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Rumor: Intel competitor Montalvo bracing for cuts

Montalvo Systems has spent a lot of money and hasn't produced a chip for commercial shipment yet. Cuts look inevitable.

Montalvo Systems, the super secretive company that wants to compete against Intel in chips for portable computers, has a big internal announcement coming tomorrow, according to sources, and the news may not be good.

The company may internally order layoffs and cutbacks, according to a source close to the company. Montalvo, which has raised more than $73 million, has been seeking an additional $100 million and burning through bridge loans. New investors haven't materialized, which could lead to cutbacks.

"They have to. They are way too big," said one VC, who had been approached by Montalvo for funding recently. Sources say the company employs more than 200.

The news may not be all bad. The company has also been trying to get its hands on samples of a chip based around its architecture. Montalvo has designed a chip, but as of a few weeks ago, it didn't have one. Fujitsu has agreed to manufacture the chip on behalf of Montalvo. Thus, this might be the announcement. The cutbacks, though, seem more likely.

Staffed by alumni from would-be Intel competitors like Transmeta and NexGen, Montalvo has designed a chip that can run the same software as processors from Intel and AMD. The trick is that the chip, which contains four cores, is asymmetrical. Two of the cores are high-powered, geared for running complex applications, and two run on less energy. The idea is that this can prolong battery life in smartphones or thin notebooks.

While the architecture is intriguing, competing against Intel is no easy task. Several companies have tried and most have failed, badly. AMD has done the best and it has lost more money than it has made in its 30-plus year life.

Like with other stories, Montalvo declined to comment on this story.