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. 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, including those concerning
Transmeta�s revenue, the value of Transmeta�s intellectual property
and technologies, the amount of cash consideration to be received
by Transmeta stockholders, the timing and likelihood of closing of
the proposed merger and the potential benefits of the proposed
merger. 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 actual
results or future events. These risks and uncertainties include,
among others, the satisfaction of closing conditions to the
proposed merger, failure of Transmeta stockholders to approve the
proposed merger, Transmeta�s estimates of its operating costs prior
to closing the proposed merger, costs related to the proposed
merger, general economic and political conditions in the U.S. and
abroad, and other risks affecting Transmeta�s and Novafora�s
respective businesses generally, including, with respect to
Transmeta, those risks discussed in our most recent reports on
Forms 10-K and 10-Q. 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. Additional Information and Where to Find
It Transmeta will file a proxy statement with the SEC in connection
with the proposed merger. Investors and stockholders of Transmeta
are urged to read the proxy statement and any other relevant
documents filed with the SEC when they become available because
they will contain important information regarding Novafora,
Transmeta, the proposed merger, the persons soliciting proxies in
connection with the proposed merger on behalf of Transmeta and the
interests of those persons in the proposed merger and related
matters. Transmeta intends to mail the proxy statement to its
stockholders as soon as practicable. Investors and stockholders
will be able to obtain a copy of the proxy statement and other
documents filed by Transmeta with the SEC free of charge at the Web
site maintained by the SEC at http://www.sec.gov. In addition,
documents filed with the SEC by Transmeta are available free of
charge by contacting Transmeta Investor Relations (Kristine Mozes,
781-652-8875). Participants in Solicitation Transmeta, and its
directors, executive officers, and employees may be deemed to be
participants in the solicitation of proxies from the stockholders
of Transmeta in connection with the proposed merger and related
items. Information regarding the directors and executive officers
of Transmeta and their ownership of Transmeta stock is set forth in
Transmeta�s proxy statement for Transmeta�s 2008 annual meeting of
stockholders, which was filed with the SEC on August 25, 2008.
Investors and stockholders may obtain additional information
regarding the interests of those participants by reading the proxy
statement relating to the proposed merger when it becomes
available. Investors and stockholders can obtain a copy of that
proxy statement free of charge at the Web site maintained by the
SEC at http://www.sec.gov. Transmeta Corporation Condensed
Consolidated Balance Sheets (In thousands) (Unaudited) � � �
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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