Transmeta Posts Loss; To Layoff 40 Percent

The low-power chip maker posted another loss today and announced plans to lay off 200 employees.

Low-power chip designer Transmeta Corp. posted another quarterly loss today and announced plans to lay off 200 employees, amounting to about 40 percent of its work force.

For the quarter, Transmeta reported a loss of $35.6 million, or a loss of $0.27 per share. Excluding one-time charges, the chipmaker lost $23.2 million, or 17 cents per share, slightly better than the 19 cents per share forecasted by Wall Street analysts, according to Thomson Financial/First Call.

Once again, Transmetas operating expenses far exceeded revenue brought in by its low-power processors, called Crusoe, which are primarily sold in notebook PCs in Japan and to a less extent in a few high-density server products, known as blades, marketed by start-up companies in the United States.

For the three month period, sales totaled only $7.5 million for its second quarter of fiscal 2002, an increase of $3.4 million over first quarter revenue of $4.1 million, but well below the $10.5 million in sales it recorded during the same period last year. Those figures fall well short of covering the companys operating expenses, when amounted to nearly $28 million during the second quarter.

The company, which unveiled its first product in January 2000, has been hurt by delays in product introductions and intense competition from leading PC chipmaker Intel Corp..

Last October, Transmeta ousted its chief executive, Mark Allen, after the company failed on its promise to deliver a new processor, the Crusoe TM5800, on time. The chip, originally scheduled for release in spring 2001 didnt arrive on the market until this year.

But the biggest obstacle to Transmetas efforts to boost sales and achieve profitability remains market leader Intel. Shortly after Transmeta unveiled its Crusoe chip two years ago, Intel introduced its own series of ultra-low power processors designed for ultra-lightweight notebook PCs. As a result, Intel was able to persuade major U.S. computer makers to use its chips rather than the Crusoe for their new compact PC designs.

However, a crack appeared in Intels hold on the U.S. market recently when Hewlett-Packard Co. announced it would use Transmetas product in its new Compaq Evo Tablet PC, set to begin shipping later this year.

With Microsoft Corp. promoting tablet PCs and industry analysts projecting a pickup in sales of handheld computing devices in the next few years, Chief Executive Matthew Perry contends the outlook for Transmeta remains bright.

"With the demand for mobile computing devices growing faster than desktop PCs, Transmeta is extremely well positioned to increase market share and revenue in the quarters to come," Perry said in a statement issued with todays earnings.