Transmeta at a Crossroads

For the past five years, Transmeta Corp. has been a company in search of a market. Later this month, officials will decide if that journey should take the chip maker out of its core business entirely.

Executives with the Santa Clara, Calif., company saw early on that the demand for mobile computing was going to grow, and in response they rolled out processors designed to reduce energy consumption and improve battery life.

Since that time, Transmeta has unveiled additional features for its energy-efficient chips—both the Crusoe and later the Efficeon—including integrated security and the ability to dynamically control voltage and frequency. The company has also tried to grow in other directions, including in the embedded space.

Transmeta has been unable to sell many chips, however, playing in a field dominated by the likes of Intel Corp. and Advanced Micro Devices Inc. Transmeta lost nearly $600 million over the past five years trying to gain a foothold in the U.S. market, despite finding some traction overseas.

Now the company is considering halting the development of silicon altogether, opting instead to license its technology. During the recent International Consumer Electronics Show in Las Vegas, Transmeta executives said they were undertaking an internal evaluation of options, adding that a licensing model would reduce expenses and increase cash flow.

Click here to read the article: Transmeta Eyes 64-Bit, Virtualization for Efficeon .

Shane Rau, an analyst with IDC, of Framingham, Mass., said such a move would make sense for Transmeta, which in the third quarter of last year saw its licensing revenue outpace its processor revenue, $3.7 million to $3.3 million. Transmetas market share in the processor space also remains small, with about 0.06 percent of the overall global market in the third quarter and 0.3 percent of the mobile chip market.

Transmeta has already had some success in licensing its technology. Last March, NEC Electronics Corp. licensed Transmetas LongRun2 technology and bought a small stake in the chip maker. LongRun2 enables dynamic control of frequency, voltage and transistor leakage. Rau said LongRun2 and other Transmeta innovations, such as embedded security and code-morphing software that lets chips work with x86 applications, may be attractive to other companies as well.

Jan. 21, 2005 Will announce direction of company

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