Transmeta Reports Second Quarter 2006 Results

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

Exceeds first half financial guidance; reiterates full year guidance

SANTA CLARA, CA. – August 8, 2006 – Transmeta Corporation (NASDAQ: TMTA), the leader in efficient computing technologies, today announced financial results for the fiscal 2006 second quarter ended June 30, 2006.

Highlights for the 2006 Second Quarter

• Generated first half revenue of $28.8 million, exceeding first half guidance of $27.0 million
• Recorded second quarter revenue of $9.3 million, compared to $24.7 million in the second quarter of 2005
• Managed operating cash flow to negative $7.9 million for the first half, outperforming prior guidance of $10 million or less of negative cash flow
• Announced key involvement in Microsoft FlexGo Program with a specialized version of the Efficeon processor and reference platform for pay-as-you-go and subscription based computing in emerging markets
• Signed an exclusive agreement with AMD to market and provide a FlexGo-enabled version of the Efficeon processor in emerging markets under the AMD brand
• Presented recent research data confirming the benefits of LongRun2 power management technologies at the Spring Processor Forum in San Jose and the Japan Processor Forum

"In the second quarter of 2006 we exceeded our financial guidance with respect to our financial results, and we added materially to our business potential with our major announcements relating to Microsoft and AMD," commented Arthur L. Swift, president and CEO. "Our relationships with these industry leaders deliver on our continuing goal to drive Transmeta's technology into high volume market segments by leveraging licensing, customized processor development and synergistic engineering services."

"We believe that the combination of Transmeta's unique microprocessor technology, AMD's worldwide consumer brand and Microsoft's FlexGo technology for pay-as-you-go computing offers the potential to bring affordable solutions quickly to market for the hundreds of millions of prospective computing users in emerging markets," continued Swift.

Financial Update

Revenue for the second quarter of 2006 was $9.3 million, as compared to $24.7 million in the second quarter of 2005. This $24.7 million included $10.0 million of license revenue and an incremental $6.7 million of product revenue. Gross margin for the second quarter was 38.6%, as compared to a gross margin of 67.1% for the second quarter of 2005. The decline in gross margin in the second quarter of 2006 was principally due to the absence of license revenue. The Company had a net loss of $8.5 million, or a net loss of $0.04 per share, for the second quarter of 2006, as compared with a net income of $6.8 million, or net income of $0.04 per share, in the second quarter of 2005.

The Company's cash, cash equivalents and short term investments at June 30, 2006 totaled $52.2 million. In addition, the Company has a debt-free balance sheet.

Guidance

The Company is reiterating its full year guidance for FY2006:

• Full year revenue within 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

"Since the end of the first quarter we have secured further engineering work with Sony and as a result we have somewhat better visibility into the lower end of our range for 2006 revenue expectations based on our current contractual commitments," concluded Swift. "We are very encouraged by these commitments we have received from Sony and recent developments with other customers."

Conference Call

As previously announced, Transmeta's management will host a conference call 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) 312-1296. A recording of the conference call will be available starting one hour after the completion of the call until 11:59 p.m. Pacific time on August 14, 2006. The phone number to access the recording is (888) 203-1112, and the passcode is 5284273. 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.