Regulatory delays kill Transmeta’s Crusoe sale

Transmeta’s deal to sell its Crusoe line of processors to a Hong Kong-based company has been called off after delays obtaining U.S. government technology export clearance, Transmeta said in a U.S. regulatory filing on Thursday.

Transmeta’s deal to sell its Crusoe line of processors to a Hong Kong company has been called off after delays obtaining U.S. government technology export clearance, Transmeta said in a U.S. regulatory filing on Thursday.

The deal, which was announced in June 2005, was to have seen Transmeta sell its Crusoe line to Culturecom Technology for $15 million in cash. The agreement also covered licensing of an older variant of Transmeta’s Efficeon processor technology for production and sale of the chips in China. In addition to the cash payment, the deal called on Culturecom to pay royalties to Transmeta on Crusoe and Efficeon products.

The two companies agreed to terminate all deals on Monday this week, according to the filing to the U.S. Securities and Exchange Commission.

“The companies mutually and amicably elected to terminate those agreements based upon their mutual concern that they could not satisfy all of the approval conditions necessary to close the agreements in a timely fashion,” the filing said. “After several meetings with U.S. government officials, the companies mutually concluded that the necessary technology export control approvals could not be obtained for these two agreements within the timeframe necessary to satisfy Culturecom’s commercial requirements.”

When the agreement was announced last year the companies cautioned that regulatory clearance would be required, but said they hoped to receive it from the U.S. Department of Commerce and close the deal by December.

However, in November last year Transmeta and Culturecom pushed this back until the end of January 2006 because of delays.

Transmeta, founded in 1995, has until recently struggled to make money. The company tried but failed to break Intel’s dominance in the notebook PC market despite picking up some notable contracts from major Japanese PC makers. Its chips, including the Crusoe processor that was at the center of the Culturecom deal, used software tricks to reduce power consumption and so allowed portable PCs to run longer.

After racking up losses of $650 million from its founding until the end of 2004, the company last year changed its business plan, focusing on licensing its chip technology while leaving the manufacturing to other companies.

This shift won it two major deals, which triggered a turnaround in Transmeta’s fortunes. The first deal, with Sony Computer Entertainment and Sony, involved more than 100 Transmeta engineers working on projects for Sony. The second, with Microsoft, is related to a proprietary project that hasn’t been disclosed.

For the third quarter of 2005, from August to September, the most recent period for which Transmeta has announced results, the company reported revenue of $27.9 million, which was almost four times what it reported in the same period in 2004. The company also turned a net profit of $10.1 million versus a net loss of $28.6 million in the year earlier period.