Bolstering its arsenal for an ongoing battle with Intel Corp., Transmeta hopes to leverage the momentum of numerous design wins in Asia for the U.S. notebook market, a relatively untapped segment for the Santa Clara, Calif.-based company.

But Transmeta is entering a bleak financial period. The company announced in a conference call last Thursday (June 21) that its second-quarter revenues would be 40 to 45 percent below first-quarter revenues of $18.6 million.

"Our business is presently based primarily in Japan, which now appears to be experiencing the economic weakness that affected other parts of the world earlier," said chief executive officer Mark Allen. "We are also analyzing our inventory levels and expect that we will take an inventory charge during the second quarter."

Wall Street answered in kind, pummeling the stock from an opening price of $12.60 to a closing price of $5.36. In addition to an inventory glut, the company has Intel nipping at its heels with a 0.13-micron Pentium III mobile processor code-named Tualatin.

Transmeta's latest chips, with frequencies ranging from 667 MHz to 800 MHz, look to keep pace with Intel's offerings on the clock speed and power consumption fronts.

"We'll get about a 40 to 50 percent performance boost with the process shrink," said Ed McKernan, vice president of marketing for Transmeta. "One hundred percent of our output will be 0.13 micron by July, whereas it typically takes Intel about a year to transition. And for the first half of next year we're looking to up the Crusoe to 1 GHz."

Transmeta maintains that its software-intensive approach to handling X86 instructions gives it some advantages over Intel's transistor-laden architectures. "Architecturally, we have one fourth as many logic transistors as Intel," McKernan said. "In the long term we think the advantage will be toward a more software-intensive processor."

Transmeta will have its TM5800 and TM5500 processors manufactured by Taiwan Semiconductor Manufacturing Co. Ltd., having shed IBM Corp. as its foundry. The new processors feature Level 2 caches of 512k and 256k respectively. Loaded with on-chip DDR and an SDRAM controller, the chips will consume about 20 percent less energy than their predecessors due to the process shrink, McKernan said. Systems utilizing the chip are expected to be rolled out throughout the summer and fall.

Though the new Crusoes round out Transmeta's portfolio, analysts said they may not be enough to pierce the U.S. notebook market. "Anytime you take a chip to 0.13 [micron], if you're in a market where you're measured on power consumption and performance, that's goodness for Transmeta," said Nathan Brookwood, president of research firm Insight64 (Saratoga, Calif.). "But the 0.13-micron Tualatin should be very comparable in overall power consumption, plus it will deliver higher computational performance. It will be the principal product that Transmeta will be contending with for the rest of this year, and much of next year.

"Intel is not known as a pushover in the competitive department," Brookwood said.

The subnotebook market targeted by Transmeta's latest processors makes up only a small percentage of the overall notebook market, itself "only 20 percent of the overall PC market," Brookwood said. And while the Asian market has embraced Crusoe — with design wins from NEC, Sony, Sharp, Fujitsu, Toshiba and Hitachi — Transmeta hasn't yet won a design from a U.S.-based notebook manufacturer.

Aiming for diversity, Transmeta has introduced products for the information appliance and server markets. But the company "needs to find market segments above and beyond the one's they've got," Brookwood said.

Broader scope

Recently, it licensed Advanced Micro Devices' 64-bit technology and HyperTransport bus architecture in the hope of landing larger form-factor design wins. And though it recently notched a design win with RLX Technologies on the server front, it may be hampered by a performance gap with Intel's processors.

"Intel is once again taking its mobile processors and putting them into dense, rack-mounted form factors," Brookwood said. "And servers are an area where people are concerned with performance and I/O, and those are areas where Intel, and its partners like ServerWorks, do have some advantages in terms of performance."

Intel is expected to reveal details about its 0.13-micron Tualatin chips at the TechX show this week.

In addition to using TSMC as its foundry, Transmeta is also working with Advanced Semiconductor Engineering for back-end assembly and test services. And last week it inked a licensing deal with Seiko Epson to gain access to technology that will be used to develop energy efficient processors and chip sets.

The Crusoe TM5800 and TM5500 are now available. The 5800 family, identified as a high-performance line, is offered in 700-, 733-, 766- and 800-MHz versions starting at $198 each in 1,000-unit quantities. The Crusoe TM5500, identified as a "value" line, is offered in 600-, 667- and 733-MHz version starting at $85 each in 1,000-unit quantities.