developing new energy-efficient technology for microprocessors.
"Our investment will support Transmetas technology development work and AMDs efforts to leverage Transmetas innovative energy-efficient technologies to the benefit of AMDs customers," Dirk Meyer, president and chief operating officer of AMD, said in a statement.
Since 2005, Transmeta,
which was best-known for its Crusoe processor for notebooks, has been transforming itself from a chip maker into a company that licenses its own technology, such as its LongRun2 processor power management product, while helping other companies develop and design chips.
Transmeta no longer makes chips, such as its Efficeon and Efficeon 2 processors for notebooks and thin clients, but it does license its intellectual property to third-party vendors.
Besides its own chip technology, Transmeta has been involved in an ongoing patent dispute with IntelAMDs main rivalinvolving chip architecture and power-efficiency technology used in its processors. On Jan. 9, Intel filed a countersuit in federal court against Transmeta.
Click here to read more about the initial Transmeta lawsuit against Intel.
The news that AMD is investing in Transmeta comes just after AMD announced that its long-awaited quad-core Opteron processors, called "Barcelona," will come to market in August.
On June 29, AMD announced that the first of its quad-core processors, which will compete against Intels quad-core Xeon chips, will offer a clock speed of 2.0GHz and stay within the same thermal envelope as its current lineup of dual-core Opterons.
The fact that the first round of Barcelona chips will be clocked at 2.0GHz has drawn criticism from Intel and some analysts, who say that AMDs new processors are coming at a lower clock speed than had been anticipated, which could hint at problems with implementing the processors design.
AMD executives have countered that more quad-core Opteron models will hit the market after the initial August launch and those will offer much faster clock speeds.
Click here to read more about vendors offering early support for Barcelona.
In a note to investors June 6, Doug Freedman, an analyst with American Technology Research, wrote that the launch of Barcelona does not matter as much as AMD ramping up the performance of its quad-core chips in the months to come.
"[The] timing of the release (AMD says August) is not as important as the performance of future generations of Barcelona (there was no major architectural swing in Barcelona to move the needle), with faster frequencies expected at year-end," Freedman wrote.
The news of AMDs investment in Transmeta also comes at a time when the chip maker is having its own financial troubles
due to lower prices and less demands for its chips. AMD is also trying to absorb ATI, which it bought last year
for $5.4 billion.
AMD is hoping the release of Barcelona will counter the head start that Intel, of Santa Clara, has had since releasing its own quad-core processors in November. Since that time, Intel has sold 1 million of its quad-core Xeons, according to company executives.
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