Analysts say Murray’s Transmeta is now a potential candidate for acquisition

Troubled chip designer Transmeta has announced that fourth-quarter revenues will come to only $1 million because of further delays for its latest processors. The Santa Clara, California-based company, which designs energy-efficient chips for notebooks, admitted that fixing problems with its Crusoe 5800 and 5500 chips has been more difficult than expected. The problems are now repaired, the company said, but volume production of the chips won’t happen until early February.

In October, the company said it hoped to get the chips into volume production by Dece-mber. Originally, the chips were expected to come out in commercially acceptable volumes in June. “We certainly hoped to satisfy the critical demand for the holiday season in larger volumes than we have,” said Murray Goldman, Transmeta’s CEO. “Although shipments increased in November, we fell substantially short of our production goals.”

The drop in revenue, which follows disappointing revenue in the last two quarters, will likely spark debates over Transmeta’s survival as an independent company. Some have speculated that the company could become an acquisition target.

Revenue went from $18.6 million in the first quarter to $5 million in the third quarter.

In all likelihood, the problem was caused by Transmeta’s design, rather than anything TSMC did, said Kevin Krewell, an analyst at the Microprocessor Report. To fix the final problem, Goldman said, Transmeta has come out with a new metal mask set, a device used to connect layers of silicon with metal.

Typically, the chip designer, not the manufacturing foundry, controls the mask set design. “More than likely when there is a metallisation change, there is a design bug they are patching around,” Krewell said.

Despite the problems, Goldman said Fujitsu released a notebook containing the 5800 chip in Japan. Fujitsu is using the limited number of 5800 chips already produced by Transmeta but testing them thoroughly, a Transmeta representative said. Although the company’s technology continues to get high marks from manufacturers and analysts, plummeting sales are making many question Trans-meta’s long-term viability. “This points out the problem of being a one-product company,” Krewell said. “I really believe they would be better off as part of a larger company.”