Microprocessor technology supplier Transmeta said it has received the initial payment of $150 million from Intel toward the $250 million settlement that the two companies agreed upon back in October. The payment was received on January 28, according to Sujan Jain, Transmeta's chief financial officer. Mr. Jain also said that Transmeta is evolving its business model to generate a more constant revenue stream.
Transmeta LongRun2
(Credit: Transmeta Corp.)Transmeta, previously a supplier of low-power x86 processors, now develops and licenses microprocessor technologies and related intellectual property. The company filed a lawsuit against Intel in October 2006 alleging that the latter infringed upon Transmeta's patents. Transmeta later settled with Intel for $250 million.
Last week, the company came under attack from one of its largest stockholders, Riley Investment Management, for what Riley claims is an unconvincing business strategy based on Transmeta's LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control." Riley claims that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses.
But Transmeta says it is making headway with LongRun2. Using this technology, NEC announced in July 2007 that it is targeting production of approximately one million mobile phone chips a month by 2008. As a result, Transmeta expects approximately $215,000 in LongRun2 royalty revenue that will show up in its first-quarter earnings, said Mr. Jain. That would be an improvement over its third-quarter earnings when Transmeta posted only $44,000 in revenue, including $43,000 of services revenue and $1,000 of license revenue for royalty payments.
Mr. Jain also said that Transmeta has been evolving its business model. Previously, Transmeta only dealt with big companies that had plenty of engineering know-how, due to the complexity of the technology transfer. But now it is focusing on building IP (intellectual property) modules to license to smaller, fabless chip companies too. The new strategy will help expand the LongRun2 business and should result in "more consistent revenues over time," Mr. Jain said.
Transmeta will provide details on how and when it will recognize the entire $250 million settlement from Intel during its 2007 fourth-quarter earnings conference call, said Mr. Jain.
Chip designer Transmeta said Thursday it lined up Piper Jaffray to help it weigh an unsolicited buyout offer from investor Riley Investment Management.
"Transmeta's board is focused on enhancing shareholder value," Les Crudele, Transmeta chief executive, said in a statement. "As part of that mission, we have been engaged in a process to expand our advisory resources and we are pleased to have Piper Jaffray & Co. join our team."
Last Friday, Transmeta disclosed Riley Investment Management made an unsolicited cash offer of $15.50 per share--a move that built on its previous demands in December to realign its board of directors, according to a Reuters report.
Riley Investment, which holds a 6.6 percent stake in Transmeta, also requested Transmeta complete its evaluation of its offer by this coming Friday. But the chip designer said it does expect to meet that timeline.
Riley's buyout bid, announced before the markets opened on Friday, gave Transmeta shares a minor bump of roughly 3 percent to $13.94 per share that day.
But since the offer was made last week, shares of Transmeta have slipped a bit to $13.89 a share in early morning trading Thursday.
The company received a big bump in late October,
Transmeta has also received a little financial boost from its partners, as well. Last July, Transmeta announced it received a $7.5 million investment from Advanced Micro Devices.
The great corporate graveyard is filled with hundreds, maybe thousands, of technology companies that managed to go public and then fizzled. Still, most of them weren't going anywhere and never should have gone public to begin with.
But venture capitalists funded them, investment banks underwrote them, analysts wrote glowing reports about them, and you and I bought into it, gullible lemmings that we are. Sorry for being such a negatron; that's just the way it is.
Anyway, what's different about these 10 companies is that they were once important, maybe even exciting. And now, for one reason or another, they're fading slowly and tediously into obscurity. Like people, most companies go out, not with a bang, but with a whimper.
Depressing, isn't it? ... Read more
Transmeta, the erstwhile x86 chip competitor, is coming under attack from shareholders.
Transmeta's Crusoe processor once powered NEC, Sony subnotebooks.
(Credit: Transmeta)The fact that the company posted revenue of only $44,000 in the third quarter, "which included $43,000 of services revenue and $1,000 of license revenue for royalty payments" may or may not have anything to do with Friday's proposed buyout by Riley Investment Management, which owns over 6 percent of Transmeta shares.
The investment firm does have serious questions about the business model based on the LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control" in processors, among other technologies.
Riley complains that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses. In an EETimes.com article, Riley also rails against an "illegal and unconscionable bonus of over $10 million" paid to Transmeta's general counsel, "simply for doing his job and settling an intellectual property lawsuit against Intel 10 months after it was filed" and claims that grants to top executives were given "at great cost to the shareholders with no commensurate value creation."
A little history: Transmeta, founded in 1995, ultimately failed in its bid to build better low-power x86 processors than Intel after consistently posting large annual losses. Not able to compete as a chip supplier, Transmeta in 2005 transformed itself into a supplier of x86 intellectual property.
After this transition, Transmeta filed a lawsuit against Intel alleging that the latter infringed upon 10 of Transmeta's patents, including computer architecture and power efficiency technologies. In October, Transmeta settled with Intel for $250 million. But this is a one-time payment and doesn't change the fact that Transmeta has exhibited unreliable earnings, particularly compared with a company like ARM Holdings--with 10 billion ARM design-based chips shipped to date and revenue of $384 million in the third quarter.
Transmeta's meager Q3 revenue juxtaposed with the handsome payouts to executives is, indeed, a cause for concern.
Ditzel left the company on April 1, and is right now contemplating starting a new start-up, he told me during a coffee break at the Hot Chips conference taking place at Stanford.
A former Sun Microsystems chip designer, Ditzel shook up the chip world with Transmeta in the late 90s. The company aimed at coming out with an Intel-compatible chip that would consume less power. Ditzel was one of the first execs to warn that power consumption would become a huge problem. The company, quite secretive at the time, attracted big name investors and people like Linus Torvalds, who works in software.
Unfortunately, all didn't work as planned. The performance of the first chip was pretty weak and subsequent versions were late. Potential contracts with customers like Toshiba faded away.
Meanwhile, Intel woke up to power consumption, in part thanks to Transmeta, and came out with a number of energy efficient processors.
Transmeta has had at leave five CEOs and lost hundreds of millions of dollars. It sold most of its chip operations and now tries to license software.
Still, the company helped bring attention to power consumption and Dave was always an entertaining speaker. It was also the last big IPO of the Internet era. The company went public in November 2000.
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