More job cuts on the way for Transmeta

By Colleen Taylor, Contributing Writer -- Electronic News, 4/2/2007

Transmeta Corp. has cut even more jobs in a second phase of its restructuring plan signaling its complete exit from the engineering realm and the sale of microprocessors. The now completely IP-driven company has announced plans for further workforce reductions in Q2.

The Santa Clara, Calif.-based company today announced that it took additional steps last month to streamline its operations under a restructuring plan it began implementing in February. During the initial phase of the plan initiated by new CEO Les Crudele, Transmeta decreased its worldwide workforce by some 39 percent, or approximately 75 employees, most of whom worked in the company's engineering services business.

Transmeta said today it reduced its headcount by an additional 55 workers effective March 31. The company said that the March reduction primarily affected employees who had remained with Transmeta to complete engineering services work for Sony and Microsoft, as well as employees who supported the company's microprocessor production support operations.

The restructuring has brought a major change of focus to the company. As a result of its recent operational streamlining activities, Transmeta said it has now completely ceased to pursue engineering services as a separate line of business, has ceased its operations relating to microprocessor production support, and has exited the business of selling microprocessor products.

The latest cuts have affected more than just Transmeta's engineers; as of March 31, the company's restructuring plan had also effectively eliminated the management positions of at least four of the company's executive officers: Patrick V. Boudreau, senior VP of human resources; David R. Ditzel, CTO; Martin A. Levy, VP of operations; and Robert Rogenmoser, vice president of VLSI development.

Currently Transmeta has approximately 65 employees—but says that even more jobs cuts are on the way. Today Transmeta said it expects to reduce its headcount by another 15 percent to 20 percent during Q2.

Transmeta said that the February and March workforce reductions are set to result in cumulative restructuring charges in the range of $11 million to $14 million, the vast majority of which will be an expense in Q1. The company said it estimates these actions will require total cash expenditures of $7 million to $10 million, which will be incurred primarily in Q1. Ultimately, Transmeta said it expects these actions to generate cost savings in the range of $17 million to $23 million on an annualized basis.

The major changes are not at all unwarranted for the company; indeed, Transmeta 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. In January 2007, 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."

Last week, another Santa Clara-based company, PMC-Sierra Inc., announced 175 layoffs and the closure of two of its R&D centers in an effort to save some $20 million to $24 million a year.