Transmeta Corporation Meets Revised Guidance.Business Editors/High-Tech Writers SANTA CLARA Santa Clara, city, Cuba Santa Clara (sän`tä klä`rä), city (1994 est. pop. 217,000), capital of Villa Clara prov., central Cuba. , Calif.--(BUSINESS WIRE)--July 19, 2001 Transmeta Corporation (Nasdaq: TMTA TMTA Transmeta (stock symbol) TMTA Texas Music Teachers Association TMTA Tennessee Mathematics Teachers Association TMTA Truro Morlaix Twinning Association (UK) ) today reported net revenue of $10.5 million for its second quarter of fiscal 2001, ended June 29, 2001, meeting the company's revised guidance set on June 20, 2001. Net revenue for the second quarter of fiscal 2001 was $10.5 million, compared with $354,000 for the same period last year. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss was $17.8 million, or $0.14 per share, for the second quarter of fiscal 2001. This compares to pro forma net loss of $19.1 million, or $0.59 per share, for the second quarter of fiscal 2000. Pro forma net loss excludes the effects of amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and deferred stock compensation, purchased in-process technology, and charges to write-off excess inventory. Details on the purchased in-process technology and the write-off of excess inventory, totaling $41.7 million are discussed below. During the second quarter of fiscal 2001, Transmeta acquired certain in-process technology from AMD (Advanced Micro Devices, Inc., Sunnyvale, CA, www.amd.com) A major manufacturer of semiconductor devices including x86-compatible CPUs, embedded processors, flash memories, programmable logic devices and networking chips. for shares of the company's unregistered common stock with a fair value of $13.6 million. The company expensed the cost of this technology as a one-time charge of $13.6 million, or approximately $0.11 per share, as a write off of in-process research and development. In addition, the company recorded a $28.1 million charge to cost of sales primarily comprised of excess inventory as a result of a significant decrease in actual and forecasted demand for its products. Excluding this charge, gross margins remained consistent with the prior quarter at 44%. Actual net loss for the second quarter of fiscal 2001 was $69.3 million or $0.54 per share, compared with actual net loss of $23.8 million or $0.73 per share for the same period last year. Net revenue for the first six months of fiscal 2001 was $29.1 million, compared with $358,000 for the first six months of fiscal 2000. Pro forma net loss was $31.0 million or $0.24 per share for the first six months of fiscal 2001, compared with pro forma net loss of $35.8 million or $1.16 per share for the first six months of fiscal 2000. Actual net loss for the first six months of fiscal 2001 was $92.0 million or $0.72 per share, compared with actual net loss of $43.8 million or $1.42 per share for the first six months of fiscal 2000. "Although Transmeta has just completed a difficult quarter, we remain committed to our long term plan of Crusoe adoption into the rapidly evolving mobile and wireless platforms," stated Transmeta President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Mark K. Allen. "With the adoption of Crusoe by Toshiba and Sharp this quarter, we are pleased to be able to count all major Japanese notebook makers as our customers. We attribute this success to the benefits of low power and long battery life that our product brings to the marketplace." The Second Quarter in Review New Product Announcements In June, Transmeta introduced its new TM5800 and TM5500 Crusoe microprocessors. These new microprocessors are manufactured with advanced 0.13 micron process technology and feature up to 50 percent higher performance and 20 percent lower power consumption than the company's previous generation of microprocessors. These new Crusoe products will be manufactured for Transmeta by TSMC TSMC Taiwan Semiconductor Manufacturing Company, Ltd TSMC Taiwan Semiconductor Manufacturing Corporation TSMC Traffic Systems Management Center TSMC Toll Station Management Controller TSMC Transportation Supply Maintenance Command TSMC Technical Services Manager Code , which is the world's largest dedicated semiconductor foundry and provides the industry's most advanced 0.13 micron process technology. In early May, Toshiba Corporation (company) Toshiba Corporation - A Japanese technology manufacturer with 364 subsidiaries worldwide. Toshiba makes and sells electronics for home, office, industry and health care including information and communication systems, electronic components, heavy electrical apparatus, announced its first Crusoe based notebook computer A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. . Toshiba announced the Libretto libretto (ləbrĕt`ō) [Ital.,=little book], the text of an opera or an oratorio. Although a play usually emphasizes an integrated plot, a libretto is most often a loose plot connecting a series of episodes. L1/060TNMM TNMM Transactional Net Margin Method TNMM Trustworthy Network Management Model with a 600 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. Crusoe processor An x86-based CPU chip from Transmeta that is designed for Internet appliances and other handheld devices that require batteries. It consumes significantly less power than mobile x86 chips from Intel, AMD and others because it