Knobias Clip Report (10-24-2007)

Submitted By Knobias ClipReport

TMTA: $250M Settlement Causes Huge Spike in Shares

Wednesday’s session saw the financials feed the bear following Merrill Lynch’s larger than expected losses. Online retailer, Amazon.com, also contributed to the downward move following an earnings report that beat estimates, though fell due to expected profit margins declining with the holiday season right around the corner.

Even further, the National Association of Realtors reported sales of existing homes fell 8% in September to their lowest levels in 8 years. Median sales prices also fell 4.2%. Following the intraday bounce off lows of over 200 points, the Dow closed almost even, while the Nasdaq was down almost 1%. Speculation suggested an emergency Fed meeting as the catalyst, though the rumors were quickly dismissed.

In the small cap space, one name saw a fairly large increase in price on an important piece of news.

Transmeta Corporation (TMTA) develops and licenses innovative computing, microprocessor and semiconductor technologies and related intellectual property. Founded in 1995, Transmeta first became known for designing, developing and selling its 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. The Company also develops advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices.

In October of 2006, the Company filed a patent infringement suit against Intel for infringement upon 10 Transmeta U.S. patents covering computer architecture and power efficiency technologies.

The complaint charged that Intel had infringed Transmeta's patents by making and selling a variety of microprocessor products including at least Intel's Pentium III, Pentium 4, Pentium M, Core and Core 2 product lines. The complaint requested an injunction against Intel's continuing sales of infringing products as well as monetary damages, including reasonable royalties on infringed products, treble damages and attorneys' fees.

In January, Intel countersued and disputed Transmeta's charges while accusing the smaller rival of infringing seven Intel patents. One of Intel's patents, filed in 1998, covers an "apparatus for controlling power usage," while the remaining six cover kinds of chip features.

In May, the Company reported some disappointing earnings and announced a restructuring was to take place.

“In the first quarter of 2007 we made the difficult, but necessary, decision to reduce our spending by restructuring the company to focus on developing and licensing our technologies and intellectual property,” said Les Crudele, president and CEO in the Company’s first quarter earnings release. “The restructuring is proceeding according to plan and, in some cases, is ahead of schedule. We expect to further reduce our headcount by 15 to 20 percent during the second quarter, mainly affecting general and administrative positions. As a result of the restructuring, we are no longer pursuing engineering services as a separate line of business and have also exited the business of selling microprocessor products.”

On Wednesday, the Company made a large stride towards their licensing and development strategy. Trasmeta announced that it had reached an agreement with Intel to settle all claims between them and to license the Transmeta patent portfolio to Intel for use in current and future Intel products.

The agreement grants Intel a perpetual non-exclusive license to all Transmeta patents and patent applications, including any patent rights later acquired by Transmeta, now existing or as may be filed during the next ten years. Transmeta will also transfer technology and grant to Intel a non-exclusive license to Transmeta's LongRun and LongRun2 technologies and future improvements.

The agreement provides for Intel to make an initial $150 million payment to Transmeta as well as to pay Transmeta an annual license fee of $20 million for each of the next five years for a total of $250 million.

Following the announcement, shares of TMTA gained over 230%, INTC shares fell 3.5%, while Applied Micro Devices (AMD), who owns $7.5 million in preferred stock in TMTA, shares fell 4.37%.




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