UPDATE 1-Transmeta says shareholder offers to buy company

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Feb 1 (Reuters) - Transmeta Corp TMTA.O said it received a letter of interest from key shareholder Riley Investment Management LLC seeking to buy the chip designer for $15.50 a share in cash.

The loss-making company said its board will carefully consider and evaluate Riley Investment’s offer in due course.

Riley Investment, which owns a 6.6 percent stake in Transmeta, had demanded a change in the company's board last December and expressed concern about the company's strategy following a favorable settlement of a patent litigation with Intel Corp INTC.O.

Transmeta is best known for its Crusoe and Efficeon computer microprocessors launched in 2000, when it strived to be a chipmaker, before pulling out of the microprocessor business under heavy pressure from Intel in 2005.

Last July, Advanced Micro Devices Inc AMD.N also bought a stake in Transmeta, which now focuses solely on developing semiconductor technologies for other companies.

The Santa Clara, California-based company's biggest customers include NEC Electronics Corp 6723.T, Fujitsu Ltd 6702.T, Sony Corp 6758.T and Toshiba Corp 6502.T.

Shares of Transmeta were up more than 4 percent to $14.05 in trading before the bell, after closing at $13.46 Thursday on the Nasdaq. (Reporting by Aditi Samajpati in Bangalore; Editing by Jarshad Kakkrakandy)