Two start-ups that hoped to popularise skinny, energy-efficient servers using Transmeta Crusoe processors are throwing in the towel. FiberCycle, which hoped to market ultradense "blade" servers with Crusoe chips, is in the process of winding down operations, chief executive Spero Koulouras said Wednesday. The size of the staff has dropped from 33 to about 10. "FiberCycle will go away," he said. "The technology and remainder of the team will go into something new." Meanwhile, Rebel.com, which marketed the NetWinder 3100 server appliance, has effectively gone out of business. The Ottawa-based company went into receivership in July, according to several sources. Zentra bought Rebel.com's enterprise server division this month, but not the NetWinder product line, according to Zentra representatives. Rebel.com representatives could not be reached for comment, and the company's Web site is unavailable at this time. The demise of the two companies reflects both the dire straits of the technology market and the notorious difficulty of trying to break into the hardware industry. Both companies pinned their dreams on a similar concept: that rising prices for energy and office space would drive demand for small, dense servers that used less power than standard Intel machines. Transmeta chips consume less energy than standard Intel server chips, according to proponents. By being more energy efficient, more servers also can be crammed into a finite space. Blade servers further maximise space by eliminating redundant cables and computer chassis. But soon after FiberCycle and Rebel.com aired their business plans in the early part of this year, Compaq Computer, Hewlett-Packard and IBM touted upcoming blade server projects. Intel also announced an effort to produce energy-efficient components for the market, denting the appeal of Transmeta-based boxes. Demand, already weak at the time, continued to plummet. "Entering the server business per se is a tough thing to do without deep pockets," Koulouras said. "The market softened at a point in time where we weren't able to get further funding." Los Gatos, California-based FiberCycle planned to start marketing its WebBunker server back in April. Concept units were made, but the company ran out of money before production could begin. During its life, the company raised $3m (£2m) in seed money. Rebel.com's NetWinder product had a more colourful life. The NetWinder started out as a computer marketed by Corel for videoconferencing. Corel then toyed with the idea of selling the NetWinder as a Java-enabled network appliance. In 1998, the NetWinder got relaunched as a Linux server. Before Corel could complete its plans for a Linux desktop, it sold its hardware division to Hardware Canada Computing. Hardware Canada Computing became Rebel.com. Initially, the company continued to sell the computer with a StrongArm chip, but it converted to Transmeta in February. Although the StrongArm version of the NetWinder had it adherents, few of the Transmeta servers made it out the door, according to Gerard Maynard, a consultant at Alliance Technologies, a North York, Ontario-based reseller. "We never got to test it out or try it," he said, adding, "I always thought it would be a good product for the Third World countries where you pay through the nose for electricity." Other server start-ups have had recent problems as well. RLX Technologies, a Transmeta server start-up managed by former Compaq executives, laid off employees in August. And the picture won't get sunnier anytime soon. "Niche product companies have trouble selling against far better-funded, far broader companies with more lasting power," said Jonathan Eunice, principal analyst at Illuminata. "If you're buying critical infrastructure, who are you going to trust to be around for the long haul--Compaq, Dell, HP, IBM and Sun? Or FiberCycle, RLX and their fellow travellers?" See Chips Central for the latest headlines on processors and semiconductors. See the Hardware News Section for full coverage. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Chips Central forum Let the editors know what you think in the Mailroom. And read other letters.