| inoutside looking outin, part 1 |

---

for those of you just tuning in, transmeta is a stock i’ve owned through a number of very down years. the company’s technology is in a great position now to return some rewards to its long-suffering shareholders – only one of which i really care about – which is precisely why the company is being taken private in a manner that makes it a poster-child for ‘wall street vs. main street’.

transmeta was one of the companies which rose to great heights and came crashing back to earth in the dot-com world of the early 2000s. incredible possiblities failed to materialize in tangible realities. in fact, transmeta often finds itself the very poster-boy for the dot-com boom and bust because of how it’s share price rose and collapsed while the company lost roughly $600 million of investor monies.

i’ll explain the unique technology that transmeta patented (and continues to receive patents on) by using what i hope will be an understandable analogy: the human body.

seated on the couch, our hearts beat about 70-80 times a minute. we can reach for the remote, or turn the pages of a newspaper, or read a book, or look through a box of stuff in our lap without having to elevate our heart rate to get that done. if we decided to go out and run a couple of miles, we’d find that our heart would have to pump more blood to different parts of our bodies because of our exertion; it accomplishes this by beating faster, perhaps to 130, 150, or 175 beats a minute.

imagine that we had a to-do list we wanted to accomplish this saturday. imagine there was one item on that to-do list: clean out the carport. spending our entire saturday dedicated to this task, we’d get the job done. we’d have to empty some boxes, clean some oil stains, put away some tools. in doing all of that, we’d work up a sweat – with sweating being the method the body utilizes to both give off the heat our body generates and to cool our bodies down.

imagine, though, that instead of a carport, our to-do list was that we had to clean out a four-car garage. further, this four-car garage was like most american garages these days: packed full of stuff such that the cars sit in the driveway. we’d have to work a lot harder to get the job done in one saturday. we’d have to move faster, move more boxes, put away more tools, clean bigger spills. working harder and faster – and, in the end, accomplishing more – our heartbeats would have to necessarily pump a lot faster, our bodies would get hotter, and we’d have to sweat more to cool ourselves off. further, we’d find that we couldn’t really get cool in the confines of that packed garage, and would need to go outside occasionally to feel a breeze and cool off.

now, let’s compare that with what a computer does. at the heart of every computer is a piece of electronics wizardry that controls everything the computer does. it’s called a microprocessor. attached to it is another piece of electronics called a ‘clock’ that sends pulses on a constant basis to tell the microprocessor to move on to the next task in line. the microprocessor performs tasks somewhat similar to what we did cleaning out the garage: we put tools away, it stores some data in memory; we used a lot of elbow grease cleaning some oil stains, it plays the video and sound for movies on our computer screens.

think way back to the 1980s. the first ibm personal computer was not that different from the computers of today: it had a microprocessor, it had memory, it had a display. it also had a clock that kept the beat inside. the first ibm pc contained a clock that beat around five thousand times a second. the pc didn’t have a lot of memory; the display had little of the fancy graphics we see on our computers today. it certainly couldn’t play movies, and there was no internet to connect to. so five thousand beats a second got the job done for the most part.

comparing that to our human body example, it’s similar to getting the carport cleaned in one saturday. and, not surprisingly, the microprocessor in the ibm pc ‘worked up a sweat’, so to speak: it generated physical heat as it went about all of its tasks. did you ever hear that whirring sound from your pc? that’s a fan blowing air inside the pc to cool things off – kind of like us going outside of our crowded garage to find a little breeze so that we didn’t overdo it.

fast forward a bit. the computers we could buy got more and more powerful through the nineties. they had more memory. the displays changed from twenty-five scrolling lines of characters to lots of colors and images. the operating system we used went from the weird language of dos to the first few versions of windows where we pointed and clicked on lots of fancy icons in an abundance of windows – some of which even played movies while we continued working (or pretended to work) in others.

this is pretty similar to us moving from cleaning a carport to cleaning our four-car-with-no-cars garage. and just as we had to work harder and faster to clean the garage in a day than we did cleaning the carport, the microprocessor had to work harder and faster to access expanded memory, more colorful displays, and a host of other things we started attaching to our computers (cameras, for instance).

how much harder and faster? well, the processors started going many thousands of times faster – accomplishing thousands of more tasks each second than the original pc.

and, not surprisingly, these microprocessors started running physically hotter and hotter. pcs still had fans which kept things cool, but heat was getting to be more of a problem.

but then something else happened: laptops. all the functionality in those big, bulky boxes started getting squeezed into smaller packages. laptops had fans, but there were limits to how big these fans could be, and thus how much cooling they could realistically be expected to do. it’s kind of like having to clean our four car garage with the garage door closed, and no windows open. we’d find it harder and harder to stay cool.

so we come to today. laptops continue to shrink in thickness, displays get slicker, they play dvds, you connect your headphones and listen to tunes while surfing the internet and doing your work (or pretending to do your work), you have more and more memory – and connect more and more gadgets – to do more and more things. imagine having to clean all the garages on your street in one saturday! oh – and with the windows and garage door at each house closed! in august … in florida, no less! your heart would have to pump a lot faster to get all this work done. to say you’d get hot would be the understatement of the year.

i’m sure you can see where this is leading. the microprocessor in today’s laptops runs literally a million times faster than the one in the original ibm pc. and it accomplishes this in smaller and smaller spaces. how does it stay cool?

and we haven’t even begun to talk about cellphones. or mp3 players. or digital cameras. our electronics do fancier and fancier things in smaller and smaller spaces.

did you ever hear a fan running in your cellphone? how does the brain inside of it – yes, a microprocessor is inside it, too, just like a laptop – get all of this done and manage to stay cool?

that’s one of the most challenging problems that high-tech companies are having to face today: how to keep shrinking things, adding new wizardy, and not melt the plastic in the process. xbox’s, in fact, have seriously problems overheating. some sony laptops were recalled because they would catch on fire. microprocessors must continue to shrink and operate faster and faster to do all that these gadgets demand.

that’s where transmeta comes in. earlier this decade, it patented some technology that allowed microprocessors to run cooler. this patented technology allowed microprocessors to conserve electricity and actually get more things done during each beat of the clock.

but here’s the problem it faced: heat wasn’t the problem back in 2001 that it is today. fewer gadgets. bigger pcs – even laptops were bigger and bulkier. remember the first cellphones? they were the size of thermoses.

and so transmeta stepped into the market with this whizbang technology – and everyone kind of thumbed their noses at it. the heat problem hadn’t really gotten to be a serious issue yet. they were ahead of their time, in a way.

to compound their problem, they stepped into a market dominated by intel, a company which dwarfed transmeta. and even though pc makers started recognizing the heat problems soon to face them, intel’s size and market share virtually prohibited these companies from looking elsewhere for a source of microprocessors.

this time around, david didn’t fare too well against goliath. the market didn’t have the immediate need for the technology, and doing business with anyone other than intel really didn’t seem practical.

transmeta’s promising future never materialized. investors lost a lot of money. the stock fell to practically nothing.

but the story gets a little more interesting.

somehow, intel managed to keep their processors from overheating.

how?

well, it turns out they violated a few patents along the way. transmeta’s patents.

transmeta found this out by doing some slick reverse engineering on intel’s products.

and transmeta took intel to court – in 2007.

and intel settled with transmeta before the case went to trial. for $250 million. the first payment from intel to transmeta occured earlier this year; in the final arrangement, intel would continue to make payments for ten years.

to be continued…

~ by mikerucker on December 3, 2008.