Transmeta slashes 39% of workforce, plans more cuts, closures
By Colleen Taylor -- EDN, February 5, 2007
In an abrupt move to streamline its business, Transmeta Corp. has undertaken a massive restructuring plan, already slashing a whopping 39 percent of its worldwide workforce, outlining further job cuts and the shuttering of sales and support offices.
"After a critical evaluation of all our lines of businesses, we have decided that IP development and licensing will be our core business activity going forward," Lester Crudele, the Santa Clara, Calif.-based company's president and CEO, said in a statement. "Therefore, we have initiated a restructuring plan to re-align our headcount and expenses accordingly."
Transmeta said it began the initial phase of its re-alignment on Friday by decreasing its worldwide workforce by approximately 39 percent, or 75 employees, most of who worked in the company's engineering services business. Transmeta said it also took the initial steps to close its sales and support offices in Taiwan and Japan. Over the next two quarters, as the company completes its existing engineering services work, the company said it expects to further reduce its headcount by 25 to 55 people, depending on the level of support required for the Microsoft FlexGo program.
The troubled IP company has been navigating turbulent waters for some time now. In January, chip making giant Intel Corp. hit Transmeta with a patent infringement suit in response to a similar suit filed by Transmeta in October. Additionally, the company suffered a host of financial woes throughout 2006, reporting quarter after quarter of slumping profits, and saw former CFO Mark Kent resign in May. Last month, Transmeta's board voted to replace then-CEO Arthur Swift with Crudele in a move to head the company with an exec who had "more operational experience." Crudele's appointment was effective February 1.
The company said it estimates that the job cuts and office closures will result in cumulative restructuring charges in the range of $11 million to $14 million, the vast majority of which will be an expense in the current quarter. Transmeta said it estimates these actions will require total cash expenditures of about $7 million to $10 million, which also will be incurred primarily in Q1. In the long run, however, the company said it expects the actions to generate cost savings in the range of $17 million to $23 million on an annualized basis.
