Transmeta may be preparing to exit the microprocessor market following the publication of an internal report into its business model later this month.

The company warned investors in August that if it continued to lose money, it would have to consider licensing its low-power technologies as its primary business activity. This week, it said it now has definite plans to increase its licensing activities, and that it would "complete a critical evaluation of the economics of its current business model of designing, developing and selling x86-compatible microprocessor products."

The company has already signed licensing deals with NEC and Fujitsu for its LongRun2 power-management technology. LongRun2 allows a processor to adjust both clock speed and voltage thousands of times a second in order to control power consumption depending on the processor's workload.

In addition to specific technologies like LongRun2, Transmeta is considering licensing the designs of its microprocessor cores, similar to the business models of Arm and MIPS.

"We're looking at almost everything," said Transmeta's director of marketing, Greg Rose, in an interview yesterday. The company has not said anything yet about the future of its microprocessor business, but it is very interested in expanding its licensing business, he said.

Moving to an intellectual-property business model is much less expensive than trying to sell processors, Rose said. Transmeta does not own and operate its own chip manufacturing plants, which is extremely expensive, but there are still significant testing and distribution costs that could be avoided if the company no longer sold chips, he said.

Transmeta entered the processor business 2000 with a low-power chip designed for ultra-portable notebooks. The chip, known as Crusoe, consumed much less power than other notebook processors of the era but was unable to duplicate the performance of other chips.

Crusoe used a VLIW (very long instruction word) architecture, and needed code-morphing software to allow that technology to work with the x86 architecture used by processors from Intel and AMD as well as Windows.

This software-based architecture dramatically reduced the amount of power consumed by the chip because much of the processing was moved from transistors to software. However, software can not match the performance of a transistor. Early reviews were unkind, and Crusoe's acceptance was further hampered in 2001 by manufacturing problems.

The company's latest processor, known as Efficeon, offers much better performance than Crusoe with the same power-friendly characteristics. However, Intel has since cornered the notebook market with the Pentium M processor, also designed for low power consumption.

Since its initial public offering in 2000, Transmeta has lost a total of $591 million trying to get its processors accepted by the PC industry, as of its second-quarter SEC filing. The company continued to lose money in the third quarter of 2004, but licensing deals now account for over 50 percent of the company's revenue.

Transmeta will hold a conference call on 21 January to discuss the results of its evaluation.