The launch of the Crusoe mobile device processor could present more of a challenge for UK microchip designer ARM Holdings than Intel.
Analysts expected that Transmeta's chip would knock the wind out of Intel's sails, but so far Wednesday's announcement has had more of an impact on Arm, which designs the chips used in 70 per cent of digital mobile phones worldwide.
This week's launch of the microprocessor chip for portable computers and handheld information appliances knocked nearly eight per cent off Arm shares, which rose to more than £41 at the end of last year.
"Transmeta won't blow Arm out of the water, but it has introduced the possibility of risk," said Keith Woolcock, an analyst at researcher Nomura Securities. "Fund managers thought Arm was safe and would pay any price, but now Crusoe is aimed at part of Arm's market. It's introducing a seed of doubt."
Woolcock believes that Arm is safe because its market does not yet need the advanced technology that Crusoe offers, but he says the company may respond to the Crusoe threat by considering advancing its chip capability or even bidding for Transmeta.
"Crusoe has leapt two generations from 64-bit to 128-bit, but mobile phones are 32-bit," he said. "Much of Arm's market is aimed at embedded microprocessors in things such as cars which don't need anything as advanced as 128-bit. Crusoe is trying to do something different. It is a multimedia chip aimed at processing images and sound. It is aimed at a market that will be big in five years' time.
"I'm surprised that Arm has stuck at 32-bit. I would also be amazed if Arm is not sitting around the board room looking at the possibility of buying Transmeta."
Arm said it could not comment because it is due to release its results on 31 January and is in a closed period.
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