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Former Intel rival under attack

After posting just $43,000 in revenue in the third quarter, Transmeta is faced with a shareholder's buyout effort.

Transmeta, the erstwhile x86 chip competitor, is coming under attack from shareholders.

Transmeta's Crusoe processor once powered NEC, Sony subnotebooks. Transmeta

The fact that the company posted revenue of only $44,000in the third quarter, "which included $43,000 of services revenue and $1,000 of license revenue for royalty payments" may or may not have anything to do with Friday's proposed buyout by Riley Investment Management, which owns over 6 percent of Transmeta shares.

The investment firm does have serious questions about the business model based on the LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control" in processors, among other technologies.

Riley complains that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses. In an article, Riley also rails against an "illegal and unconscionable bonus of over $10 million" paid to Transmeta's general counsel, "simply for doing his job and settling an intellectual property lawsuit against Intel 10 months after it was filed" and claims that grants to top executives were given "at great cost to the shareholders with no commensurate value creation."

A little history: Transmeta, founded in 1995, ultimately failed in its bid to build better low-power x86 processors than Intel after consistently posting large annual losses. Not able to compete as a chip supplier, Transmeta in 2005 transformed itself into a supplier of x86 intellectual property.

After this transition, Transmeta filed a lawsuit against Intel alleging that the latter infringed upon 10 of Transmeta's patents, including computer architecture and power efficiency technologies. In October, Transmeta settled with Intel for $250 million. But this is a one-time payment and doesn't change the fact that Transmeta has exhibited unreliable earnings, particularly compared with a company like ARM Holdings--with 10 billion ARM design-based chips shipped to date and revenue of $384 million in the third quarter.

Transmeta's meager Q3 revenue juxtaposed with the handsome payouts to executives is, indeed, a cause for concern.