Transmeta May License Power-Management Tech

As the company weighs its options for reorganization, executives say licensing LongRun2 and other property promises to be a key component going forward.

It will be another couple of months before Transmeta Corp. gets a clear idea of what its reorganized company will look like.

Executives with the chip maker said earlier this month that they were exploring a change in their business model, possibly moving away from selling silicon-based products and instead focusing on licensing their intellectual property, in particular their LongRun2 power-management technology.

During a conference call with analysts and reporters Friday, president and CEO Matthew Perry said Transmeta is reviewing its options—with the help of the San Francisco-based investment bank Perseus Group LLC—with the idea of reorganizing the company on March 31 to support its modified business model.

/zimages/6/28571.gifRead more here about Transmetas position at a crossroads.

Perry and other executives said the licensing of LongRun2 and other property promises to be a key option for the company going forward. LongRun2 enables dynamic control of frequency, voltage and transistor leakage.

Transmeta, of Santa Clara, Calif., already has had some success licensing the technology. NEC Electronics Corp. licensed the technology in March 2004 and bought a small stake in Transmeta. Perry said NEC is planning to roll out devices with the technology by the end of the year.

Fujitsu Ltd. also has licensed LongRun2 but has yet to make any plans public, Perry said. In addition, Transmeta is expecting to announce next week a licensing deal with a third company, and is currently in discussions with other companies regarding licensing possibilities.

"We believe there is a high level of interest in our power-management technology," Perry said.

Transmeta also will move forward in the short term with a modified plan to support its processors, Crusoe and Efficeon. Chief financial officer Mark Kent said the company in the short term will continue to sell the inventory it has of Crusoe processors and 130-nanometer Efficeon chips. Transmeta also will cut new wafers of the chips if demand calls for it.

The company also is pushing forward with development of its 90-nanometer Efficeon processors, Kent said.

Perry said in the meantime, Transmeta is pursing partnerships with other companies to determine the long-term course of their processors. It also is looking to drum up new business.

"Were absolutely exploring new customers," Perry said.

Transmeta, which came out with its first energy-efficient Crusoe chip in 2001, first broached the idea of reorganizing early last fall, and executives again discussed the idea during the International Consumer Electronics Show in Las Vegas earlier this month.

Over the past four years, the company has struggled to gain a foothold in the competitive mobile computing space. Crusoes successor, Efficeon, was designed to enable Transmeta to grow from the ultra thin-and-light notebooks into larger laptops.

However, while gaining some success overseas—particularly in Asia—Transmeta found little traction in the U.S. market.

However, technology the company introduced with the Crusoe and Efficeon processors—including LongRun2, embedded security and code-morphing software that lets chips work with x86 applications—may be attractive to other companies.

Perry said that as other chip makers move to 90-nanometer and, later, 65-nanometer processors—which result in smaller chips containing more transistors—LongRun2 will be an attractive option for controlling power consumption and leakage.

"The power challenge is a real one," said Arthur Swift, senior vice president of marketing at Transmeta. "There has been a lot of unsolicited interest in LongRun2."

How attractive an option LongRun2 is will play a role in what Transmeta decides on March 31. The company already has notified its employees that it may have to lay off a percentage of them, depending on what direction the reorganization takes, Perry said.

In the meantime, Transmeta has undertaken a retention program to keep the employees that it will need going forward, he said.

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