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Transmeta, Chip Patents Up for Sale

Transmeta, the chip maker that once challenged Intel with its low-power x86-compatible processors and once employed Linux creator Linus Torvalds for some time, has put itself up for sale.

The company has never been able to make much headway with its products, although it remains a popular source of technology licenses for its patents related to very low-power chips. With every processor vendor on a low power kick, that gives it some appeal.

The company entered the market with its energy-efficient Crusoe processors early in the decade, before power concerns became the industry's obsession. Crusoe never gained much traction and Transmeta became more famous as the place with Torvalds drew a paycheck then as a serious competitor to Intel (NASDAQ: INTC) and AMD (NYSE: AMD).

In recent years, the company has gotten by on revenues from its LongRun and LongRun 2 technologies, which allow for dynamic control of the frequency, voltage and transistor leakage in a microprocessor.

"This year, as a result of our successful licensing activities, we will collect at least $265 million of cash payments for our intellectual property and patents," said Transmeta CEO Les Crudele in a statement. "We expect that our intellectual property portfolio and licensing business, combined with our solid balance sheet, will be attractive to potential bidders, and we look forward to conducting a timely process to maximize value for our stockholders."

The company has contracts with practically every big chip vendor, all of which would undoubtedly love to buy the company, if only to put an end to the royalty payments. Last year, Transmeta settled a patent infringement lawsuit with Intel that saw Intel writing a $150 million check to Transmeta, plus owing another $20 million payments for the next five years.

In 2007, AMD invested $7.5 million in Transmeta, and this year nVidia (NASDAQ: NVDA) licensed some of Transmeta's low-power technologies.

So who would want to buy Transmeta? What semiconductor company wouldn't want to buy Transmeta, if only for the patents, noted Nathan Brookwood, research fellow with Insight64. "They have some very valuable patents," he told InternetNews.com. "Those patents came about primarily through their circuit designs to improve power efficiency on chips. Everybody wants that. Everybody wants what their patents are doing."

Intel owes the most, and has the most money to spend, Brookwood noted. AMD and nVidia would undoubtedly like the company but both firms have hit hard financial times and need to get their own houses in order first.

The sale price is not known, but Brookwood doesn't believe it will go for anything close to the $265 million the company scored last year. That stemmed from some large royalty payments, many of which are running out. "That would be awesome if they did [go for nearly $265 million] but I would say it's much more likely to be substantially less than that," said Brookwood.