Transmeta Unveils New Chips In Ambitious Bid to Take on Intel By DEAN TAKAHASHI Staff Reporter of THE WALL STREET JOURNAL SANTA CLARA, Calif. -- Transmeta Corp. unveiled a new kind of chip for portable computers Wednesday, a move that could deliver huge benefits to consumers of portable computers -- and possibly transform Transmeta into a threat to market leader Intel Corp. David Ditzel, chief executive of the secretive Silicon Valley start-up (www.transmeta.com), showed a number of personal computers using the company's "Crusoe" family of microprocessors. The chips can run Microsoft Corp.'s Windows operating-system software just like Intel's chips do, but they can also run other operating systems, such as Linux. "We're going after the x86 [Intel-compatible] market and can run any kind of x86 out there," Mr. Ditzel said in an interview before the announcement. "We're going into mobile Internet computers, and we're creating a whole new category of computing." Transmeta's chips use patented "code-morphing" software to translate Windows or Linux software instructions into a native code that the Crusoe chips can process efficiently. Hence, Transmeta uses generic hardware chips that are tailored by the software to run either Windows, Linux or Sun Microsystems Inc.'s Java. Because the chips rely upon the translation software for many functions, the actual hardware of the chips can be much smaller and simpler than comparable Intel chips, Mr. Ditzel said. As a result, the Crusoe chips cost less, can run on low power, and can fit into portable machines easily. By contrast, Intel's chips are speed kings, but they are much larger in size and consume so much power that laptops can't run on batteries for a long time. Intel Tuesday introduced a technology to make laptops run at higher speeds if plugged into a socket or at a lower speed, power-conservation mode while on batteries. But Mr. Ditzel said his chips would make Intel's technology look "rather rudimentary." On Wednesday, Robert Jecman, vice president of Intel's mobile-computing group, declined to comment on Transmeta's impending launch. The entry of Transmeta could shake up the PC-chip market, where Intel now has an commanding 82% market share. Intel has begun making chips for the so-called "information-appliance" market, which consists of devices that connect to the Internet but don't necessarily use Windows software. Transmeta's chips are targeted at handhelds and portable computers -- whether they be appliances or actual PCs. All-Stars Blew Company's Cover Mr. Ditzel's company has only 200 employees, compared with Intel's tens of thousands. But it has an all-star pedigree of executives, board members, venture capitalists and business partners. To date, Transmeta has raised more than $100 million in multiple rounds of funding, Mr. Ditzel said. Mr. Ditzel, a former top chip architect at Sun and one of the principal creators of the 1980s chip architecture known as "reduced instruction set computing," tried hard to keep the company secret since forming it with eight other computer gurus in 1995. He operated quietly from a headquarters in Santa Clara, and even had employees put trash into special garbage cans so that sensitive company data couldn't be obtained by the numerous spies who dove into the firm's dumpsters. But the venture was too big to keep secret. Top names such as Linus Torvalds, creator of the free Linux operating system, joined the company and brought unwanted media attention. "I think if we didn't have Linus, we could have pulled off the secrecy," said Mr. Ditzel, who referred to Mr. Torvalds as the "world's greatest programmer." The company's board includes Hugh Barnes, former chief technical officer at Compaq Computer Corp.; Murray Goldman, former executive vice president in charge of Motorola Inc.'s chip group; Pete Thomas of Institutional Venture Partners; Bill Tai, formerly of Walden Group and now at Institutional Venture Partners; and Mr. Ditzel. On Wednesday Mr. Ditzel will name Mark Allen, an operations executive at Nvidia Corp., as president and chief operating officer of Transmeta. Other key people include Colin Hunter, financial adviser, and James Chapman, former vice president of sales and marketing at Intel's old foe, Cyrix Corp. Backers include seed investors Walden Group and Institutional Venture Partners. Others include Integrated Capital Partners, Microsoft co-founder Paul Allen's Vulcan Ventures, the Soros Fund, Deutsche Bank, Tudor Investments, Invimed, and Novus Ventures. Raising Money Was Tough Early On Mr. Ditzel said the company started as an idea in 1995. He was one of the founders of RISC computing, which favored the simplification of computer chips. In 1980, he co-wrote a paper dubbed "The Case for RISC" with David Patterson, a computer-science professor at the University of California at Berkeley. Mr. Ditzel later joined Sun and became one of its chief chip architects. But Mr. Ditzel had become disenchanted with the growing complexity of both RISC chips and Intel's own x86 chips. He consulted eight different computer software and hardware experts and enlisted all of them to join the company. Each brought different skills, such as Mr. Hunter, a computer pioneer who was an expert at translating software. "We'd meet at my home for the first six months," Mr. Ditzel recalled. "I'd look out from my balcony at my home in Palo Alto and see all of Silicon Valley. We decided we had to give it a try." The approach they took was called "very long instruction word," or VLIW, which is very similar to what Intel is working on in its joint venture with Hewlett-Packard Co. But Mr. Ditzel said that he believes his company took a simpler approach than Intel. Raising the money was tough, Mr. Ditzel said, because funders wanted to steer their money into Internet companies "with five people who would take it public in a year." Mr. Ditzel said he had to constantly raise money every six months to keep the venture afloat. A couple of early prototypes didn't work, and one chip was scrapped. But Mr. Ditzel said the team kept debugging their work, and found that they had created tools that allow chip flaws to be discovered quickly. International Business Machines Corp. will manufacture the chips for Transmeta. Besides bringing a well-honed chip-manufacturing operation, IBM also offers the small company an important legal shelter against Intel because it has a patent cross-licensing agreement with Intel. Customers are expected to begin announcing computers with Crusoe chips shortly. Mr. Ditzel said the family of chips is called Crusoe, after Daniel Defoe's classic "Robinson Crusoe," the story of a man stranded on a desert island. Mr. Ditzel said he liked the word's connotation of "adventure, self-sufficiency, and the idea of someone sitting on an island and getting a lot of work done."