October 2, 2000 12:40 PM PDT

Transmeta plans to raise more than $140 million in IPO

Transmeta, which makes chips for notebooks and portable Net appliances, plans to raise $143.6 million in an initial public offering, according to a filing with the Securities and Exchange Commission.

The Santa Clara, Calif.-based company initially filed for its IPO on Aug. 17, but it filed again today with the specific size and terms of its offering. Transmeta plans to sell 13 million shares at a range of $11 to $13. After its IPO, the company will have 126 million shares outstanding, giving it an approximate market value of $1.64 billion based on a sale price of $13 per share.

Transmeta's Crusoe chips are compatible with both the Linux and Windows operating systems but use less power than rival chips, allowing computer batteries to last longer. The company currently manufacturers a chip called the 5400 for notebooks and the 3200 for portable Net appliances. Its upcoming 5600 will provide higher performance for notebooks, along with new 3300 and 3400 chips for appliances.

Although Transmeta faces established competitors such as Intel and Advanced Micro Devices, the company has managed to build a strong customer base. So far, companies that plan to incorporate the Crusoe chip include IBM, Sony, NEC, Fujitsu, Gateway and Hitachi. Sony, Gateway, America Online, Compaq Computer and several other manufacturers are also investors in Transmeta.

Both the IPO and the release of the first Transmeta-based notebooks this month will be highly scrutinized events. On paper, the Crusoe processors could provide substantial advantages in power consumption and could become popular. But because of certain architectural features in the chips, Crusoe processors will not run as fast, potentially, as similar Intel and AMD processors. The performance issue remains an open question because Transmeta has not released complete benchmarks or even sample systems for analysts to test.

Another issue is price. Transmeta chips are expected to cost slightly less than similar processors from Intel and AMD. However, both Intel and AMD manufacture huge volume of processors and could easily sustain a price war in the notebook segment that would be damaging to Transmeta.

Transmeta began seeing its first revenue from product sales in the first half of 2000, although it earned licensing revenue between 1996 and 1999.

The company has lost money every year since it was founded in 1995. For the six months that ended June 30, Transmeta lost $43 million on revenue of $358,000, according to the prospectus.

Investors in the company include Institutional Venture Partners, a Silicon Valley venture capital firm that owns 14 million shares, and Paul Allen's Vulcan Ventures, which owns nearly 8 million shares. Transmeta CEO Dave Ditzel owns roughly 4.4 million shares, according to the prospectus.

Transmeta has applied to trade on the Nasdaq under the ticker symbol "TMTA." Morgan Stanley Dean Witter and Deutsche Banc Alex Brown will handle the sale.

 

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