Transmeta’s New Right To Life From Intel (TMTA, INTC)

October 24, 2007 by Douglas A. McIntyre

Transmeta Corp. (NASDAQ:TMTA) is seeing shares gap up exponentially after the announcement that it has reached an agreement with Intel (NASDAQ:INTC) to settle all legal claims between the companies and to license the Transmeta patent portfolio to Intel for use in current and future Intel products. Intel will make an initial $150 million payment to Transmeta as well as annual license fees of $20 million to Transmeta for each of the next five years.  So this is a real deal rather than just a consiliatorty gesture.

The agreement will grant 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. Under the agreement, Intel will covenant not to sue Transmeta for the development and licensing to third parties of Transmeta’s LongRun and LongRun2 technologies.

This should at least solidify the ability for Transmeta to be able to sell its microprocessors and mirochip technologies.  The skeptical answer is that they still have to actually sell them, but you cannot argue that this is a huge win for the company because of the payments and licensing.  Its sales for all of 2006 were a mere 448+ million and its market cap before this pop just sat under 442 million.

Transmeta shares are up over 200% pre-market at $14.50 versus a $4.18 close yesterday.  Shares have traded as high as $26.00 over the last year and the stock was only recently on its lows of $4.10.  On a split-adjusted basis, this used to be a significantly higher priced stock.  But that is also after a 1-for-20 reverse stock split that went in effect on August 17, 2007.

Jon C. Ogg
October 24, 2007