What was found
ENROUTE, DURING CRUISE FLIGHT, CREW NOTICED AN OILY/WATERY SUBSTANCE ON THE TRANSPONDER RADIO HEAD. SHORTLY FOLLOWING THE DIGITS DISAPPEARED AND ATC REPORTED TO THE CREW THAT THEY HAD LOST BOTH NR 1 AND NR 2 TRANSPONDERS. THEN SMOKE WAS NOTICED IN COCKPIT BETWEEN THE CONDITION LEVERS FOR APPROXIMATELY 15-20 SECONDS. ALL NON-ESSENTIAL EQUIPMENT WAS TURNED OFF, AND THE SMOKE DISSIPATED. AN EMERGENCY WAS DECLARED AND AIRCRAFT DIVERTED, WHERE A SAFE LANDING WAS ACCOMPLISHED. MAINTENANCE REMOVED AND REPLACED THE ATC CONTROL HEAD AND RESET THE TCAS CIRCUIT BREAKER. OPERATIONAL CHECKS FOR BOTH ATC NR 1 AND NR 2 TRANSPONDERS GOOD. AC RETURNED TO SERVICE.