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2/7/2007
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Tough Times Prompt Murmurs That Transmeta Might Be On Block

When high-profile startup Transmeta Corp. launched its X86-based microprocessor line, Crusoe, in 2000, the company received a ton of media coverage. Times have changed.

San Jose, Calif. -- When high-profile startup Transmeta Corp. launched its X86-based microprocessor line, Crusoe, in 2000, the company received a ton of media coverage, even from CNN. But now, like Daniel Defoe's Robinson Crusoe, Transmeta is stuck on a deserted island, a shadow of its former self.

After a slew of layoffs, management changes and losses, the Santa Clara, Calif., company exited the processor business a while ago to focus on intellectual property. But even that has proved disappointing: Transmeta last week disclosed lackluster sales for an entry-level PC technol- ogy that it co-developed with Microsoft Corp., and announced another big layoff.

Transmeta has lost money from the start. Last year's third quarter was the only time it made a profit, thanks to licensing fees of $10 million from Toshiba Corp. and others. Now, some observers believe Transmeta is actually winding down operations for a possible sale of its assets. The likely buyers would be IP partners IBM, Sony and Toshiba, observers said.

Transmeta last week laid off 75 employees, decreasing its worldwide work force by about 39 percent. Most of the cuts were in the engineering-services business, which is being discontinued. Sales and support offices in Taiwan and Japan are also being closed. Over the next two quarters, the company expects to further reduce head count by about 25 to 55 people.

Transmeta last year developed the Efficeon processor line and a reference system platform specifically to support Microsoft's FlexGo technology. FlexGo enables subscription and pay-as-you-go computing models in emerging markets like China and Brazil. The FlexGo program is still ongoing, but sales have been disappointing, said president and CEO Lester Crudele in a conference call with analysts. Crudele, a former semiconductor executive at Motorola Inc., replaced previous CEO Arthur Swift last month.

Still, Transmeta continues to move forward with IP. "We have decided that IP development and licensing will be our core business activity going forward,'' said Crudele in a statement last week. The company expects that its cost-cutting efforts will generate annual savings of $17 million to $23 million.

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