The chipmaker, which is considering ceasing production entirely, has announced that it is to discontinue two chip lines and has warned of massive staff cuts if it does not find a strategic partner soon

Ailing chip designer Transmeta on Friday said it is looking for a strategic partner to help it along.

The Santa, Clara, California-based company, which been losing more than $20m a quarter for the past few years, stopped short of saying it will get out of the business of developing Intel-compatible processors, a possibility it has been considering.

The company, though, will curb production. It will discontinue making 130-nanometer Efficeon chips and only make Crusoe and 90-nanometer Efficeon processors to meet demand for critical products.

Transmeta also said it needs to land a deal with one or more partners to help it continue to produce chips for sustained production and help it further develop its strategy of licensing its intellectual property. The company has been working with San Francisco's Perseus Group, an investment bank, on lining up potential interested parties.

"We want to assure our customers that it is our intent to support their near- and intermediate-term needs either directly or through some form of strategic collaboration," Transmeta CEO Matthew Perry said in a conference call. "But we will take immediate and ongoing steps to improve our overall operations model."

Staff reductions may begin as early as the end of March, the company added. In a worst-case scenario, most of the employees could be dismissed, said Art Swift, vice-president of sales. The company has a cash balance of $53m, it said in a statement. Along with the reorganisation, Transmeta said a global consumer electronics company has signed a licence for its LongRun2 technology, the third licensee to date.

The announcement comes five years and a day after the company publicly unfurled its first processor, the Crusoe, which was designed to enable notebooks to run longer on a single battery charge.

The company racked up a significant number of design wins with high-profile customers like Sony that year and even conducted one of the last IPOs of the Internet era. Still, analysts questioned the performance and wondered why demo systems were nearly impossible to find. (At the 2000 Microprocessor Forum, founder Dave Ditzel, tired of the complaints, brought a Crusoe-based notebook and showed it to as many analysts as he could find.)

Revenues climbed in 2001. The company, however, then ran into manufacturing problems with the second version of Crusoe. Deals with Toshiba and others fell through. Performance reviews were less than stellar. Rival Intel ramped up its efforts to reduce power consumption in its own chips, and Transmeta, mired in financial losses and management changes, quickly got pushed to the fringe of the industry.

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