Microprocessor technology supplier Transmeta said it has received the initial payment of $150 million from Intel toward the $250 million settlement that the two companies agreed upon back in October. The payment was received on January 28, according to Sujan Jain, Transmeta's chief financial officer. Mr. Jain also said that Transmeta is evolving its business model to generate a more constant revenue stream.
Transmeta, previously a supplier of low-power x86 processors, now develops and licenses microprocessor technologies and related intellectual property. The company filed a lawsuit against Intel in October 2006 alleging that the latter infringed upon Transmeta's patents. Transmeta later settled with Intel for $250 million.
Last week, the company came under attack from one of its largest stockholders, Riley Investment Management, for what Riley claims is an unconvincing business strategy based on Transmeta's LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control." Riley claims that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses.
But Transmeta says it is making headway with LongRun2. Using this technology, NEC announced in July 2007 that it is targeting production of approximately one million mobile phone chips a month by 2008. As a result, Transmeta expects approximately $215,000 in LongRun2 royalty revenue that will show up in its first-quarter earnings, said Mr. Jain. That would be an improvement over its third-quarter earnings when Transmeta posted only $44,000 in revenue, including $43,000 of services revenue and $1,000 of license revenue for royalty payments.
Mr. Jain also said that Transmeta has been evolving its business model. Previously, Transmeta only dealt with big companies that had plenty of engineering know-how, due to the complexity of the technology transfer. But now it is focusing on building IP (intellectual property) modules to license to smaller, fabless chip companies too. The new strategy will help expand the LongRun2 business and should result in "more consistent revenues over time," Mr. Jain said.
Transmeta will provide details on how and when it will recognize the entire $250 million settlement from Intel during its 2007 fourth-quarter earnings conference call, said Mr. Jain.