AMD announced a $7.5 million investment in Transmeta yesterday, bolstering the stock prices of both companies, with Transmeta up $0.24 to $0.94 while AMD rose $0.20 to $14.39. AMD will receive preferred stock in exchange for its investment.

The investment is a badly-needed shot in the arm for Transmeta, who reported earnings of just $2.1 million at the end of its first quarter in May, compared to $19.5 million the year previous. The company will cut its workforce by 15 to 20 percent in this quarter in order to help stem such losses. The company is on the ropes, and there are lots of questions about its future.

Transmeta no longer actively designs or manufacturers processors, but has transitioned, obviously not without cost, into a licenser of its CPU technology. AMD did not specify what technologies or licenses the new investment covers, but it praised Transmeta as an industry innovator.

"Transmeta has been an innovative force in the industry for more than a decade," said Dirk Meyer, president and COO of AMD. "Transmeta was a key ally in helping to bring our highly-successful AMD64 technology to market and has supported the widespread industry adoption of both AMD64 and AMD's HyperTransport technology. Our investment will support Transmeta's technology development work and AMD's efforts to leverage Transmeta's innovative energy-efficient technologies to the benefit of AMD's customers."

AMD's investment is likely to further cement ties between the two companies. Sunnyvale has already agreed to sell Transmeta Efficeon processors as part of Microsoft's FlexGo project and has previously licensed Transmeta IP for use in the Athlon 64/Opteron products.

The cynic will note, of course, that Transmeta is also in the middle of a legal battle against Intel. The lawsuit, filed in US District Court in Delaware, alleges that Intel's entire x86 microprocessor line, from the Pentium Pro on down to the present day, infringes on one or more of ten patents.

In the suit, Transmeta is seeking treble damages and a licensing deal. The company says that Intel has made over $100 billion on the processors at issue in this case, so we suspect that if Transmeta can build a strong suit, Intel might opt to just buy the beleaguered company.