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Transmeta Corp., a promising startup of the late nineties which aimed to reduce processor’s power consumption to an absolute minimum while maintaining high performance, said this week it decided to quit microprocessor business and refocus itself to license intellectual property (IP), not actual chips.

“After a critical evaluation of all our lines of businesses, we have decided that IP development and licensing will be our core business activity going forward. We continue to believe that this is the best way for us to deliver our technology to the market and monetize our investments. Therefore, we have initiated a restructuring plan to re-align our headcount and expenses accordingly,” said Lester Crudele, president and chief executive of Transmeta.

On Friday, February 2, 2007, Transmeta began the initial phase of its re-alignment by decreasing its worldwide workforce of about 192 by approximately 39%, or 75 employees, most of whom worked in the company’s engineering services business. The company also took the initial steps to close its sales and support offices in Taiwan and Japan. Over the next two quarters, as the company completes its existing engineering services work, the company expects to further reduce its headcount by about 25 to 55 people, depending on the level of support required for the Microsoft FlexGo program.

Transmeta Corp. was founded in 1995 with the aim to develop low-cost, low-power, high-performance x86 microprocessors for mobile or embedded computing platforms. Even though its Crusoe (introduced in 2000) and Efficeon (introduced in 2003) processors capture a lot of attention and were even incorporated into several laptops primarily sold in Japan, they have never become popular. Transmeta tried to sell manufacturing rights on the Crusoe processors to foreign companies, but the U.S. authorities banned such export.

Being unable to compete in the market of x86 chips primarily because both AMD and Intel are battling for the lowest power consumption amid highest performance, Transmeta has been licensing its technologies to third parties, who wanted to trim power consumption of their designs.

Transmeta estimates that lay-offs and closures of foreign offices will result in cumulative restructuring charges in the range of $11 million to $14 million, the vast majority of which will be an expense in the first quarter of 2007. The company estimates these actions will require total cash expenditures of about $7 million to $10 million, which will be incurred primarily in the first quarter. The firm expects these actions to generate cost savings in the range of $17 million to $23 million on an annualized basis.

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