Transmeta has won fans, but needs sales to heat up
In the 18 months since it launched, Transmeta has done what many doubted it could do: It has established itself as the first-choice chip in two key market segments Japanese laptops and new blade servers in the U.S.
To be sure, Transmeta is still a long way from rivaling Intel or subduing Advanced Micro Devices, the leading suppliers of PC microprocessors. And its not yet on firm financial ground: Last month, Transmeta spooked investors with the warning that its second-quarter revenue is expected to be 40 percent to 45 percent lower than the previous quarters $18.6 million a shortfall that the company blamed on weak sales in Japan. The news caused Transmetas stock price to tumble 57 percent in one day.
Nevertheless, analysts say, the company is threatening to become a long-term contender in power- and heat-conscious computer markets.
"Transmeta has proven its compatible [with Intels x86 instruction set]. Its proven it can run cooler and get longer battery life," says Kevin Krewell, senior analyst at MicroDesign Resources, publisher of the Microprocessor Report.
In the past year, Transmeta has successfully launched its Crusoe software-based chip into the Japanese laptop market, and now powers the two best-selling laptops: Toshibas Libretto and Sonys VAIO PictureBook. In fact, Crusoe is now embedded in the product lines of all the major Japanese notebook producers, including Fujitsu, Hitachi, NEC and Sharp Electronics. Despite Transmetas current financial worries, analysts say, those customer wins lay the groundwork for Crusoe to start appearing in the notebooks of standoffish U.S. manufacturers as well.
The Crusoe-powered Toshiba Libretto L1/060 "is just such a convenient machine to carry around," says David Ditzel, vice chairman and chief technology officer at Transmeta and the architect of Crusoe. "It gets up to 14 hours of battery life [with an extra battery], has a high-resolution screen and sells for about $1,200."
Ditzel has particular reason to be happy with the 2.4-pound Libretto. Toshiba was the sole Japanese notebook maker that had not adopted the Crusoe chip last year, and in December was reportedly undecided on whether to launch a Crusoe-based product. Toshibas addition of a Crusoe model to its lineup could pay dividends to Transmeta once the market picks up since Libretto, unlike many Japanese notebooks, is sold in the U.S. as well as Japan.
With Toshiba on board, it is only a matter of time before U.S. notebook manufacturers build Crusoe into their designs, says Rob Enderle, an analyst at Giga Information Group. "Whats happening in the Japanese notebook market is a precursor to what will happen here," Enderle says. "U.S. manufacturers know they will have to counter the Japanese offerings or get killed."
Enderle says that Transmeta has been able to lay to rest doubts about whether its combination of a simpler chip and x86 instruction-morphing software would really work. They do, he says, at the expense of a minor performance penalty.
Early benchmark tests of Crusoe reflected poorly on the chip, when compared with Intel and AMD chips comparable to Crusoes 600-megahertz and 667-MHz speeds. Ditzel says that those benchmarks were designed to test Intel and AMD processors on their first run of an application. The software side of the Crusoe hardware/software combination, he says, needs to read instruction sequences and then optimize them, before the chip maximizes its performance.
"People who use the machines for real dont notice the penalty" because the application speeds up after Crusoe optimizes the instructions, Ditzel says.
However, MicroDesigns Krewell says that Transmeta has a clear lead over its competitors on power consumption and reduced heat generation. Intel produces a low-power chip for laptops, but the more powerful 500-MHz version still requires 8 watts of power, compared with Crusoes 6 watts. For the most part, that determines whether or not a notebook needs to include a cooling fan, Krewell says.
Transmeta will take its existing power-management lead and expand it with two new chips introduced last month the TM5500 and TM5800. The TM5500 will be priced at $85 per chip for its 667-MHz model. The TM5800 will be produced to run at 800 MHz for $198 per chip for orders in quantities of 1,000 or more. The TM5800 will also be offered at speeds of 700 MHz, 733 MHz and 766 MHz. The two chips lower power consumption by another 20 percent, while version 4.2 of the instruction-morphing software has been accelerated up by 50 percent, Ditzel says.
In the server realm, the Crusoe chip is the foundation for RLX Technologies System 324 server blade, a low-power, low-heat, reduced-size server introduced last month. The typical thin servers, which are used by Internet service providers and colocation hosting providers, can be stacked 42 deep in a 6-foot data center rack. RLX can fit 336 blades into a rack, in part because they dont require cooling fans and they offload some disk storage to a network attached storage pool. Houston-based RLX says that each of its blades consumes 15.7 watts, compared with the 72 watts to 76 watts per server for the typical thin server.
But Transmeta officials make no bones about wanting to move the power-stingy Crusoe into more mobile Internet devices and appliances. Ditzel points to Casios Cassiopeia FIVA subnotebooks, which weigh 2.2 pounds and run for nine hours as an example.
The Crusoe is also the power plant of an Internet appliance jointly planned by Gateway and America Online, but Krewell describes the device as "in limbo" and unlikely to appear anytime soon. Its more likely that manufacturers will pick up on the example of Microsoft, which produced a Crusoe-based Tablet PC running Windows in time for the Comdex trade show last November. About 100 prototypes are being circulated to potential developers and manufacturers, Krewell says.
But Krewell warns that Transmeta which is unprofitable must still capitalize on its early successes. Winning followers in Japan is not the same as capturing the mass market in the U.S. In addition, he says, after a late start on low-power chips, Intel is not going to present a stationary target.
IBM demonstrated a Crusoe-based ThinkPad notebook last year, but at the end of the year it announced that the model would be based on an Intel power-conserving chip instead.
At the time, IBM was the fabricator of Crusoe chips, and it still is. But Transmeta says that its new second-generation TM5500 and TM5800 Crusoe chips will be produced by a Taiwanese fabricator, TSMC. Transmeta hasnt ruled out production of any of its current or future chips by IBM. At the same time, IBMs plans for a Crusoe-based ThinkPad remain unknown, though Ditzel says that no U.S. manufacturer should be ruled out from using the Crusoe chip.
Transmeta plans to release new versions of its software every six months, which can be improved more quickly than chip designs, Ditzel notes. "Designers no longer have to wait for Moores law [which says chip capacity doubles every 18 months]," he says. "Weve sped it up."
Another hidden advantage of Crusoe-based systems is that they can take advantage of double-data rate synchronous dynamic random access memory, a form of memory chip that can move data at twice the rate of standard RAM chips. "You get twice the bandwidth for less power and less heat," Krewell says.
The combination of features built into Crusoe is beginning to make it look like more than a one-generation flash in the pan, analysts say. Since Crusoes January 2000 launch, Transmeta has "surprised a lot of folks," Gigas Enderle says. "Their design has proven to be much cooler technology than people anticipated," he says pun intended. Now the question is whether Transmeta can turn that head start into financial success.