places more of the processing burden on the software. , a 10" wide SXGA (Super XGA) A screen resolution of 1280x1024 pixels. SXGA is commonly used on standard monitors, but provides a 1.25:1 aspect ratio, compared to the more common 1.33:1 (4:3) ratio. SXGA+ has a 1400x1050 resolution, which is an exact 1.33:1 ratio. See PC display modes. TFT (Thin Film Transistor) The term typically refers to active matrix screens on laptop computers. Active matrix LCD provides a sharper screen display and broader viewing angle than does passive matrix. See LCD and thin film. TFT - Thin Film transistor screen and a 10 gigabyte hard drive. This new notebook measures 10.5" wide by 6.6" deep and is 0.81" thick. The Libretto delivers life up to 4.5 hours with a standard battery and up to 14 hours with an optional battery. The notebook runs Microsoft Windows See Windows. (operating system) Microsoft Windows - Microsoft's proprietary window system and user interface software released in 1985 to run on top of MS-DOS. Widely criticised for being too slow (hence "Windoze", "Microsloth Windows") on the machines available then. Me, has two USB USB in full Universal Serial Bus Type of serial bus that allows peripheral devices (disks, modems, printers, digitizers, data gloves, etc.) to be easily connected to a computer. connectors and Bluetooth capability. The Libretto has been available for sale in Japan since May 18. In mid-May, Sharp Electronics Corporation also announced a new notebook, the Mebius PC-SX1-H1, which incorporates a 600 MHz Crusoe TM5600 processor and weighs only 3.2 lbs. The new Sharp notebook offers up to five hours of battery life with a standard battery, and up to 10 hours with an optional battery. This notebook has three USB ports A USB socket on a computer or peripheral device into which a USB cable is plugged. See USB. , a SmartMedia card slot A socket for inserting a printed circuit board or a PC Card (CardBus card). See PC Card. , SD memory card slot, IEEE (Institute of Electrical and Electronics Engineers, New York, www.ieee.org) A membership organization that includes engineers, scientists and students in electronics and allied fields. 1394 interface and built-in modem, network and standard DB-15 video connectors. These features make the Mebius PC-SX1-H1 the first notebook to provide connections with handheld devices and digital cameras. This system incorporates Microsoft Windows Me, a 20 gigabyte hard drive, 128 megabytes of memory and a 10.4" TFT screen. Honors and Awards In June, Fujitsu won Best of Show Award at TECHXNY (formerly PC Expo A trade show for resellers, corporate managers and technical professionals from CMP Media LLC, a subsidiary of United Business Media. First held in New York in 1983 with 120 exhibitors and 9,600 attendees, the show grew from the personal computer's early years to 550 vendors and more than ) for the Crusoe-based Fujitsu FMV-Biblo Loox T ultralight ul·tra·light n. A recreational aircraft constructed of lightweight materials such as aluminum, graphite composites, or high-strength plastics, having an engine of roughly 15 to 40 horsepower and often resembling a hang glider with wings. notebook. Two of the other three other finalists for this CNET (body) CNET - Centre national d'Etudes des Telecommunications. The French national telecommunications research centre at Lannion. sponsored award were Crusoe-based machines. Along with the winning Fujitsu notebook, CNET also selected the Crusoe-based NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Versa Versa Versatile System Architecture (Genrad) DayLite and the Crusoe-based Cassiopeia Fiva MPC-206VL as finalists in the ultralight notebook category. Transmeta was also recognized this quarter by the U.S Environmental Protection Agency Environmental Protection Agency (EPA), independent agency of the U.S. government, with headquarters in Washington, D.C. It was established in 1970 to reduce and control air and water pollution, noise pollution, and radiation and to ensure the safe handling and for our energy-efficient microprocessor. The EPA EPA eicosapentaenoic acid. EPA abbr. eicosapentaenoic acid EPA, n.pr See acid, eicosapentaenoic. EPA, n. noted that Transmeta's innovative approach to microprocessor design is enabling many Energy Star Partners to meet program energy-efficient specifications, which is an asset to both consumers and the environment. Consumers are able to recognize energy saving devices through the wide spread use of the Energy Star label. Significant Transactions In April, Transmeta announced the licensing of certain intellectual property from Applied Micro Devices, Inc., including AMD's HyperTransport interconnect technology. The HyperTransport interconnect enables the chips inside of PCs, networking and communications devices to communicate with each other up to 48 times faster than with existing technologies. In May, Transmeta and Seiko Epson Seiko Epson Corporation (セイコーエプソン株式会社 agreed to cooperate in developing semiconductor technology related to low power Crusoe microprocessors for mobile equipment. Seiko Epson and Transmeta will collaborate and share information about their respective "energy-saving" technologies in an effort to develop higher-level peripheral chipsets and other devices for Crusoe microprocessors. In conjunction with this cooperative arrangement, Transmeta acquired from