Transmeta Restructures, Allies with Sony, Gets New CEO
By Jessica Davis -- EDN, March 31, 2005
Struggling ten-year-old processor maker Transmeta Corp. has streamlined its business model, named a new CEO and announced the first strategic alliance consistent under its reorganized business.
Laying off 67 employees to get to an ultimate headcount of 208, Transmeta will refocus most of its attention on its IP licensing business, specifically of its power management and heat reduction technology, LongRun2. In addition, Transmeta will offer engineering services to licensees to help them accelerate deployment of the technology and thus royalties paid to Transmeta. And the company will continue with a small portion of its product business with new terms designed to reduce costs.
To implement this new structure the company has named its senior VP of marketing as its new president and CEO. Arthur Swift, who spearheaded the licensing program since its start in the fall of 2003, and grew that business from $1.1 million in 2003 to $10.7 million in 2004, will lead the transformation of Transmeta in 2005. Transmeta’s current president and CEO, Matthew Perry, is leaving the company. Swift brings 25 years experience with leading companies in the semiconductor industry to his new role. He joined Transmeta in March 2003,
Consistent with its new structure, Transmeta announced its first engineering deal with one of its three LongRun2 licensees. Under the new strategic alliance with Sony, Transmeta will help the consumer electronics giant accelerate and expand its adoption of Transmeta's LongRun2 technologies in products such as Cell derivatives, and provide additional assistance on Cell processor development.
Transmeta said “over 100” of its 208 employees will be fully dedicated to the Sony engineering effort, and the deal with Sony calls for payment on a per engineer basis. By structuring the deal in this way, Transmeta said Sony will ultimately fund about half of Transmeta’s slimmed-down workforce.
The Cell processor is a next generation processor under development by IBM, Sony and Toshiba, slated to go into production at the end of this year. Sony expects to use the processor as the brains behind its next generation PlayStation3.
Transmeta said it is also in talks to create an engineering deal with “NRE” revenues with “another significant customer.”
In addition, Transmeta estimates that there are approximately 30 fabs in production, under construction or in development that are using or will use 90 nanometer or 65 nm process technology – technology that may require technologies such as LongRun2 because of the high level of heat generated by chips at those nodes.
"Industry data suggests that less than 15 percent is dedicated to 90nm today,” Swift said. “That suggests that we are early in the 90nm space and in the infancy of 65 nm.”
And while big chip companies are developing their own technologies to reduce heat, Swift acknowledged, these technologies are not competitive. Rather, they are complementary.
”What we bring to the party is a practical solution that can be used to address problem today,” Swift said. “Then we can leverage the new developments of these companies as they come forward in the future.”
As for its new product business model, Transmeta is slimming things down to a shadow of what they once were. The company has announced end of life for its once trailblazing Crusoe processor and for its .13-micron Efficeon processor. Transmeta will continue to produce Efficeon at 90nm, but it is raising prices and will require prepayment on new wafer starts, Swift said.
The new business structure will take the company through 2005 without the need to raise additional capital, according to CFO Mark Kent. Indeed, the new structure will decrease the burn rate to $5 million.
"We are moving much closer to a pay as you go model,” Kent said. The current projections are based on no additional new licensees in 2005, and no royalties from existing licensees for the year.
