Transmeta: Will better technology alone help?

One of the futuristic statements that Intel CTO Pat Gelsinger loves to make

is how the microprocessor speed will increase in a few years to emanate heat

that equals that of Sun's surface. Imagine a notebook using this chip on your

lap! How to get the millions of transistors inside the chip consume less power

even as they switch between the two states faster, is one of the most serious

challenges the processor industry faces today. This issue is even more relevant

for notebooks.

A small company called Transmeta, therefore, shot into fame when it declared

in 2000 that its processors consumes much less power and, therefore, let out

less heat than Intel's Pentium. The fact that Linux founder Linus Torvalds was

working with the Transmeta team to develop mobile Linux further added to the

excitement. Transmeta's Crusoe chips use a process called Code Morphing, which

transfers the instruction sets of the microprocessor to the software instead of

hardware. This software orientation helped engineers reduce the number of

transistors needed in the chip, enabling less power consumption by the

processor.

A few months back Transmeta released the latest version of Crusoe, the delay

of which has caused the company dearly, with its stock touching an all-time low

of $1.16. During the fourth quarter of 2001, the company's revenue was a mere

$1.5 million, forcing many analysts to forecast the demise of the promising

company. However, the first quarter of this year saw revenues going up to $4.1

million. The company projects a further increase by 55-65 per cent in the next

quarter.

Transmeta is the latest entity that competes with Intel. Of the many that

appeared during the last few decades only AMD has survived. Several players, IDT,

Cyrix and Via to name a few, tried and lost out. Early Crusoe sales suffered

with NEC and later Sony, recalling their notebooks due to chip problems.

Moreover, the latest product announcement from Transmeta came at a gap of almost

a year, an unpardonable mistake in the chip industry. Consequently, nobody was

waiting for the chip. Intel, with its aggressive marketing and price-cutting

campaigns further added to Transmeta's woes.

Interestingly, Transmeta's earliest market was not to be the US but Japan.

"The Japanese market/major customers are more responsive to new

technologies in the mobile space, innovative designs and new opportunities.

Also, this is reflected in the end customer in Japan, in terms of mobility,

wireless use of technology and small form factors," Transmeta spokesman

Phillip Bergman told CIOL Bureau. He, however, added that Transmeta did have US

customers and was now moving into other geographies including Europe, Asia

Pacific and other regions.

The company now looks at its TM5800 chip as the savior. Sony and Fujitsu have

launched notebooks based on this chip. Transmeta claims that a few more

manufacturers would soon launch 5800-based products. According to the spokesman,

Transmeta is moving forward with a recovery plan that has been on track.

"We are shipping the TM5800 processor and customer systems with it. Also,

we expect to play a key role in the Tablet PC space, which will be emerging

later in 2002, as well as other key markets," he said.

To make matters worse, Intel has decided to target Crusoe with a processor

for the mobile device, called Banian, next year. Reports say that it will

consume about 2 watt of energy against 1 watt of Crusoe, which analysts say is

only marginally lower. But, Transmeta is not prepared for Banian. "We will

have to see what it (Banian) is when it arrives... All we can say for sure is

it's not here now. Transmeta is not standing still, but is moving forward with

more advanced processors," said Phillip.

However, Transmeta has yet not been able to rope in big players such as IBM

to use Crusoe. "Transmeta is in business for the long haul, and our success

or failure should not be judged in such a short period of time. Our competitors

have ingrained relationships, marketing agreements and associated funding and

these present heavy competitions. However, we are confident that we will move

into these customer accounts in the future, over time," said Phillip. He

added that IBM has undertaken a Crusoe-based research project recently, which is

not a commercial product at this time.

Will Transmeta take the competition head-on by entering the desktop market?

"We do think with energy issues and a lack of real innovation in desktops,

that there is the opportunity for more power efficient desktops. At the same

time, the market is moving more and more toward mobility," remarked

Phillip.

This is, no doubt, a make or break year for the company. Transmeta is a

perfect example of how better technology is not the only factor that determines

success. More money and better market reach are the other important ingredients.

Ask AMD. Transmeta's survival, if it happens, will be a significant event in the

industry as it will spawn newer technologies to try their luck in the

increasingly competitive processor market.