Transmeta Lowers Year Forecast; CFO Resigns

Staff Reporter -- Electronic News, 5/11/2006

Transmeta Corp. has downgraded its revenue forecast for the full year and announced that its CFO plans to resign, but said that revenue for its Q1 grew 185 percent year over year.

The Santa Clara, Calif.-based company said that service agreements with Sony would generate less revenue than originally expected for the year, putting total revenues for the year in the range of $48 million to $58 million. The company’s original forecast was for revenues of $60 to $72 million. The company also expects a wider loss for the year than originally anticipated

For its Q1 Transmeta reported revenue of $19.5 million compared to $6.9 million for the same period a year ago. Part of that came from $9.1 million in previously deferred revenue related to services provided to Microsoft.

Transmeta also announced that Toshiba has licensed its LongRun2 power management technology, making it the fourth OEM to do so.

"Our solid first quarter marked another period of excellent execution for Transmeta," said Arthur Swift, president and CEO, in a statement. "… The modifications we made to our business model last year have resulted in a much stronger company with a blue chip customer base. We have increasing interest in our key technologies and a growing intellectual property portfolio. Our improved financial position now allows us to pursue new business initiatives and opportunities."

A year ago, as operating capital dwindled, Transmeta made the switch from a fabless processor company to an IP licensing and service company.  At its inception the upstart company had sought to challenge processor leaders Intel and AMD, and is widely viewed to have accelerated those companies’ efforts to lower the power requirements of their processors.

Transmeta’s net loss of for Q1 totaled $1.6 million, or 1 cent per share compared with a net loss of $21.1 million or 11 cents per share in the first quarter of 2005.

Transmeta said it is revising guidance in light of reductions in Sony’s requirements and the company’s current expectations regarding further decisions by Sony and other potential customers about prospective new engineering service engagements in 2006.

Transmeta now anticipates meeting its first half financial guidance of at least $27 million in revenue and a negative operating cash flow of no more than $10 million.  Further, it expects a net loss for the full year in the range of $26 million to $16 million or a loss of 13 cents to 8 cents per share, which includes non-cash charges of $7 million of patent amortization and $6 million of stock option compensation expense

Separately, Transmeta announced the resignation of CFO Mark Kent. Kent’s resignation will become effective following the filing of the company’s Q1 10Q document with the Securities and Exchange Commission.

Transmeta said it has initiated a search for a new CFO. Kent will remain available to Transmeta on a consulting basis for a three month interim period while the search is underway.

"Mark has made significant contributions to our corporate transformation, including helping us to refine our strategy, enhance our liquidity position, build the finance team and infrastructure, and drive our efforts to become fully compliant with the requirements of the Sarbanes-Oxley Act," Swift said, in a statement.

"I have enjoyed working with Art, the Board and my colleagues at Transmeta," said Kent, in a statement. "When I came to Transmeta over a year and half ago, my goal was to help the executive team and the Board to get the Company onto a more sustainable strategic path, and I now feel that we have accomplished this goal."