Has Transmeta's chip finally come in?

Secretive chip startup Transmeta says its eye-opening deal to supply Gateway and America Online with Internet-appliance chips is just the start of things to come.

Five-month-old Transmeta on Tuesday announced its largest deal yet, supplying Gateway and AOL with its Crusoe TM3120 processor. The Transmeta chip and the company's homegrown Linux operating system will appear in forthcoming Internet appliances Gateway is developing in a partnership with AOL.

For consumers, it means Gateway and AOL are closer to producing high-performance Internet appliances that offer exceptional battery life. However, little else is known about the devices.

Gateway and AOL last month announced the development of three appliances, due in the second half of this year. They include a desktop appliance, a countertop machine and a wireless Web pad device, all of which will provide Internet access, email and instant messaging.

The appliances will use a 400MHz version of the 3120 chip, along with Transmeta's Mobile Linux.

The announcement, which positions Transmeta as the chip maker for some of the best-known companies in the emerging Internet-appliance market, is a significant win for Transmeta. Until Tuesday, the company had not announced any major customers.

"It's good for Transmeta. It gives the company some credibility," said Mike Feibus, an analyst with market research firm Mercury Research in Scottsdale, Arizona.

Transmeta's other area of focus, the thin-and-light notebook PC, is sexy but a small piece of the overall market for PCs, Feibus said. Transmeta "is going to win or lose in these new and emerging markets" as symbolised by the Gateway/AOL deal, he said.

It is rumoured that Gateway chose Transmeta over National Semiconductor's Geode, an x86-based system-on-a-chip aimed at Internet appliances. Gateway officials said the company evaluated processors by criteria including performance, operating temperature and power consumption. The 3120 chip, available in speeds of 333MHz to 400MHz, consumes about 1 watt of power when in use.

While the announcement came Tuesday, Gateway and AOL each have been working with Transmeta for some time. As evidence, each company has prototypes of the Internet-appliance devices working in their respective research and development labs. Meanwhile, Transmeta has booked a "substantial" number of orders for 3120 chips for use by Gateway, company officials said.

Transmeta execs are bullish on the growth potential of the new appliances.

"I think the Web pad is going to be a very successful product," said Jim Chapman, Transmeta's senior vice president in charge of marketing. "This whole thing of having second terminals (for Internet access) in the home ... I think is very real."

"Consider this our big Net-appliance announcement," Chapman said. Transmeta is also working with S3, which plans to launch its own Web pad.

However, more customer announcements, this time for the company's TM 5400 chip, are on the way.

Transmeta will be at PC Expo in New York next month "in a big way," Chapman said, with announcements from "major" PC makers.

These customers will announce plans to offer Transmeta's TM 5400 chip in notebook PCs. The notebooks, which would run Microsoft's Windows operating system, are expected to be small, thin and light, but offer long battery life and multimedia features, such as built-in DVD.

Chapman declined to comment on whether Gateway would also use the TM 5400 chip.

However, it is likely that several companies that contributed up $88m for Transmeta's latest round of financing, announced in April, will also buy Crusoe chips.

Those companies include Gateway and AOL, as well as Compaq and Sony. Other notables in the financing round were Compal Electronics and Quanta Computer, which manufacture PCs for other companies.

PC makers Hewlett-Packard and IBM have also been fingered as possible Transmeta customers. IBM already has a tight relationship with Transmeta -- IBM's Microelectronics division manufactures Crusoe chips.

The Transmeta-based notebooks will begin shipping in the second half of the year.

The first Gateway-AOL appliances to ship will be the countertop appliance and the desktop appliance, Gateway officials said last April. They are due in the second half.

The countertop appliance will utilise an LCD touch screen and mount to a countertop in the kitchen or other high-traffic areas in the home to allow quick access to email, schedules and other information.

The desktop appliance will be the most similar to a PC, including a traditional keyboard. It will be low-priced, officials said.

The Web pads are due next year. Prototypes shown by AOL and Gateway included an LCD touch screen and digital camera. It will also come with a base station and a wireless keyboard. It is expected to weigh about 3 pounds.

Gateway's announcement yesterday that Transmeta would supply chips for their Web pad Internet appliances generated a lot of hoo-ha about the decline of the Wintel duopoly. Go with Jesse Berst to read the news comment at AnchorDesk UK.

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