Dropped unceremoniously from IBM Corp.'s latest notebook PC, Transmeta Corp., a manufacturer of low-power microprocessors, is finding out first hand what it's like to play in the big leagues.
With little warning or explanation, IBM this week reversed its support for Transmeta's Crusoe processor in an upcoming version of its ThinkPad PC and said it is considering alternative suppliers-namely Intel Corp.-while it "re-evaluates" the Crusoe chip.
The news came as a blow to Transmeta, Santa Clara, Calif., which is planning to launch an initial public offering next week and had widely touted the IBM design win as proof of its ability to dramatically cut power and extend battery life in mobile-PC platforms.
Those claims are apparently being questioned by IBM, Armonk, N.Y. Without detailing the company's decision to suspend its support for Crusoe, an IBM spokesman said the company is continuing to look for a processor supplier that can provide "significantly low-voltage road maps."
Transmeta, noting that it was subject to SEC regulations that restrict public statements during the IPO process, did not comment on the implications of the IBM decision. However, a company spokesman said several top-tier OEMs have already introduced Crusoe-based notebooks, including Fujitsu, Hitachi, NEC, and Sony. "These companies are setting the standard for long battery life," the spokesman said.
Transmeta shrugged off the disclosure and boldly increased its IPO price range by $5 a share today, from $11 to $13 to $16 to $18. Nevertheless, the loss of the IBM design win could hardly have come at a worse time for the start-up, which had expected to begin shipping its processor in IBM machines late this year.
IBM showed a Crusoe-equipped ThinkPad 240 platform at last summer's PC Expo in New York, although at the time, the computer giant qualified the demonstration by stating that it did not constitute a design win for the chip, and that it would need to meet further, unspecified performance and supply requirements.
Those conditions seem to have thrown up as an unforeseen obstacle for the Crusoe, while opening an opportunity for Intel. Intel in June debuted a 1.2-V processor running at 500 MHz, at which time Transmeta was offering a 600-MHz device with a power-consumption range of 0.5 to 2 W depending on the application. Last month, however, Intel took a direct jab at Transmeta when Bob Jackson, principal engineer at Intel's Mobile Platform Group, disclosed a road map that showed processors for the notebook space making new strides both in performance and power consumption.
"Based on our 0.18-micron process, we'll break the gigahertz [barrier] during the first half of next year and will break the 1-V barrier with a 500-MHz chip," Jackson said at the Microprocessor Forum last month in San Jose. "These [features] will offer the widest range available for [customer] requirements."
Intel's swift response may have stemmed from a lesson it learned in the low-cost-PC segment several years ago, when companies like Cyrix and Centaur were winning acclaim for CPUs that broke open the sub-$1,000 PC market. At the time, Intel was slow to move against its upstart rivals and was forced to react to, rather than help create, market demand.
When it comes to the low-power battle, which is being waged over design wins in a broad range of mobile-computing platforms, Intel wants to make sure it's no Johnny-come-lately, according to observers.
"Transmeta got Intel's attention earlier this year, and that's not necessarily a good thing for any company," said Linley Gwennap, an analyst at The Linley Group, Mountain View, Calif. "Intel has really focused since then on this low-powered segment. When Transmeta announced their first product in January, Intel didn't really have anything close to it."
IBM currently uses Intel chips in its ThinkPad systems, and Gwennap said that, should the computer giant turn to Intel for its upcoming low-power notebook, the choice would be in keeping with IBM's conservative culture. "They prefer to deal with Intel rather than an untested start-up," he said.
Despite its decision to suspend use of the Crusoe, IBM continues to manufacture the devices for Transmeta on a foundry basis.
Transmeta, which filed for an IPO eight months after rolling out the first Crusoe chip, reported sales of $358,000 and a net loss of $43.4 million in the first six months of the year.The company has relied heavily on IBM and Toshiba Corp. for the bulk of its early revenue, noting in an SEC registration document that licensing fees from the two constituted "substantially" all of Transmeta's revenue from 1997 through 1999.