Transmeta: No money? No credit? No problem

Just how desperate is Transmeta to get sold? Well, the pitch from the former high-flying semiconductor IP vendor now sounds like something we usually hear on late-night TV: easy financing. (‘No money? No credit? No problem. At Transmeta, we’re ready to do a deal with you.’) And honestly, that’s one of the only selling points left at the company, which retained Piper Jaffray six months ago to advise it on a possible sale. On Wednesday, Transmeta removed the word ‘possible’ and said it was starting the sale of the company. Shares jumped 20%, giving Transmeta a market capitalization of about $200m.

The financing comes into play because Intel, which had been slated to pay $100m to Transmeta in equal installments over the next five years, is writing a lump-sum check for $92m in the next few days. That’s on top of the $150m Intel has already paid to settle a patent lawsuit with Transmeta. As the company has noted, the settlement ‘strengthens’ its balance sheet, which effectively greases a deal by having the cash on hand to finance a transaction. Given the frozen credit markets, that’s not insignificant.

As to who might buy Transmeta, a year ago my colleague, Greg Quick, tapped Advanced Micro Devices as the most-obvious buyer. AMD, which licenses Transmeta technology, also owns a stake in Transmeta through its purchase of a block of preferred shares last year. Other companies that license Transmeta technology, including Sony, Toshiba and Fujitsu, also might be interested but are probably long shots. Whoever does end up buying Transmeta will get a bargain on the company, which never lived up to its hype. Transmeta’s sale price is likely to be in the neighborhood of one-tenth of the company’s valuation at its IPO eight years ago.