Transmeta today revealed a secret Microsoft (MSFT) project it has been working on for the past 18 months - a special microprocessor equipped with pay-as-you-go security technology called FlexGo.

Microsoft wants to bring cheap PC computing to billions of people who cannot afford PCs and it is promoting FlexGo as a variation on the cell phone pre-paid minutes programs. Customers pay for part of the cost of a PC up front and then pay per minute of use, along with paying off the balance of the PC cost.

Transmeta has produced a special version of its Efficeon low-power consuming microprocessor. Arthur Swift, CEO of Transmeta, told SVW: "We managed to add the FlexGo capability quickly because of the software design of our microprocessors. It would take a lot longer if you were to do it in hardware."

Advanced Micro Devices will rebrand the chip under its own name and use its distribution channels in emerging markets to deliver the chip to manufacturers.

An additional advantage is that the Efficeon microprocessor uses less electric power than regular X86 compatible microprocessors because it relies on software to emulate X86 functions. PC systems using the chip don't need a fan and can run on 12V sources of power.

SVW Take:

Bridging the digital divide could be accelerated if Microsoft were to dramatically cut the cost of its operating system and applications in emerging markets.

I'm not sure FlexGo PC buyers will like to be nickel-and-dimed for switching on their PCs and then wasting hours to figure out why they cannot print a document and being charged for it...

Also, what happens to the FlexGo component after the PC has been paid for? Will it still be checking for legitimate Windows software? Will it act as a trojan horse digital rights management component? Questions like that might make FlexGo PCs less attractive. Why not offer PCs on a rent-to-own basis, which is quite common in emerging markets and doesn't require a heavy-duty security component.

The press release is here: Transmeta Delivers Specialized Processor to Support Microsoft's Pay-as-you-go Computing With FlexGo for Emerging Markets

From Cnet's News.com:

Microsoft pitches pay-as-you-go PCs