Transmeta Reports Fourth Quarter and Fiscal 2006 Results

SANTA CLARA, Calif.—(BUSINESS WIRE)—February 27, 2007— Transmeta Corporation (NASDAQ: TMTA) today announced financial results for the fourth quarter and fiscal year ended December 31, 2006.

Revenue for 2006 was $48.6 million, compared with $72.7 million in 2005. The decrease in revenue between 2005 and 2006 was primarily due to the anticipated reduction in the Company's end-of-life product revenue. License and service revenue was $46.9 million in 2006, which was comparable to $48.1 million in 2005. Net loss for 2006 was $23.5 million, or a loss of $0.12 per share, compared with a net loss of $6.2 million, or a loss of $0.03 per share in 2005.

Revenue for the fourth quarter of 2006 was $2.4 million, which included $2.2 million of service revenue and $200,000 of end-of-life product revenue. This compared with $13.3 million in the fourth quarter of 2005, which included $10.1 million of service revenue and $3.2 million of end-of-life product revenue. Net loss for the fourth quarter of 2006 was $15.9 million, or a loss of $0.08 per share, compared with a net loss of $2.1 million, or a loss of $0.01 per share, in the fourth quarter of 2005. The fourth quarter of 2006 results included fixed assets and other assets impairment and restructuring charges totaling $1.2 million due to the Company's recent restructuring, as well as non-cash charges of $1.7 million for amortization of intangible assets and $1.4 million for stock-based compensation expenses.

Gross margin for the fourth quarter of 2006 was a negative 45 percent, compared with gross margin of 47 percent in the fourth quarter of 2005. The decrease in gross margin was due primarily to an inventory write down of $1.8 million for inventory built in anticipation of a ramp in demand from the Microsoft FlexGo program.

The Company's cash, cash equivalents and short term investments at December 31, 2006 totaled $41.6 million. The Company continues to be debt free.

"Overall, 2006 was a year of successful program execution for Transmeta. We signed Toshiba, the fourth largest semiconductor supplier in the world, as the fourth licensee of our LongRun2 technologies; we developed and built a customized processor for Microsoft's FlexGo program; and we successfully completed multiple engineering services programs for Sony," said Les Crudele, president and CEO. "Despite these accomplishments by our team, we did not succeed in signing a second LongRun2 licensee within the year, and our other programs experienced some significant disappointments in the marketplace. Notably, Microsoft's FlexGo program did not ramp as quickly as projected, and Sony's internal roadmap decisions reduced its need for engineering services. In view of these challenges, we initiated a restructuring program to reduce our spending and focus our resources on developing and licensing our technologies and intellectual property. Over the long term, our goal is to build a company that is financially stable with a steady and consistent revenue stream, sustainable profitability, and positive cash flow."

Conference Call

As previously announced, Transmeta's management will host a conference call today at 5:00 p.m. Eastern time / 2:00 p.m. Pacific time to discuss the operating performance for the quarter. The conference call will be available live over the Internet at the investor relations section of Transmeta's website at To listen to the conference call, please dial (913) 981-5592. A recording of the conference call will be available for one week, starting one hour after the completion of the call, until 11:59 p.m. Pacific time on March 6, 2007. The phone number to access the recording is (888) 203-1112, and the passcode is 3484923. For callers outside the U.S., please dial (719) 457-0820, with the same passcode.

About Transmeta Corporation

Transmeta Corporation develops and licenses innovative computing, microprocessor and semiconductor technologies and related intellectual property. Founded in 1995, we first became known for designing, developing and selling our highly efficient x86-compatible software-based microprocessors, which deliver a balance of low power consumption, high performance, low cost and small size suited for diverse computing platforms. We now also provide, through strategic alliances and under contract, engineering services that leverage our microprocessor design and development capabilities. In addition to our microprocessor product and services businesses, we also develop and license advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices. To learn more about Transmeta, visit

Safe Harbor Statement

This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements speak only as of the date of this release, and we will not necessarily provide updates of our projections or other forward-looking statements. Investors are cautioned that such forward-looking statements are subject to many risks and uncertainties, and may differ materially or adversely from our actual results or future events. Important risk factors that could have material or adverse effects on our results include practical difficulties in implementing our restructuring plan and modifying our business model, the risk that we might not successfully negotiate any additional agreements to provide engineering services, the potential loss of key technical and business personnel, our ability to satisfy the continued listing requirements of the Nasdaq Stock Market, uncertainty about the adoption and market acceptance of our products and technologies by current and potential customers and licensees, our inability to predict or ensure that third parties will license our technologies or use our technologies to generate royalties, difficulties in developing or manufacturing our products in a timely and cost effective manner, our dependence on third parties for sourcing materials and providing manufacturing services, the risk that we have difficulties entering into strategic collaborations or raising financing on satisfactory terms, patents and other intellectual property rights, and other risk factors. We urge investors to review our filings with the Securities and Exchange Commission, including our most recent reports on Forms 10-K, 10-Q and 8-K, which describe these and other important risk factors that could have an adverse effect on our results. We undertake no obligation to revise or update publicly any forward-looking statement for any reason.

Transmeta and LongRun2 are trademarks of Transmeta Corporation. All other product or service names mentioned herein are the trademarks of their respective owners.
                        Transmeta Corporation
                Condensed Consolidated Balance Sheets
                            (in thousands)

                               December 31, 2006 December 31, 2005 (1)
                               ----------------- ---------------------

Current assets:
  Cash and cash equivalents     $        11,595   $            27,659
  Short-term investments                 29,955                28,811
  Accounts receivable                       310                 1,686
  Inventories                                 -                   265
  Prepaid and other current
   assets                                 2,729                 2,279
                               ----------------- ---------------------
Total current assets                     44,589                60,700

Property, plant and equipment,
 net                                        758                          1,623
Patents  and  patent  rights,  net                        9,234                                16,080
Other  assets                                                            2,148                                      911
                                                              -----------------  ---------------------
TOTAL  ASSETS                                        $                56,729      $                        79,314
                                                              =================  =====================

Current  Liabilities:
    Accounts  payable                            $                  1,467      $                          1,521
    Accrued  compensation  and
      benefits                                                              3,245                                  3,279
    Deferred  income,  net                                              15                                  5,937
    Accrued  other                                                      3,015                                  2,109
    Advances  from  customers                                  1,320                                  7,260
    Accrued  restructuring  costs                          1,996                                  1,803
    Current  portion  of  long-term
      payables                                                                  667                                          -
                                                              -----------------  ---------------------
Total  current  liabilities                                11,725                                21,909

Long-term  accrued
  restructuring  costs                                                988                                  2,453
Long-term  payables,  net  of
  current  portion                                                    1,333                                          -
                                                              -----------------  ---------------------
Total  liabilities                                                14,046                                24,362
                                                              -----------------  ---------------------

Stockholders'  equity:
    Common  stock                                                    724,229                              713,129
    Treasury  stock                                                  (2,439)                              (2,439)
    Accumulated  other
      comprehensive  loss                                              (66)                                  (195)
    Accumulated  deficit                                    (679,041)                          (655,543)
                                                              -----------------  ---------------------
Total  stockholders'  equity                              42,683                                54,952
                                                              -----------------  ---------------------
  STOCKHOLDERS'  EQUITY                      $                56,729      $                        79,314
                                                              =================  =====================

(1)  Derived  from  the  Company's  audited  financial  statements  as  of
  December  31,  2006,  included  in  the  Company's  Form  10-K  filed  with  the
  Securities  and  Exchange  Commission.

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