Transmeta’s sales plunges from $18.6m. to $10m.

Transmeta it seems is facing the grim reality of operating in high-tech

quicksand: The further you sink, the harder it is to pull yourself out. And

sinking it is. Transmeta sales have plunged to $10 million from $18.6

million just one quarter ago and are projected to go down further according to

the firm's own projections.

Transmeta says it has a gross operating profit of 44 per cent. However,

regular operating expenses, including the cost of research and development,

sales, and general and administrative are running at a rate of $26 million.

With sales of around $8-10 million, how long can any firm stay around?

Of course sales will go back up when the personal computer market recovers.

But that is not expected until next year, and chances are sales growth will

not jump by the kind of degree necessary to pull Transmeta out of the

quicksand.

No doubt, Transmeta can lay-off a large portion of its staff and make other

cost-cutting moves. But in order to become a player of significance in the

next boom market for mobile computer devices, those would be the wrong moves.

The alternative is to keep burning through financial resources and hope a

turn-around will save the day.

Another reality for Transmeta is that if the firm cannot come anywhere near

making a profit when the vast majority of Japanese notebook computer makers

use its processor, where exactly will the business have to come from that will

pull the firm into the black. Transmeta has done a fabulous job among the

major notebook makers in Japan. But it has failed to convince even a single

top American computer maker to adopt the Crusoe. IBM tried, but later dropped

the chip, which did not live up to power-saving expectations.