[Standard and WSJ] Transmeta: Et Tu, IBM?

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From: Linda (joelinda1@home.com)
Date: Thu Nov 02 2000 - 11:41:31 PPET

[Greg and I had discussed the questionable merits of the Crusoe
processor. This is a rather untimely announcement given that
Transmeta's IPO is tentatively set for next week.



Transmeta: Et Tu, IBM?

Next time the phone rings just as you step into the shower, consider
this bit of bad timing: Transmeta's big-gun partner IBM cancelled a
joint project just a few days before Transmeta's IPO. And Transmeta is
in its quiet period, so it can't even throw on a towel and run for the
phone anyway.

IBM kept pretty quiet itself, saying only that the project - to build
a ThinkPad using Transmeta's Crusoe processor - was off, but that IBM
would keep an eye on Transmeta for future projects. Big Blue wouldn't
explain why it bailed, leaving ample room for speculation. ZDNet
"sources" blamed the disappointing battery life of the ThinkPad-Crusoe
prototype, and a few other outlets referenced the much-hyped chip's
alleged shortcomings. Wait a minute, doesn't IBM make the Crusoe
chips? Yes, "so a vote of no confidence from Big Blue is like getting
stabbed in the back by your partner," opined Forbes.com. Several
analysts downplayed the drama, like the one who told CNNfn the IBM
incident "will put somewhat of a crimp in their early valuation" but
is "a bruise ... not a deal breaker."

Forbes.com's David Einstein pointed the finger at Intel, which "has
brought out some low-power Pentiums that it claims offer better
performance than Crusoes," wrote Einstein. Or maybe, speculated
Einstein, Intel undercut Transmeta's price, since "Intel has been
known to practically give chips away to shut out a competitor." Half
an hour later, The Register made the same accusation under the
headline "Intel claimed to have squeezed IBM to dump Transmeta."
Anonymous "sources close to Transmeta" said the ThinkPad in question
worked fine and IBM liked it ... so what happened? "Taipei sources are
adamant that Intel put the squeeze on IBM," wrote The Register's John
Lettice - we think "Taipei" is a reference to Intel, which The
Register also nicknames "Chipzilla," but you can never be sure with
these guys. At any rate, Intel's wrangling and/or a complicated set of
licensing circumstances could have led to IBM to cancel the project,
said Lettice.

You'll have to wait for Nov. 6 to see how Transmeta's IPO pans out,
but one thing's for sure: Intel's Andy Grove won't be getting any
friends-and-family shares. - Jen Muehlbauer



November 2, 2000

IBM Cancels Plans to Use Transmeta Chip in Laptop


International Business Machines Corp. canceled plans to use a
Transmeta chip in a new Thinkpad laptop that was to come out later this
year, dealing the upstart chip maker a blow just days before it expects
to offer shares to the public.

IBM declined to give a reason for its decision. IBM had lined up behind
Transmeta this year, pledging to work on a new Thinkpad that
would take advantage of the longer battery life and low-power
consumption offered by Transmeta's Crusoe processor. While other
companies, including Sony Inc., Fujitsu Ltd., Hitachi Corp. and NEC
Corp. have announced laptops using the chip, only Sony is selling it
in the U.S., and none of the U.S. manufacturers have announced products.

IBM, Armonk, N.Y., and one of the largest makers of notebook computers,
said it is still evaluating Transmeta's processors for future use in
other products, though it is also evaluating low-power products from
Intel Corp. and Advanced Micro Devices Inc. IBM's support was seen as
a crucial victory for Transmeta. IBM manufactures Transmeta chips as
part of an unrelated manufacturing agreement.

"IBM had a vested interest in the product, because they manufacture it,
so there is a significant feeling that this could hurt Transmeta,"
said Kevin Krewell, senior analyst at MicroDesign Resources, a
research firm.

Transmeta's processors use software to do some of the most common
computing functions; that reduces the need for big, complicated
circuitry and helps to reduce power consumption. The personal-computer
makers that have introduced laptops with the Crusoe processor said it
offers as much as two times the battery life of other laptops on the

Transmeta, based in Santa Clara, Calif., is expected to raise nearly
$200 million in its initial public offering as early as Monday.
Transmeta has filed to sell nearly 14 million shares at $11 to $13 each.
Transmeta unveiled its products in January after nearly five years of
heavily guarded secrecy. Early investors included billionaire
George Soros and Microsoft co-founder Paul Allen. Linus Torvalds,
inventor of the Linux operating system, was an early employee.

Transmeta is in a regulatory "quiet period" before its IPO and
declined to comment specifically on IBM's decision.


Roger Siboni, CEO of E.piphany:
"If you see the IBM ad, they start off and they say, "An epiphany is
this, an epiphany is that.... They just mention the word epiphany. But
we're getting great press from it, so we appreciate all their efforts.
Actually, they took out a print ad, center of the Wall Street Journal,
12 pages, and the word epiphany was at the top of each page. Our stock
went up 10 points! It did! I am serious!"

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