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Cash-starved chip designer Transmeta has received an unsolicited buyout offer from its largest, and very irate, shareholder.

Banking firm Riley Investments wants to pay $15.50 a share in cash to transform the troubled company into a full-fledged patent squatting joint. The firm aims to kill most of the company's predicted annual $20m in operating expenses and better monetize its intellectual property.

Riley, which owns about seven per cent of Transmeta, has demanded a change in the company's board via a "shareholder's derivative action" lawsuit filed last December. The investment firm accused Transmeta of gross mismanagement, waste of corporate assets, and abuse of control after the company favorably settled patent litigation with Intel.

In its complaint, Riley said that Transmeta's general counsel, John Horsley, was paid "an outrageous, illegal and unconscionable bonus of over $10 million simply for doing his job and settling an intellectual property lawsuit against Intel ten months after it was filed, and likely settling for less money than was reasonable due to the incentive to settle".

The firm also said Transmeta awarded $12m to its CEO Lester Crudele and CFO Sujan Jain in cash bonuses related to the Intel lawsuit, in which, it claims, they played no material part. Riley is also angry about stock options totaling 725,000 being granted to various executives in December, causing dilution of over five per cent of the company's value to existing investors.

Riley said it will withdraw the proposal if it doesn't receive a response by February 8. Transmeta said it is considering the offer.

Transmeta was once known as an underdog in the low-power microprocessor game. However, through a combination of its own fumbling and Intel's...persuasive business tactics, Transmeta failed to generate any major sales. The company has since switched to developing semiconductor technology for other companies. ®

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