Transmeta Exits Engineering Business to Concentrate on Licensing

The company that at the start of this decade appeared poised to beat Intel and upset AMD in the race to produce a low-power notebook processor for the masses, announced yesterday it is exiting the engineering business altogether. Transmeta will be laying off up to 68% of its current workforce by the end of the third calendar quarter, concentrating the remainder of its resources on the licensing of its existing designs to AMD and others, as well as to pursue the final resolution of its courtroom battle against Intel.

Since last June, Transmeta has been licensing its low-power CPU design to AMD for use in its Efficeon processor line, which is marketed exclusively to emerging markets. Efficeon-based systems utilize a Microsoft technology called FlexGo, which lets lower-income families purchase PCs on an enforced version of the installment plan.

But since January 2005, Transmeta has been on a slow and steady march away from the business that gave it life. At that time, the company said it would exit the business of manufacturing CPUs under its own brand, implementing instead a new, streamlined business model that would take effect the following March.

Twenty-five months later, the end result is a company that will attempt to eek out a living in the design business, with revenues it hopes can be boosted from a positive outcome or settlement in its patent infringement suit with Intel.

In 2000, Transmeta unveiled what was considered at the time an ultra-low-power CPU line called Crusoe, whose power envelope was low enough to prod Intel to admit in 2002 that it had been facing defeat on that front, and that it changed its design strategy in an effort to fend off Transmeta.

Transmeta's design innovation at that time was something called Code Morphing Software, which continues as an element in the company's technology portfolio. Its aim is to emulate in software much of the preprocessing logic that Intel's NetBurst architecture was reliant upon at the hardware level, thus reducing the number of transistors a CPU would require. In turn, however, critics said the concept lowered Crusoe's performance, especially when two 700 MHz processors from Transmeta and Intel were compared head-to-head.

Statements from Transmeta executives last year indicate that the company became curious, following Intel's Pat Gelsinger's comments in 2002, just how much Intel was "inspired" by Crusoe. That investigation led to the filing of the lawsuit against Intel that month. At the time, then-CEO Arthur Swift alleged Intel may have been actively engaged in copying Transmeta concepts as far back as 1999, with the first Pentium III series.

Intel's response may have been the proverbial last straw. Four weeks ago, Intel countersued, claiming some of Transmeta's power consumption tactics may actually have been Intel innovations to start with. Five days later, Transmeta's CEO was out, replaced by Lester M. Crudele, a former Compaq vice president. Days later came indications that new layoffs were imminent. That shoe dropped yesterday.

As far as its remaining contracts are concerned, Sony has already committed to reducing or letting lapse its existing contract with Transmeta, leaving the AMD/Microsoft emerging-markets program as its last major business.