Transmeta Reports First Quarter 2006 Results

Update: Intellectual Ventures has acquired Transmeta Patent Portfolio on Jan. 28, 2009

Expects to meet first half financial guidance, lowers full year financial guidance

SANTA CLARA, CA. – May 9, 2006 – Transmeta Corporation (NASDAQ: TMTA), the leader in efficient computing technologies, today announced financial results for the fiscal 2006 first quarter ended March 31, 2006.

Highlights for the 2006 First Quarter

• Increased revenue by 185% to $19.5 million compared to $6.9 million in the first quarter of 2005
• Recognized $9.1 million of previously deferred revenue related to Microsoft services
• Increased cash and short-term investments balance to $57.4 million at March 31, 2006
• Held negative operating cash flow to $2.0 million, offset by proceeds from stock option exercises
• Announced a LongRun2 license with Toshiba, the fourth major company to license Transmeta's advanced power management technologies

Business Update

"Our solid first quarter marked another period of excellent execution for Transmeta," commented Arthur L. Swift, president and CEO. "As anticipated, we completed key project deliverables for our Microsoft engineering services contract, we signed our fourth LongRun2 licensee, Toshiba, and we entered into the second year of our engineering services relationship with Sony. 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."

Revenue for the first quarter of 2006 was $19.5 million, compared to $6.9 million in the first quarter of 2005. The year-over-year increase reflects the recognition of the Microsoft services revenue of approximately $9.1 million. Gross margin for the first quarter was 43.4% compared to a gross margin of 28.3% for the first quarter of 2005. The Company had a net loss of $1.6 million, or a loss of $0.01 per share, for the first quarter of 2006 compared with a net loss of $21.1 million, or a loss of $0.11 per share, in the first quarter of 2005.

The Company's cash, cash equivalents and short term investments at March 31, 2006 totaled $57.4 million. In addition, the Company has a debt-free balance sheet.

Guidance

The Company is revising its guidance in light of both reductions in Sony's requirements for Transmeta engineering services as reflected in the current project agreements entered into with Sony in April 2006 and the Company's current expectations regarding further decisions by Sony and other potential customers about prospective new engineering service engagements in 2006.

The Company now anticipates:

• Meeting first half financial guidance of at least $27 million of revenue and negative operating cash flow of no more than $10 million
• Revising full year revenue guidance to a range of $48.0 to $58.0 million
• Net loss of $26 million to $16 million, or a loss of $0.13 to $0.08 per share, which includes non-cash charges of $7 million of patent amortization and $6 million of stock option compensation expense
• Full year negative operating cash flow of $28 million to $20 million

"Earlier this quarter, we entered into new project agreements with Sony for their new fiscal year, but at a lower revenue level than anticipated. As a result, our services revenue may be lower than we previously expected and we have reduced our full year revenue guidance to between $48.0 to $58.0 million," commented Mark R. Kent, chief financial officer. "Based on our current outlook, we are forecasting increased negative operating cash flow, which we expect to partially offset by working capital or partner supported financing. We also expect a somewhat higher net loss for the year, but we remain committed to building a business characterized by an expanding customer base, recurring revenue streams and sustained profitability."

Conference Call

As previously announced, Transmeta's management will host a conference call today at 5:00 p.m. Eastern time / 2:00 p.m. Pacific time to discuss the operating performance for the quarter. The conference call will be available live over the Internet at the investor relations section of Transmeta's website at www.transmeta.com. To listen to the conference call, please dial (913) 981-5545. A recording of the conference call will be available for one week, starting one hour after the completion of the call, until 9:59 p.m. Pacific time on May 16. The phone number to access the recording is (888) 203-1112, and the passcode is 7623346. For callers outside the U.S., please dial (719) 457-0820, with the same passcode.

About Transmeta Corporation

Transmeta Corporation develops and licenses innovative computing, microprocessor and semiconductor technologies and related intellectual property. Founded in 1995, we first became known for designing, developing and selling our 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. We now also provide, through strategic alliances and under contract, engineering services that leverage our microprocessor design and development capabilities. In addition to our microprocessor product and services businesses, we also develop and license advanced power management technologies for controlling leakage and increasing power efficiency in semiconductor and computing devices. To learn more about Transmeta, visit www.transmeta.com.