Seiko Epson certain patents and patent rights relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc microprocessor technology. Together, Transmeta and Seiko Epson will explore possibilities for further cooperation and technical exchange in other technology areas focusing on the development of semiconductor products for mobile information equipment and development of a partnership or alliance in the Internet appliance Also called "information appliance," "smart appliance," and "Web appliance," it is a device specialized for accessing the Web and/or e-mail. Designed for ease of use, it plugs into a telephone jack or LAN connection for Internet hookup. field. Current Financial Outlook for Third Quarter 2001 The following outlook statements are based upon current expectations. These statements are forward looking, and our actual results could differ materially. 1. Transmeta expects revenue for the third quarter of 2001 to be flat to down 15% compared to second quarter revenue of $10.5 million. 2. Transmeta expects gross margin percentage for the third quarter to be approximately 44%. Our gross margin is influenced by several factors, including the yields achieved in the ramp of our 0.13 micron product, average selling prices, product mix and foundry pricing. 3. Transmeta expects that the total dollar spending in Research and Development and Selling, General and Administrative will be approximately flat to the second quarter spending levels of $26.1 million. About Transmeta Corporation Transmeta is a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. located in Santa Clara, California Santa Clara, California (IPA: /ˌsæntəˈklærə/) , founded in 1777 and incorporated in 1852, is a city in Santa Clara County, in the U.S. state of California. . Transmeta develops and sells software-based microprocessors and develops additional hardware and software technologies that enable computer manufacturers to build computers that simultaneously offer long battery life, high performance and x86 compatibility. Transmeta's family of Crusoe microprocessors is targeted at the notebook and Internet appliance segments of the Mobile Internet Refers to gaining access to the Internet using a lightweight, handheld device. See Mobile IP, PDA, smartphone and mobile TV. Computer market, as well as ultra-dense servers. To learn more about Transmeta, or the Crusoe Smart Processor, visit our Web site at www.transmeta.com. Transmeta and Crusoe are trademarks and/or registered trademarks of Transmeta Corporation in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and/or other countries. All other trademarks are the properties of their respective owners. Cautionary Statement This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of the company, which statements are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Investors are cautioned that these forward-looking statements are only predictions, which may differ materially from actual results or future events. All such forward-looking statements are based upon our current expectations but involve inherent risks and uncertainties. Such forward-looking statements speak only as of the date of this release, and the company will not necessarily provide updates of its forward-looking projections or forecasts. Risks and uncertainties that may have material effects on our future performance include general economic conditions, including the recent significant slowdown in the technology sector and semiconductor industry, the timing, rescheduling or cancellation of significant customer orders, potential fluctuations in our quarterly results, dependence on increasing demand for our Crusoe products, difficulties in developing or manufacturing new products in a timely and cost effective manner, market acceptance of our new products and of our customers' systems using our products, the growth of emerging markets that we are addressing, our customer concentration, the loss of revenue if a major customer were to cancel, reduce or delay a product order, inventory write-offs from a failure to forecast product demand accurately, our dependence on third parties for sourcing materials and providing manufacturing services, delays in product deliveries as we transition to smaller geometry process technologies, intense competition from Intel and others, delays in the introduction by Microsoft of its new Windows XP The previous client version of Windows. XP was a major upgrade to the client version of Windows 2000 with numerous changes to the user interface. XP improved support for gaming, digital photography, instant messaging, wireless networking and sharing connections to the Internet. operating system operating system (OS) Software that controls the operation of a computer, directs the input and output of data, keeps track of files, and controls the processing of computer programs. , rapid technological change, patents and intellectual property rights, volatility of our stock price, and the cyclical nature of the semiconductor market. We urge investors to review our regular filings with the Securities and Exchange Commission, including specifically our most recently filed Form 10-Q Form 10-Q See 10-Q. , which identifies and describes many of these and other important risk factors that could cause our actual results to differ from those contained in these forward-looking statements.
