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Transmeta May Exit The Chip Business

Declining revenue is forcing Transmeta to rethink its business model. It may focus solely on the licensing of intellectual property.
After struggling for years for momentum and profits as a provider of processors for mobile computing platforms, Transmeta Corp. later this month may decide to pull the plug on its chip business and concentrate strictly on the licensing of intellectual property.

It is unclear how a decision to stop producing x86-compatible processors, including its Crusoe and Efficeon lines, would affect current customers, including Hewlett-Packard, which last year launched a line of PC blades based utilizing Transmeta technology. Transmeta plans to unveil its future business model on Jan. 21.

The company is completing a "critical review" of its current business model, including an evaluation of its customer requirements, and the economics and competitive conditions in the market, Matthew Perry, president and CEO of Transmeta, said in a statement released this week. "Transmeta has spent a decade developing world-class microprocessor technology and related intellectual property," Perry said. "By modifying our business model to focus more on our licensing opportunities we could expect to reduce our cash needs substantially."

Transmeta has seen its revenue decline from a high of $36 million in 2001, when the company posted a loss of $171 million, to $16 million in 2003, when it lost $88 million.

Through the first three quarters of 2004, Transmeta reported revenue of $18.2 million, and a loss of $77.6 million. Of the 2004 revenue, $4.2 million came from licensing.

Last year Transmeta licensed its LongRun2 technology for power management and transistor leakage control to NEC and Fujitsu. To date it has not licensed Crusoe or Efficeon.

At the Consumer Electronics Show in Las Vegas this week, Transmeta garnered support from Microsoft, which said Transmeta's new fanless digital entertainment center initiative is suited for use with Microsoft's XP Media Center Edition 2005.

At CES Transmeta demonstrated several digital entertainment center designs that utilize its Efficeon, which can operate with a fan for cooling the processor. "Transmeta's new designs enable the creation of ultra-quiet media center PCs," said Bill Mannion, director of Windows XP consumer marketing for Microsoft in statement. "This will hasten the adoption of the PC as the center of the home-entertainment system, providing video and audio content on demand for use throughout the home."