Linus Torvalds, founder of the Linux computer operating system, plays a game as he demonstrates the new Crusoe chip from Transmeta Corporation for laptops and mobile internet applications in California yesterday.

The market response was to push shares in palmtop computer group Psion and microchip designer ARM sharply down as investors worried about the effect of the new low-power mobile chip on their business. Transmeta's new chips, used with the Linux system, were introduced as "revolutionising the field of mobile computing".

ARM, which fell sharply on Wednesday before the new chips were made public, was off more than 7% on the previous day's close. Psion fell 5.7%.The chips, which IBM will make, are likely to challenge Intel's domination of the microprocessor market.

Low power use will drive consumer take-up of a coming array of new mobile Internet devices. The Crusoe chips use 1.2 to 1.65 watts of power, a fraction of the 7 watts for comparable Intel Pentium III processors. Photograph: Paul Sakuma