Transmeta Turns to Technology Licensing

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Transmeta Corp. will stop offering engineering services in order to focus entirely on developing and licensing intellectual property, the Santa Clara developer of chip technologies said on Monday.

The move follows a restructuring in early 2005 that cut its chip sales business in order to focus on engineering services and intellectual property licensing.

"Over the past year, the level of activity for engineering services has declined dramatically due to the completion of programs and our customers' declining staffing requirements," said Les Crudele, president and CEO of Transmeta, during a conference call to discuss the change. "As a result, the billable time for our engineers has declined to the point that the projects are no longer sufficient to cover the costs associated with that business."

On Friday, Transmeta laid off 75 employees, mostly engineers in the services business, and expects to let go another 25 to 55 people in the next few quarters.

The majority of Transmeta's engineering business came from Microsoft Corp. and Sony Corp. Last year, Sony reduced its deal with Transmeta and its contract ends in March.

Transmeta has also completed a services contract with Microsoft on the FlexGo project, a program that enables customers in developing economies to buy computers and software on a pay-as-you-go basis. Transmeta plans to retain some staff in order to support that program as it progresses past the trial phase.

Transmeta also plans to close its sales and support offices in Taiwan and Tokyo.

Without the drag of the engineering services business, Transmeta hopes that it can build its licensing business by attracting more customers. Currently, companies including NEC Corp., Fujitsu Ltd., Sony and Toshiba Corp. license technology from Transmeta. The company has been talking to chip makers outside of Japan about licensing deals but isn't ready to make any announcements yet, Crudele said.

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