The recall, expected to be announced later Wednesday, only affects an estimated 284 notebooks, all of which have been shipped in the Japanese market. Transmeta has fixed the problem, so no further chips containing the flaw are being produced. The flaw made it difficult to reinstall operating systems on the notebook.
Customers with NEC notebooks containing a Crusoe chip are being asked to contact the Japanese manufacturer. NEC will then exchange the notebook for a new one.
Rumors of the recall likely contributed to a slide in the company's stock Wednesday. Transmeta's stock closed at $23.81, down $5.06 from Tuesday. The company's stock went public at $21 on Nov. 7. It shot up to $45.25 on the first day of trading and grazed in the low $50 range in subsequent days. Since then, however, it has steadily declined in a sagging market.
Transmeta designs the Crusoe--a processor primarily for notebooks--and says it consumes less power than competing chips from Intel. By consuming less power, batteries ideally last longer. Whether the company succeeds in its ambitions has emerged as one of the raging debates in the semiconductor industry.
Proponents claim the company has a 12-month lead on Intel in ultra-low power notebook chips. Sony was the first to incorporate a Crusoe processor in a notebook. Earlier this month, Gateway and American Online announced an Internet appliance that contains a Crusoe chip.
By contrast, critics say the battery power gains aren't large enough to prompt major notebook manufacturers to adopt the company's chips on a broad scale. IBM, for instance, halted a project to put Crusoe into the ThinkPad because the battery benefits didn't meet IBM's goals.
Sony said it is investigating whether it has incorporated any of the defective parts, but sources close to Transmeta said it is unlikely that other companies have been impacted.
"We've just recently become aware of the situation," a Sony representative said. "We're working to quickly study the matter."
News.com's Ian Fried contributed to this report.