Tuesday November 7, 1:43 pm Eastern Time
Forbes.com
Transmeta Defies Bad News
By Mark Lewis
The bad news keeps coming for Transmeta, but investors have shrugged it off. The stock
opened at $44.88 around 1 P.M. and it looks set to pop--despite mounting concerns that
the company may end up as just another notch on Intel's gun belt.
Last week, IBM (NYSE: IBM - news) decided not to use Transmeta's (Nasdaq: TMTA - news) new low-power Crusoe
chips in its lighter-weight ThinkPad notebook computers. Today, Compaq Computer (NYSE: CPQ - news) confirmed that it
has no current plans to use Crusoe in its own lightweight notebooks. Two published reports assert that Compaq found no
significant advantage from the Crusoe, compared with Intel's (Nasdaq: INTC - news) new low-power Pentium III chip.
Compaq spokesman Arch Currid would not comment on that report, but he points out that Compaq has not announced any
plans to use the Crusoe at this point.
Both IBM and Compaq had been seen as Transmeta supporters. Compaq has invested $5 million in the company and IBM
builds the chips. Their reluctance to adopt Crusoe at this point has fueled speculation that Intel, having turned its attention to
low-power chips, will crush Transmeta as it has disposed of so many previous rivals.
Still, as the bad news mounted for Transmeta, demand for its 13 million-share IPO increased. Originally, the price range was
$11 to $13; after IBM announcement last week, the company boosted the range to $16 to $18. Finally, it priced yesterday at
$21, yielding Transmeta at least $273 million from the offering. Bert Holmes, president of ipoPros.com, said before the stock
began trading that he expected it to double or triple today.
Why the discrepancy between bad news and strong investor response? First, the IPO market has been so anemic this fall that
investors are gasping for a quality issue to help turn things around. Transmeta has been hyped for years as a strong challenger to
Intel's hegemony. And Transmeta has actual sales and customers, even after IBM's defection. Thus the enormous focus on this
offering, at a time when very few new issues are being offered. ``When have we ever had this attention given to a single issue?''
Holmes asks.
Secondly, Transmeta offers investors a chance to buy into the next big thing, if things work out as the company hopes. ``They
all want to buy convergence,'' Holmes notes of investors. Transmeta's low-power chips are billed as a natural fit for wireless
Internet appliances--Microsoft (Nasdaq: MSFT - news), for instance, is reportedly working with Transmeta to develop a new
electronic tablet computer.
The problem for Transmeta is that Intel will not be twiddling its thumbs while mobile wireless appliances relegate the PC to the
dustbin of computer history. Transmeta's technology is new and potentially exciting. But if Intel really can match the Crusoe's
performance, Transmeta's technical brilliance may be of little comfort to any investors who buy the stock today at a big
premium.
Gruß Dampf