Transmeta defeated by Intel?
 

SANTA CLARA, Calif., Jan 21, 2005 (BUSINESS WIRE) -- Transmeta Corporation (TMTA), the leader in efficient computing, today provided an update on its plans to modify its current business model to focus on licensing its intellectual property and advanced technologies in 2005.

"Over the last two years, we have worked to establish a revenue stream based upon the licensing of our proprietary technology and intellectual property," said Dr. Matthew R. Perry, president and CEO of Transmeta Corporation. "As further support for our decision to focus on the licensing of our intellectual property, yesterday we signed our third LongRun2(TM) licensing agreement with a global consumer electronics company."

Transmeta is also actively engaged in discussions with other industry leaders, not only regarding the Company's industry-leading power management technologies, but also its microprocessor designs and development capabilities to explore additional means of creating shareholder value.

Business Model Modifications

During the first quarter of 2005, Transmeta plans to modify its existing business model of designing, developing and selling x86-compatible microprocessor products, including its Crusoe(R) and Efficeon(TM) families. The Company's management has completed a critical review of its current business model, including competitive conditions in the market for x86-compatible microprocessors and the economics of making and selling its products.

During the course of this review, Transmeta sought and received direct feedback from its customers, suppliers, and prospective collaboration partners regarding its products and technology.

"We have received consistently strong, positive feedback in support of Transmeta's technology, and customers clearly desire the continued availability of our products and technology, either directly or through some form of strategic collaboration," added Perry.

As a result of these discussions, Transmeta will continue to support critical customer product requirements while taking immediate steps to improve its targeted product margins and positively impact its cash flow. The Company has been working closely with its customers and critical suppliers in these efforts.

Strategic Options

At the same time, Transmeta continues to pursue strategic transactions that would enable the longer term supply of its current product lines and support its growth strategies on a modified business model. Although no assurances can be given, Transmeta hopes to reach agreements with one or more strategic partners. Transmeta has been working with Perseus Group LLC, a San Francisco-based investment banking firm, and other advisors, on these efforts.

Restructuring Plan

As part of its overall restructuring plan, Transmeta plans to reorganize its operations on March 31, 2005 to align with the business prospects it has firmly identified at that time. Accordingly, the Company has notified its employee base that it may reduce its staffing as early as March 31, 2005. As part of its effort to retain employees during this interim period, the Company has put in place an appropriate retention program.

Solid Balance Sheet

The Company's cash balance at the beginning of 2005 was $53 million.

During the fourth quarter, the Company strengthened its balance sheet through financing and the restructuring of its existing contract payment obligation with IBM. The Company raised net proceeds of approximately $16.0 million through the sale of common stock in November 2004. In addition, Transmeta made a scheduled $4.0 million payment to IBM that was due in December 2004. Transmeta also paid an additional $7.0 million at that time, in exchange for IBM's deferral of the remaining balance of $5.0 million to June 30, 2006.

"We believe that our ongoing efforts on licensing, prospective strategic collaborations, cost management and planned restructuring will give us sufficient resources to successfully execute on growth strategies that will best serve Transmeta and its many stakeholders," said Mark Kent, chief financial officer of Transmeta.

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