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Transmeta Reports Third Quarter 2008 Results
Date: Tuesday November 18, 2008
Category: Business / Industry
Manufacturer Link: Transmeta
Company Also Announces Non-Exclusive Patent License Agreement with AMD and Definitive Agreement to be Acquired by Novafora, Inc.
 

Transmeta Reports Third Quarter 2008 Results

Transmeta Corporation (NASDAQ: TMTA) today announced financial results for the third quarter ended September 30, 2008.

Revenue for the third quarter of 2008 was $25.3 million, compared with $366,000 for the second quarter of 2008. Revenue in both the third and second quarters of 2008 was derived from licensing activities.

Total operating expenses for the third quarter of 2008 resulted in a gain of $3.5 million, compared with expenses of $1.9 million in the second quarter of 2008. Third quarter operating expenses included $2.9 million of income from two previously announced agreements with Intel entered into during the quarter. Third quarter operating expenses also included $5.9 million of income from the December 2007 settlement and licensing agreement with Intel, and non-cash stock compensation charges of $887,000.

In the third quarter, Transmeta recorded interest income of $1.8 million, including $1.2 million of imputed interest income from the December 2007 settlement and licensing agreement with Intel. Net income was $30.6 million, or $2.31 per share, compared with $214,000, or $0.02 per share, in the second quarter of 2008.

Transmeta’s cash, cash equivalents and short term investments at September 30, 2008 totaled $255.2 million. Cash at September 30, 2008 included the $91.5 million payment received from Intel pursuant to the technology licensing and amended settlement and licensing agreements entered into in September 2008, as well as the $25 million payment from NVIDIA for the licensing agreement it entered into in July 2008. Transmeta continues to be debt free.

AMD Patent License

Transmeta also announced today that it has entered into a patent license agreement with Advanced Micro Devices (“AMD”). The agreement grants a non-exclusive license under Transmeta’s patents to AMD, and includes FoundryCo, which AMD recently announced as part of its Asset Smart strategy. Under the terms of the agreement, AMD will transfer to Transmeta 700,000 shares of Transmeta’s Series B Preferred Stock held by AMD. The 700,000 shares of Series B Preferred Stock are convertible into 499,429 shares of Transmeta’s common stock.

"We are pleased to have achieved this license agreement with AMD," said Les Crudele, president and CEO of Transmeta. "Transmeta and AMD have a long history of collaboration on promoting industry standards for next-generation microprocessors, as well as a broader strategic relationship. This licensing agreement further highlights the value of Transmeta’s intellectual property and technologies to our industry, and provides Transmeta stockholders with an immediate return on our intellectual property rights."

Acquisition By Novafora, Inc.

Transmeta also announced in a separate release today that it signed a definitive agreement to be acquired by Novafora, Inc. for $255.6 million in cash, subject to certain working capital and other adjustments. Novafora is a privately held fabless semiconductor company in San Jose, California that develops a family of digital video processors. Under the terms of the agreement, and based on current estimates of Transmeta’s future working capital at the effective time of the merger, stockholders are expected to receive between $18.70 and $19.00 for each outstanding share of Transmeta’s common stock, subject to working capital and other adjustments. The merger is expected to close in the first quarter of 2009.

“As a result of our successful licensing activities, we collected $116.5 million of cash payments for our intellectual property and patents in the third quarter, bringing our yearly total to $266.5 million,” said Les Crudele, president and CEO. “We also generated additional value for our stockholders through the transfer of 700,000 shares of Transmeta Series B Preferred Stock that was held by AMD. After creating such significant value this year, we are pleased that we are able to return this value to our stockholders through the impending acquisition by Novafora.”

Outlook

In the fourth quarter, Transmeta expects to recognize $5.9 million of operating income from the December 2007 settlement and licensing agreement with Intel. Transmeta expects to be profitable on a GAAP net income basis in the fourth quarter of 2008 and continues to expect to be profitable for fiscal year 2008. The definitive agreement with Novafora provides, among other things, that Transmeta may not enter into any future licensing transaction prior to closing of the merger without Novafora’s consent.

Conference Call

Transmeta has delayed its third quarter earnings conference call, previously scheduled for today at 5:00 p.m. Eastern time/2:00 p.m. Pacific time, to Tuesday, November 18, 2008 at 9:00 a.m. Eastern time/6:00 a.m. Pacific time. The conference call will be available live over the Internet at the investor relations section of Transmeta's website at www.transmeta.com. To listen to the conference call, please dial (785) 830-1997. 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 November 24, 2008. The phone number to access the recording is (719) 457-0820, and the passcode is 2156284.

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 are presently focused on developing and licensing our advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices, and in licensing our computing and microprocessor technologies to other companies. To learn more about Transmeta, visit www.transmeta.com.

