IBM cancels Crusoe laptop

With minimal comment, IBM canceled the release of a Transmeta Corp.-powered laptop computer yesterday.

IBM had planned to use Transmeta's low-energy Crusoe microprocessor chips in its ThinkPad 240 laptops and had even demonstrated a Crusoe laptop at the PC Expo trade show in New York in June. Originally, IBM said the computers would start shipping by the fourth quarter.

"The only thing we can say is that it is only this one project and that we're continuing to look for ways to lower the energy costs for consumers," said Rick Bause, an IBM spokesman. "We will continue to look at Transmeta on an ongoing basis."

Sony Corp. released a laptop with the Crusoe chip in the U.S. -- the Vaio C1 PictureBook -- one week ago. NEC Corp. and Hitachi Ltd. also have Transmeta-powered computers -- but only in Japan and in limited quantities.

IBM Microelectronics manufactures the Crusoe processors for Transmeta, a so-called fabless semiconductor company with no production facilities of its own. Transmeta relies on IBM for all of its assembly and test services, and, as a result, it doesn't directly control its product delivery schedules, according to Transmeta's filings with the U.S. Securities and Exchange Commission (SEC).

Transmeta has plans in place to make its initial public offering (IPO) on the Nasdaq stock exchange Monday, according to a spokeswoman from Morgan Stanley Dean Witter & Co., the chip maker's underwriter.

A Transmeta spokeswoman said she couldn't comment on IBM's change of plans, citing the SEC "quiet period" rules preceding an IPO.

However, the company's SEC filings indicate that Transmeta anticipated using $2.5 million of the net proceeds from this offering to make a payment to IBM that is due within 30 days of the offering. Transmeta has agreed to pay IBM a total of $38 million over the next four years and fixed the conversion rate of a convertible promissory note issued to IBM at 1.2 million shares of its common stock, according to its filings. Transmeta owes IBM $5 million for this year, $4 million next year, $6 million in 2002, $7 million in 2003 and $16 million in 2004.

License fees from IBM and Toshiba Corp. constituted all of Transmeta's revenue in 1997, 1998 and 1999, according to the document.

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