Transmeta Reports Revenue Of $27.9 Million And Positive Cash Flow From Operations For Q3 2005

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

• Raises Cash Guidance to $53 Million at 2005 Fiscal Year End
• Guides to Revenue of $71 Million to $72 Million for Full Year 2005

SANTA CLARA, CA. – November 8, 2005 – Transmeta Corporation (NASDAQ: TMTA), the leader in efficient computing technologies, today announced financial results for the third quarter ended September 30, 2005.

Highlights for the Third Quarter 2005

• Net revenue of $27.9 million
• Net income of $10.1 million, or $0.05 per share
• Positive cash flow from operations of $9.5 million
• Cash balance of $56.9 million at September 30, 2005
• Deferred income of $6.0 million
• Engineering services projects with Sony and Microsoft continue to progress well

Business Update

"We are pleased with our results as they reflect the early success of our modified business model," commented Arthur L. Swift, president and CEO. "Our continuing goal is to drive Transmeta's technology into high volume market segments by leveraging licensing, customized processor development, and synergistic engineering services. As an early innovator in the fields of microprocessor design and power reduction for leading edge chips, as well as a pioneer in addressing the challenge of power leakage, we have a solid technology base on which to build a sustainable competitive advantage. This year, we will have successfully transformed our business, and as we look to 2006, we are well positioned to capitalize on our solid financial progress and key strategic customer relationships."

Net revenue for the third quarter of 2005 was $27.9 million, compared to $24.7 million in the second quarter of 2005, and $7.0 million in the third quarter of 2004. Net revenue in the third quarter comprised $9.6 million of license revenue, $10.3 million of service revenue and $7.9 million of product revenue. This compares with $10.0 million of license revenue, $7.6 million of service revenue, and $7.1 million of product revenue in the second quarter of 2005. The product revenue reflects end-of-life (EOL) product sales as well as customer product programs which have reached or are reaching the end of their respective product life. In addition, the Company reported deferred income of $6.0 million as of September 30, 2005, as compared to $15.5 million for the second quarter of 2005.

The Company reported gross margin of 99.5% for the license business, 41.6% for the service business and 72.7% for the product business. On a consolidated basis, the Company's gross margin was 70.5% for the 2005 third quarter, compared to 67.1% for the second quarter of 2005, and a negative 62.2% for the third quarter of 2004.

The Company's net income for the third quarter of 2005 was $10.1 million, or $0.05 per share compared with a net income of $6.8 million, or $0.04 per share in the second quarter of 2005, and a net loss of $28.6 million, or a loss of $0.16 per share in the third quarter of 2004.

The Company had positive cash flow from operations of $9.5 million in the third quarter of 2005, as compared to positive cash flow of $4.8 million in the second quarter of 2005 and negative cash flow of $21.2 million in the third quarter of 2004. The Company's cash, cash equivalents and short term investments at September 30, 2005 totaled $56.9 million.

"Our licensing and services businesses, with their varying times to revenue recognition, coupled with our present high degree of customer concentration, can result in a variable revenue profile from quarter to quarter," continued Swift. "Looking forward, our goal is to generate new sources of revenue in 2006, including new licensees for our LongRun2 technologies, our first royalties from our previous LongRun2 licensees, and new revenues from specialized versions of our 90 nanometer Efficeon products."

Guidance

For the 2005 fourth quarter and FYE 2005, we expect:

• Positive operating cash flow of $6.0 to $6.5 million in the second half of 2005, increased from prior guidance of breakeven cash flow for the second half
• Fourth quarter negative operating cash flow of $3.0 to $3.5 million
• FYE 2005 year end cash of $53.0 million, increased from prior guidance of $47.0 million
• Fourth quarter total revenue of $12.0 to $13.0 million
• Fourth quarter net loss of $5.4 to $5.9 million, or a loss of $0.03 per share

"In the third quarter, we continued to build on the operational and financial success of the second quarter, and we expect to exceed our stated key objective of achieving break-even or better cash flow from operations for the second half of 2005," commented Mark R. Kent, chief financial officer. "For the full year, we are expecting revenues of at least $71 million, which includes product revenue of approximately $24 million. This product revenue includes EOL and legacy customer sales which we expect to substantially conclude this year."

"Looking forward, we expect to replace this transitioning product revenue with new revenue from licensing, services, and our specialized 90 nanometer Efficeon product business," continued Kent. "As we move into next year, we expect to continue growing our Sony services business. In addition, we expect to achieve key program milestones and the recognition of related revenue for a significant development services contract in the first half of 2006."

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) 981-5546. 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 November 15. The phone number to access the recording is (888) 203-1112, and the passcode is 2490167. 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, 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. We also develop 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.