VentureBeat

Montalvo Systems was one of the most ambitious chip startups in recent history and one of a few that dared to take on Intel in the low-power mobile processor market. Instead, it shut down in April, unable to raise a new round of financing.

The company had raised more than $84 million and hired an outstanding team of engineers in the hopes of grabbing a small piece of the $30 billion x86 (Intel-compatible) microprocessor industry. But it failed to get its chip out on time and sold its assets to Sun Microsystems for dimes on the dollar.

Understanding the company’s rise and fall offers lessons for entrepreneurs, especially those who would launch quixotic attacks against industry giants such as Intel. Clever design isn’t enough when it comes to getting a product out. For all its planning, Montalvo didn’t execute and was more than a year behind schedule, said several of the key figures involved in the company’s efforts.

The story of Montalvo also offers a peek peak into the game of chess that goes on between Silicon Valley’s biggest companies, and it raises a fatalistic question about whether the door is closed for venture-funded chip startups wanting to take on the world’s biggest chip maker, particularly in its flagship architecture, x86. That fatalism is a hard pill to swallow in optimistic Silicon Valley, where the belief in building better mousetraps rides high.

“x86 isn’t an easy thing to do,” said one of the key Montalvo figures. “There are 1,001 things that can go wrong with it.”

The Santa Clara, Calif. company was born in 2000 as Memory Logix in the garage of Peter Song, a microprocessor designer who, once upon a time, was an analyst for the Microprocessor Report. One of those articles was a prescient analysis that microprocessors would have multiple cores, or processors, on a single chip.

Song had figured out a way to create a low-power processor that was compatible with Intel’s chips. This was at a time when Intel hadn’t yet discovered its low-power religion. In an early interview, Song expressed intrigue in the possibility that Microsoft, having launched the Intel-compatible Xbox in 2001, might consider creating an x86-based portable gaming device.

Intel certainly gave no thought to Song’s company, which was working on low-power “synthesizable” cores. It was not nearly as ambitious as the later incarnation of the company would become.

But another rival, Transmeta, certainly awoke the sleeping giant. Transmeta, founded by former Sun Microsystems chip pioneer Dave Ditzel, raised hundreds of millions of dollars and managed to go public in 2000. Read the rest of this entry »