Transmeta (Semiconductor) (TMTA)

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CONFIRMED: Compaq using Crusoe in Tablet PC.

Thanks to sirlittlestock of Yahoo Board for first finding this long-awaited news report:

http://biz.yahoo.com/rc/020603/tech_transmeta_1.html

Monday June 3, 12:03 am Eastern Time
Reuters Company News
Transmeta to power HP Tablet PC, cracks US market

SAN FRANCISCO, June 3 (Reuters) - Upstart microchip designer Transmeta Corp. (NasdaqNM:TMTA - News) has cracked the market for U.S. notebook computers in a deal to supply processors for Hewlett-Packard Co.'s (NYSE:HPQ - News) Tablet PC, the companies said on Monday.

Transmeta, which is weathering a management shake-up and recovering from production glitches of its low-power chips, will ship its first gigahertz chips, performing a billion operations per second, with the EVO Tablet PC, which will be released later this year under the Compaq brand.

U.S. buyers until Monday had snubbed Transmeta's Crusoe chips, initially seen as a real challenge to Intel Corp. (NasdaqNM:INTC - News), leaving Transmeta relying on Japanese customers like Sony Corp. (Tokyo:6758.T - News) and Toshiba Corp. (Tokyo:6502.T - News).

"For Transmeta it is a big deal, because people have been saying, 'when are you going to get a big U.S. customer' and we not only have a U.S. customer, we have the No. 1 leader in notebooks with HP here," said Dave Ditzel, Transmeta founder and chief technology officer, in an interview.

Production problems delayed the latest Crusoe chip by months, sending Transmeta revenue for the first quarter down 78 percent from a year earlier to $4.1 million and helping to widen the quarter's loss by 36 percent to $30.9 million.

TABLET AIMS TO REPLACE PAPER

The Tablet PC announced by Microsoft Corp. (NasdaqNM:MSFT - News) and hardware partners incorporates drawing and handwriting recognition into the Windows XP operating system in an attempt to add features of a physical notebook pad to a computer.

Manufactures have shown off prototypes varying from a traditional notebook with a screen that can swivel 180 degrees to allow writing to a pad without a keyboard that looks like a big personal digital assistant, which is the style of the Compaq prototype, although it is keyboard compatible.

The tablet concept has met a fair share of skepticism, given an earlier failed attempt by Microsoft to push a tablet computer, and No. 2 PC maker Dell Computer Corp. (NasdaqNM:DELL - News) has not announced a tablet.

But HP Vice President Ted Clark said the Compaq EVO would be a flagship product when it was announced at Microsoft's Tablet PC launch.

"We think they will expand the overall ultra portable market, and we hope to see them accelerate purchases in the notebook market, but we are targeting the same customer who would be looking for an ultra or a mini-notebook," he said.

Notebooks have been the best performing category during recent PC doldrums, as business and home users have found they can do almost everything they want with new portable machines.

Low power microchips are extremely efficient, meaning that they produce relatively little heat, a form of wasted energy, and drain batteries much slower than high-power rivals, meaning they are less likely to burn someone holding a notebook on his or her lap or arm and can hold up longer without recharging.

But Intel, the No. 1 maker of chips for personal computers, responded to Transmeta's entry into the market by improving its own line of low-power chips and so far had kept the Crusoe chips out of U.S. brands of computers.

Ditzel, who declined to comment on financial projections, said the tablet represented the next generation of smaller hardware as well as Microsoft's next operating system, since the Tablet PC builds on XP.

"This is not a tablet system, it is full Windows XP. In fact it is the next version of XP," he said.