Transmeta's Crusoe

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Authors: Ravi Madapati
Faculty Member
ICMR (IBS Center for Management Research).

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By the end of 2000, Compaq and IBM had announced plans to use Crusoe in their laptops. But as more and more negative reviews of Crusoe appeared in the press, Compaq and IBM grew more and more skeptical about Crusoe. At the same time, the Japanese manufacturers began using Crusoe. Indeed, Crusoe developed a small cult-like following in Japan.

On June 20, 2001, Transmeta shocked the market with the news that second quarter sales were "drastically off course". The company attributed the shortfall to an economic downturn in Japan, a market on which Crusoe was heavily dependent. But some analysts felt that Transmeta's products were facing stiff resistance due to their poor functionality. Meanwhile, Crusoe was facing resistance from retail customers. The $1500 $2000 price tag on Crusoe-based notebook computers was a price considerably higher than comparable lightweight computers that were just as good or better, but which sold for approximately $1300.Manufacturers seemed to be postponing the purchase of Crusoe processors until the company came out with a better performing version. Upon these revelations, Transmeta stock dropped below $3 per share.

To compound matters, Transmeta had to deal with hostile investors. By the end of 2001, class-action suits were launched against Transmeta by disenchanted investors in the Northern District of California. Some of the charges were⁷: Documents, releases and/or statements disseminated to the investing public and Transmeta shareholders during the Class Period had omitted and/or misrepresented material facts about the business, financial condition and accounting practices of the company; Defendants had made materially misleading statements about the business, financial condition and accounting practices of the company;

Defendants had acted knowingly or with conscious or deliberate recklessness in making materially false statements and omitting material facts about the business, financial condition and accounting practices of the company; The market price of the company's securities had been artificially inflated during the Class Period due to the non-disclosures and/or material misrepresentations complained of herein; A few months after its launch, even though Crusoe seemed to be a failure, Transmeta continued to show confidence in the product. The company battled the class action suits even as it worked on product improvement.

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7] http://www.lieffcabraser.com/transmeta_press01.htm.