AMD invests in ailing chip company Transmeta

Advanced Micro Devices is investing $7.5 million in energy-efficient chip company Transmeta, which has been battling falling revenue and widening losses.

The investment, announced Friday, comes a year after AMD said it would resell Transmeta’s Efficeon processors in PCs for developing countries, and three months after Transmeta said it faced delisting from the Nasdaq stock market because of its low share price.

Transmeta shot to fame in the late 1990s when the vendor said it was developing a groundbreaking line of ultra-low-power processors for notebooks PCs. The Crusoe chips did not sell as well as expected, however, due to product delays and disappointing performance.

Transmeta did secure a few licensing deals, notably in Japan, but it also wracked up heavy losses. In January 2005, the vendor announced job cuts and said it would switch its focus to licensing its power management technology to other companies. Later that year Transmeta agreed to sell its Crusoe chips to Hong Kong company Culturecom Technology for $15 million in cash.

Last year’s deal with AMD, to resell Transmeta chips in Microsoft’s pay-by-installment PC initiative, raised the vendor’s prospects again. But in March Transmeta said it faced delisting from the Nasdaq because its stock price fell below $1 for more than 30 consecutive days.

Transmeta’s stock closed at $0.70 a share on Thursday, but it jumped 50 percent in premarket trading Friday on news of AMD’s investment.

Transmeta reported revenue of $2.1 million for its first fiscal quarter in May, down from $19.5 million in the same period a year earlier. Its losses widened to $18.7 million, from $1.7 million in the first quarter of 2006.

AMD made its investment in exchange for Transmeta stock. The chip vendor called Transmeta “an innovative force in the industry” and said it had been a key ally in bringing AMD’s AMD64 technology, the basis of its Opteron chips, to market.

“Our investment will support Transmeta’s technology development work and AMD’s efforts to leverage Transmeta’s innovative energy-efficient technologies to the benefit of AMD’s customers,” Dirk Meyer, AMD’s president and chief operating officer, said in a statement.

Separately, Transmeta said in a regulatory filing last month that David Ditzel, the company’s co-founder and its first CEO, was resigning from the vendor’s board of directors effective June 15. He’ll receive a severance payment of $210,000 in three installments, the company said. Ditzel may do consulting work for the company until June 2008, according to the filing.