The processors will compete against Transmeta's X86-compatible, low-power devices, which have aggressively pursued Intel's notebook market share. However, the Santa Clara, Calif., chip giant brushed off suggestions that Transmeta stands poised to grab the upper hand in the subnotebook space.

"We've had an opportunity to measure the power characteristics [of the Transmeta Crusoe chips], and the results show that the Transmeta power consumption is not as low as a Pentium III 600-MHz part when running in battery-optimized mode," said Frank Spindler, vice president and general manager of Intel's Mobile Platforms Group.

Intel's mobile processors are designed to run in different states: a high-performance mode, which uses more power, and the battery-optimized mode, which extends battery life but is slower.

"There are parts that are already out there that are lower in power and higher in performance" than Transmeta's chip, Spindler said.

But analysts see Intel's move as a direct reaction to the Crusoe processor line, which has stolen some of the thunder from Intel's mobile-processor products and garnered media and investment community attention.

"What Intel is saying is that they can now provide the same kind of power-performance characteristics and power consumption that Transmeta has," said Nathan Brookwood, president of market research firm Insight64 Inc. "And I think most of the benchmarks have shown that the Transmeta product is not that good a performer." Still, said Brookwood, "From a marketing standpoint, Transmeta forced Intel to change the way it characterizes its mobile-processor power performance. Essentially, this is 'The Empire Strikes Back.' "

Spindler countered that Crusoe "was five years in the making, and their power consumption is higher than ours and their performance is lower than ours. I have not seen anything to show that there is any significant benefit to Transmeta's approach."

Significantly, IBM Corp., which made an eleventh-hour decision last fall not to use Crusoe for its ThinkPad notebook line, has announced it will use one of Intel's ultralow-voltage mobile processors in its ThinkPad I-Series1124 notebook, soon to hit the streets in Japan. IBM is the sole manufacturing source for Crusoe.

The latest Pentium III, featuring Intel's SpeedStep technology, targets subnotebook systems, characterized as weighing less than 3 pounds and measuring one inch in height. Operating at 1 V, the Pentium III processor can halve its power requirements when running in battery-optimized mode at 300 MHz.

"SpeedStep technology allows for the voltage of the frequency to be adjusted based on whether the machine is in a maximum-performance mode or in a battery-optimized mode," Spindler said. "In battery-optimized mode at 300 MHz, the average power is less than one half of a watt."

Intel plans to release a mobile Pentium III operating at 600 MHz for the subnotebook space later in the year, also utilizing the SpeedStep technology. The plan is to reach 700 MHz next year, Spindler said.

That may not be good news for Transmeta, whose Crusoe processor was found to have a glitch earlier this year, when a batch of nearly 300 NEC notebooks had to be recalled. Though Transmeta hopes to pierce other untapped and emerging segments, Intel may be just behind it, analysts hinted.

"Transmeta is trying to nudge more into the information appliance space, and that's an area where Intel might start to pursue them as well," said Brookwood. "On the other hand, it's not clear that there is an information appliance space."

Brookwood also noted that the subnotebook segment is not the sweet spot of the notebook market, and that the gap between processor performance and market needs may prolong an industry-wide slowdown in a personal computer sector beset with saturation issues.

"Clearly the areas where we need all this power — digital content creation, gaming, etc. — are not in the laptop space," Brookwood said. "In my mind, the biggest thing contributing to the overall slowdown in the PC market is that upgrades are no longer being motivated by sluggish performance; the software hasn't changed enough to absorb all of this performance.

"And it's more true in the mobile space than in desktop space," he added.

— Additional reporting by Will Wade