AMD invests in ailing chipmaker Transmeta

AMD is investing US$7.5 million (NZ$9.6 billion) in energy-efficient chip company Transmeta, which has been battling falling revenue and widening losses.

The investment, announced on July 6, comes a year after AMD said it would resell Transmeta’s Efficeon processors in PCs for developing countries.

Transmeta shot to fame in the late 1990s when it said it was developing a groundbreaking line of ultra low power processors for notebooks PCs. The chips, named Crusoe, did not sell as well as expected, however, due to product delays and disappointing performance.

Transmeta did secure a few licensing deals, notably in Japan, but it also wracked up heavy losses. In January 2005 it announced job cuts and said it would switch its focus to licensing its power management technology to other companies. Later that year Transmeta agreed to sell its Crusoe chips to Culturecom Technology.

Last year’s deal with AMD, to resell Transmeta chips in Microsoft’s pay-by-instalment PC initiative, raised Transmeta’s prospects again. But in March, Transmeta said it faced delisting from the Nasdaq. Transmeta’s stock closed at US70c a share on July 5, but it jumped 50% in premarket trading Friday on news of AMD’s investment.

Transmeta reported revenue of US$2.1 million for its first fiscal quarter in May, down from US$19.5 million in the same period a year earlier. Its losses widened to US$18.7 million, from US$1.7 million in the first quarter of 2006. AMD’s purchase of Transmeta stock was accompanied by a statement calling Transmeta “an innovative force in the industry”. AMD noted Transmeta had been a key ally in bringing AMD’s AMD64 technology, the basis of its Opteron chips, to market. “Our investment will support Transmeta’s technology development work and AMD’s efforts to leverage Transmeta’s innovative energy-efficient technologies to the benefit of AMD’s customers,” Dirk Meyer, AMD’s president and chief operating officer, said in a statement.