Transmeta Goes Public as Vendors Evaluate Chip

Microprocessor design house Transmeta launched its highly anticipated 13 million share initial public offering on the Nasdaq exchange Tuesday. But questions about the performance of its low-power Crusoe chip -- and hesitation on the part of some big U.S.-based computer makers to use the chip -- may rain on the chip maker's parade.

Transmeta bumped-up its asking price from $US11-13 to the $US16-18 range last week, and then again Tuesday to $US21, reflecting investors eagerness for a high-tech IPO to revitalize the technology market. Transmeta could gain about $US273 million at the current prices.

Trading under the ticker symbol TMTA on the Nasdaq exchange, Transmeta's stock price shot to $US45 -- and climbing -- by early afternoon with over nine million shares traded by the public.

Transmeta's Crusoe microprocessors are designed for performance at low power, prolonging battery life in mobile computers. The chips are x86 processor-compatible, allowing them to accept applications designed for Intel Corp. processors. While comparable x86 processors might use 6 to 10 watts to run a particular application, according to the company, the Crusoe chip may use less than 1 watt.

Sony Corp. uses the Crusoe chip in new Vaio laptop computers, as do Fujitsu Ltd., Hitachi Ltd. and NEC Corp. in their products. Gateway Inc. and America Online Inc. are also co-developing an Internet appliance that uses Crusoe.

Questions remain about the actual performance of the Crusoe chip, however, and Intel's Pentium III SpeedStep processor -- running at somewhere near the 600MHz mark and consuming only one watt of power -- has begun competing in the same low-power chip market. Benchmark tests have shown Crusoe improves battery life, but apparently at a cost in performance. Transmeta proponents counter, saying that the chip's software learns over time, allowing a gradual increase in performance.

But some computer makers may not wait for the argument to be settled.

After evaluating the Crusoe processor for Armada notebook PCs, Compaq has not yet settled on using the chip. "The official Compaq position is that we will continue to assess the Transmeta processor for use in future products. We're very careful not to say how a particular product will be used," said Arch Currid, a Compaq spokesman. "I'm not ruling in or out Transmeta in the future."

A week ago, IBM did drop the chip, backing out of tentative plans to use Transmeta's microprocessor chips in its ThinkPad 240 laptop personal computers. IBM had been far enough along to demonstrate a Crusoe-powered ThinkPad at the PC Expo trade show in New York in June, and had said they would start shipping by the fourth quarter of 2000. An IBM spokesman also said that it would continue to evaluate the Crusoe for future use.

Compaq invested in Transmeta in April, along with several computer industry heavy-hitting companies including America Online Inc. Gateway Inc. and Sony Corp. IBM also has a financial interest in Transmeta; it produces Crusoe chips under contract in its facilities. Transmeta agreed to pay IBM a total of $US38 million over the next four years in their licensing deal, and fixed the conversion rate of a convertible promissory note issued to IBM at 1,200,000 shares of its common stock.

Transmeta, in Santa Clara, California, can be reached online at http://www.transmeta.com/.

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