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Compaq preps Asian Transmeta product; U.S. plans unclear

The company is working on a product containing a Crusoe processor from Transmeta for the Asian market, although its plans for the U.S. market remain uncertain.

Compaq Computer is preparing a product containing a Crusoe processor from Transmeta for the Asian market, although its plans for the U.S. market remain uncertain.

Sources close to the companies have said Houston-based Compaq is working with the processor designer on a computing device for the Asian market, where most Transmeta-based products so far have been sold.

Whether that translates to a device for the U.S. market remains uncertain, however. U.S. Bancorp Piper Jaffray analyst Ashok Kumar said Tuesday that Compaq and Toshiba have suspended plans for Transmeta notebooks.

"Transmeta has been designed out at Compaq," Kumar wrote in a report. "Transmeta failed to note that doubling battery life requires significant changes in the rest of the system, changes that would also benefit an Intel-based notebook."

Compaq quickly rebuffed the assertion, though, stating that no decision on whether to adopt Crusoe in its notebooks has been made.

"We have and will continue to assess the Transmeta processor for use in future products," a Compaq representative said. Compaq, like Sony and Gateway, is an investor in Transmeta.

Toshiba similarly affirmed that they are continuing to examine the technology.

"Toshiba continues to actively evaluate Transmeta Crusoe processors for potential incorporation into our product lines,? said Steve Andler, Toshiba's vice president of marketing. "Toshiba is working closely with Transmeta to evaluate their technology. However, we do not comment on non-released products."

The Compaq-Transmeta muddle comes amid big expectations for Transmeta's initial public offering. The company designs processors that compete with chips from Intel but consume far less power.

Analysts are deeply divided on the company's fate. Some believe that the company could carve out a profitable niche in the portable market. Sony has already introduced Crusoe-based notebooks, and Gateway has said it will bring out a Transmeta-based Web device in the first quarter of next year.

On Monday, Transmeta sold 13 million shares of stock to pension and mutual funds for $21 a share, far higher than the expected price of $16 to $18. Public trading of the stock, which began Tuesday, could reach as high as $55, one analyst speculated.

Skeptics, however, state that Crusoe processors don't provide significant performance or price advantages over Intel chips. Intel also has been rapidly adjusting its product line to choke off Transmeta's potential opportunity.

Last week, IBM canceled plans to use the Crusoe processor in ThinkPad portables. Some analysts, such as Insight 64's Nathan Brookwood, speculated that disappointing performance could have caused the cancellation. Transmeta hotly denied that the cancellation had anything to do with performance. IBM has been silent on the issue.

Unlike IBM, Compaq has yet to show off a prototype of a Transmeta product in public. IBM showed off a Crusoe ThinkPad in June and stated that it planned to come out with the notebook commercially, barring any unforeseen circumstances.

By contrast, Compaq has been more vague. Last July, executives at Compaq Asia said the company planned to release a Crusoe-based notebook, although officials at Compaq's U.S. headquarters said the company had yet to make a final decision on a Transmeta product at that time.