Transmeta, the chip firm that is also the home of Linux creator Linus Torvalds, is to lay off 200 employees - effectively 40 per cent of its workforce.
The company announced the cutbacks following losses of $25.2m on a revenue of $7.5m for the second quarter.
For the same period last year, losses were $17.8m on $10.5m revenue.
A slow market and product delays on its flagship chips are thought to be to blame for the heavy losses.
Transmeta said that it would discontinue production of its TM6000 consumer electronics chip as part of a cost-cutting exercise and instead focus on the TM5800.
Following its restructuring plans Transmeta hopes to achieve profitability by 2003. The company said the cuts would help to lower its operating expenses from $27.9m to $20m, beginning in the fourth quarter.
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