Transmeta plans restructuring, focus on licensing

Job cuts expected March 31

Transmeta will reorganize its operations at the end of March to focus on licensing its intellectual property for low-power microprocessor designs, the company said Friday.

The Santa Clara, California, company will cut jobs on March 31 to reduce costs and hopefully generate a profit for the first time in the company's history. It plans to fulfill the orders of existing customers for its Crusoe and Efficeon processors, but the majority of its future business plan centers on licensing, Matthew Perry, Transmeta's chief executive officer, said in a conference call.

Transmeta has retained investment banking firm Perseus Group LLC to search for partners that will allow it to continue provide chips to its current customers, he said.

Transmeta was one of the first chip makers to release a low-power processor for ultraportable notebooks and embedded devices that was compatible with Microsoft Corp.'s software. The company believed that its software-based approach to microprocessor design would usher in a new era of mobile computing, but it has been unable to capitalize on the technology.

After a classic hype-filled dot-com era company launch in 2000, Transmeta has recorded almost US$600 million in losses attempting to compete against Intel Corp. for notebook design wins. Transmeta was never able to convince the top-tier PC vendors such as Dell Inc. and Hewlett-Packard Co. (HP) that the miserly power consumption of its processors provided enough benefits for users to overlook the performance gap between Transmeta's chips and those of other companies.

Transmeta enjoyed most of its success in Japan, where demand for ultraportable notebooks is higher. Fujitsu Ltd. and Sharp Corp. have released sleek notebooks and Tablet PCs with Transmeta's chips. HP does use the chips in a Tablet PC and a thin-client device, but none of those products generate enough volume to lift Transmeta into profitability.

The company's new plan is to secure licensing deals with other chip companies for its power management technology. Transmeta has already signed licensing deals for its LongRun 2 technology with Fujitsu and NEC Corp., and announced a third deal Friday with "a global consumer electronics company." The name will not be revealed until next week, Perry said.

LongRun 2 is a power management method that allows chip designers to change the threshold voltage of transistors in order to reduce current leakage when a transistor is not active. The threshold voltage is the amount of electrical power required to activate the transistor.

Passive current leakage has become a major problem for chip makers using cutting-edge manufacturing technology as transistors have grown smaller. LongRun 2 can raise the threshold voltage of the processor so it doesn't inadvertently turn itself on in the presence of leaking current.

Going forward, Transmeta also plans to seek out licensing deals for its microprocessor designs, Perry said.

The company has not determined how many employees will be affected by the March 31 layoffs, said Mark Kent, Transmeta's chief financial officer. Employees will be given a cash retention bonus if they stay with Transmeta through that date, he said.

The number of layoffs will depend on the company's business prospects over the next few months, said Art Swift, senior vice president of marketing.

Transmeta will report its fourth quarter and 2004 full-year earnings in late February or early March, Perry said.

REFERENCES:
Transmeta's future may not be in the chips, Jan. 5, 2005
Transmeta suffers hype and hardware reality, Aug. 23, 2004

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