TRANSMETA CORPORATION
PROFORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
The following pro forma supplemental information excludes the
inventory related charges, in-process research and development, the
amortization of deferred charges and intangible assets and deferred
stock compensation.
Three Months Ended Six Months Ended
-----------------------------------------
June 29, June 30, June 29, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
(unaudited) (unaudited)
Net revenue $ 10,531 $ 354 $ 29,101 $ 358
Cost of sales 5,895 219 16,276 223
-------- -------- -------- --------
Gross margin 4,636 135 12,825 135
Operating expenses
Research and development 17,233 15,072 34,359 26,549
Selling, general and
administrative 8,861 5,781 17,851 11,447
-------- -------- -------- --------
Total operating
expenses 26,094 20,853 52,210 37,996
-------- -------- -------- --------
Operating loss (21,458) (20,718) (39,385) (37,861)
Interest and other, net 3,697 1,581 8,438 2,069
-------- -------- -------- --------
Loss before provision
for income taxes (17,761) (19,137) (30,947) (35,792)
Provision for
income taxes 3 - 16 -
-------- -------- -------- --------
Net loss $(17,764) $(19,137) $(30,963) $(35,792)
======== ======== ======== ========
Net loss per share --
basic and diluted $ (0.14) $ (0.59) $ (0.24) $ (1.16)
Weighted average shares
outstanding -- basic
and diluted 128,478 32,452 127,863 30,838
The pro forma amounts have been adjusted to eliminate the following:
Excess inventory charge $ 28,131 $ - $ 28,131 $ -
In-process research and
development 13,600 - 13,600 -
Amortization of deferred
charges and intangible
assets 4,109 2,614 7,488 4,863
Amortization of deferred
stock compensation $ 5,650 $ 2,014 $ 11,777 $ 3,140
TRANSMETA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
-----------------------------------------
June 29, June 30, June 29, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
(unaudited) (unaudited)
Net revenue $ 10,531 $ 354 $ 29,101 $ 358
Cost of sales 34,026 219 44,407 223
-------- -------- -------- --------
Gross margin (23,495) 135 (15,306) 135
Operating expenses
Research and development 17,233 15,072 34,359 26,549
In-process research
and development 13,600 - 13,600 -
Selling, general
and administrative 8,861 5,781 17,851 11,447
Amortization of deferred
charges
and intangible assets 4,109 2,614 7,488 4,863
Amortization of deferred
stock compensation 5,650 2,014 11,777 3,140
-------- -------- -------- --------
Total operating
expenses 49,453 25,481 85,075 45,999
-------- -------- -------- --------
Operating loss (72,948) (25,346) (100,381) (45,864)
Interest and other, net 3,697 1,581 8,438 2,069
-------- -------- -------- --------
Loss before provision for
income taxes (69,251) (23,765) (91,943) (43,795)
Provision for
income taxes 3 - 16 -
-------- -------- -------- --------
Net loss $(69,254) $(23,765) $(91,959) $(43,795)
======== ======== ======== ========
Net loss per share --
basic and diluted $ (0.54) $ (0.73) $ (0.72) $ (1.42)
Weighted average shares
outstanding -- basic
and diluted 128,478 32,452 127,863 30,838
Net loss per share and number of shares used in the per share
calculation for all periods presented reflect the two-for-one stock
split that was effective October 26, 2000.
TRANSMETA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 29, 2001 December 29, 2000(1)
----------------------------------
Assets (unaudited)
Current assets
Cash and short-term investments $282,418 $343,102
Accounts receivable, net 7,807 3,298
Inventories, net 3,015 15,453
Prepaid and other current assets 10,453 7,821
-------- --------
Total current assets 303,693 369,674
Property and equipment, net 12,049 10,482
Deferred charges under
license agreements 21,196 26,097
Other assets 47,573 6,283
-------- --------
Total assets $384,511 $412,536
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and other
current liabilities $ 22,051 $ 17,378
Current portion of long-term
obligations 13,622 9,292
-------- --------
Total current liabilities 35,673 26,670
Long-term payables 34,165 20,950
Stockholders' equity 314,673 364,916
-------- --------
Total liabilities and
stockholders' equity $384,511 $412,536
======== ========
(1) Derived from audited financial statements included in the
Company's Form 10-k for the fiscal year end 2000 filed with the
Securities and Exchange Commission.
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