Updated from 4:03 p.m. ET

Shares in chipmaker

Transmeta

(TMTA)

dropped sharply Wednesday afternoon on a report in Japan's largest daily that

NEC

is considering recalling notebook computers made with Transmeta's

Crusoe

chip.

The report was picked up by wire service

Reuters

, which ran a story at about 1:30 p.m. EST, driving Transmeta shares down 18% within an hour. The stock finished regular trading off $5.06, off 18%, or $23.81. It was at $20.50 in after-hours trading on the

Island

trading system.

According to Reuters, the story in

Yomiuri Shimbun

said that NEC may recall notebooks made with the Crusoe chip, a low-power chip aimed at notebook and other portable computers. Reuters wrote that the paper said that

Sony

(SNE) - Get Report

, which also uses the chip in its notebook computer, has started a probe.

Transmeta said in a statement Wednesday evening that it was working with NEC to "complete an exchange" of fewer than 300 notebooks with Crusoe chips. "The exchange is being undertaken due to the possibility that a failure might occur if a consumer were to reinstall an operating system," the company said. "The potential issue is contained to a limited number of Crusoe microprocessors and, due to the rarity of this event, is not expected to impact end consumers."

"Transmeta stands behind Crusoe and will continue to work with its customers to insure Crusoe's quality and reliability," it added.

Transmeta

went public earlier this month with much fanfare despite the negative tenor of the stock and chip markets. Its low-power chip aims to lengthen the amount of battery life available to notebook computer users.