Transmeta Corporation Condensed Consolidated Balance Sheets

September 30,
2008

 

December 31,
2007

 

September 30,
2007

 
ASSETS
Current assets:
Cash and cash equivalents $ 205,271 $ 15,607 $ 19,629
Short-term investments 49,969 2,968 8,976
Accounts receivable 2 163 45
Other receivables, current - 149,400

-

Prepaid expenses and other current assets   1,963     2,476     2,332  
Total current assets 257,205 170,614 30,982
 
Other receivables, long-term - 85,200 -
Property and equipment, net 194 284 376
Patents and patent rights, net - 2,388 4,100
Other assets   200     800     1,010  
TOTAL ASSETS $ 257,599   $ 259,286   $ 36,468  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,029 $ 341 $ 2,171
Accrued compensation 774 15,351 834
Income taxes payable 15 3,306 4
Accrued restructuring costs 352 1,592 2,592
Other accrued liabilities 473 1,028 4,384
Current portion of deferred income from settlement and licensing 23,460 23,460 -
Current portion of long-term payable   800     667     600  
Total current liabilities 26,903 45,745 10,585
 
Long-term deferred income from settlement and licensing, net of current portion 193,545 211,140 -
Long-term payable, net of current portion   200     800     1,000  
Total liabilities   220,648     257,685     11,585  
 
Stockholders' equity:
Convertible preferred stock 6,966 6,966 6,966
Common stock 743,641 739,268 738,625
Treasury stock (2,439 ) (2,439 ) (2,439 )
Accumulated other comprehensive gain (loss) 190 29 29
Accumulated deficit   (711,407 )   (742,223 )   (718,298 )
Total stockholders' equity   36,951     1,601     24,883  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 257,599   $ 259,286   $ 36,468  

 

Transmeta Corporation Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data) (Unaudited)

Three Months Ended Nine Months Ended
September 30, 2008 June 30, 2008 September 30, 2007 September 30, 2008 September 30, 2007
 
Revenue:
Product $ - $ - $ - $ 253 $ 167
License 25,299 366 1 25,905 1
Service   -     -     43     168     2,186  
Total revenue   25,299     366     44     26,326     2,354  
 
Cost of revenue
Product - - - 3 80
Service (1) - - 18 163 1,236
Impairment charge on inventories   -     -     -     -     364  
Total cost of revenue   -     -     18     166     1,680  
Gross profit (loss)   25,299     366     26     26,160     674  
Gross margin % 100.0 % 100.0 % 59.1 % 99.4 % 28.6 %
 
Operating expenses:
Income from settlement and licensing (5,865 ) (5,865 ) - (17,595 ) -

Income from license and receivable

(2,855 ) - - (2,855 ) -
Research and development (1) 1,586 2,315 1,336 6,751 8,809
Selling, general and administrative (1) 3,700 4,108 6,107 12,150 17,857
Restructuring charges, net (97 ) 455 177 700 8,878
Amortization of patents and patent rights - 908 1,711 2,388 5,134
Impairment charge on long-lived and other assets   -     -     -     -     302  
Total operating expenses   (3,531 )   1,921     9,331     1,539     40,980  
Operating loss 28,830 (1,555 ) (9,305 ) 24,621 (40,306 )
Interest income and other, net 1,813 1,769 250 6,197 1,109
Interest (expense)   -     -     (15 )   (2 )   (53 )
Income (loss) before income taxes 30,643 214 (9,070 ) 30,816 (39,250 )
Provision for income taxes   -     -     3     -     7  
Net income (loss) $ 30,643 $ 214 $ (9,073 ) $ 30,816 $ (39,257 )
Deemed dividend for beneficial conversion feature of preferred stock   -     -     (3,630 )   -     (3,630 )

Net income (loss) attributable to common shareholders

$ 30,643   $ 214   $ (12,703 ) $ 30,816   $ (42,887 )
 

Net income (loss) per share attributable to common shareholders - basic

$ 2.52 $ 0.02 $ (1.24 ) $ 2.54 $ (4.26 )

Net income (loss) per share attributable to common shareholders - fully diluted

$ 2.31 $ 0.02 $ (1.24 ) $ 2.33 $ (4.26 )
 
Weighted average shares outstanding - basic 12,170 12,152 10,236 12,145 10,066
Weighted average shares outstanding - diluted 13,265 13,242 10,236 13,220 10,066
 
(1) Includes stock-based compensation:
Cost of service revenue $ - $ - $ 1 $ 82 $ 18
Research and development 156 596 (271 )

1,599

11
Selling, general and administrative 731 $ 684 $ 244 2,047 941

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