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Once fabless, almost chipless - is Transmeta's future hopeless?

Looking for options

Five years ago almost to the day, Transmeta launched without manufacturing facilities as a "fabless chip company". Now it's all but abandoning future chip design, so it's a fabless chipless company. In a conference call today executives outlined some of the options Transmeta is exploring, and tried to explain why less is more.

There are a couple of reasons why the picture isn't as bleak as the headlines suggest. More than half of Transmeta's revenue is from licensing and services, which is where it wants to focus - and only 15 per cent comes from the notebook sector, where Intel's aggressive Centrino campaigns are perceived to have hurt it the most. And the company has more than $50m in the bank. And there's money in licensing, if you have something people think they need.

Transmeta's immediate strategy is threefold, but the specifics won't be clear until deadline day, March 31. In the background lurks and eventual sale. Investment bank Perseus has been brought in to advise.

For now, Transmeta is looking for new licensees for its LongRun2 power management technology in addition to Fujitsu and NEC. It's also looking for strategic collaboration to shore up its existing OEMs, and finally, examing more potential IP licensing deals for its other technologies. Transmeta's most recent 10Q filing valued its IP portfolio at $24m.

If these don't come to fruition the future for many of the employees looks grim. Transmeta gains 53 per cent of its revenues from licensing and services, the rest from chip sales, of which only about 15 per cent is from notebooks. But until March 31, executives said they won't be making any redundancies and staff who stay on receive a cash incentive.

Production of the 130nm Crusoe and Efficeon processors will end, but current contracts will be honored. OEMs who want supplies of the 90nm Efficeon, which launched in September, will be supported, however.

CEO Matt Perry said that Transmeta had $53m in cash at the end of the last quarter and had since raised $16m more. It had made a $4m payment to IBM and pushed back a $5m payment to Big Blue to June next year. Perry described this as "the only meaningful debt on our balance sheet."

Even as Transmeta exits the chip business, Perry couldn't resist having a dig at Intel. The Sonoma chipset launched this week "used 50 per cent more standby power" than previous Centrinos, he said. ®

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