February 5, 2007 – Seeking to further streamline operations and focus on IP development and licensing, Transmeta Corp. says it will axe 39% of its workforce (75 employees), mostly in its engineering services business.

The company says more cuts in that division (25-55 workers) will come later this year once current work is completed, and depending on future support requirements for the Microsoft FlexGo program. Offices in Taiwan and Japan also will be closed, Transmeta added.

The moves will save $17-$23 million annually, but require up-front charges of about $11-$14 million ($7-$10 million in cash expenditures), absorbed primarily in the current quarter.

“After a critical evaluation of all our lines of businesses, we have decided that IP development and licensing will be our core business activity going forward,” said Lester Crudele, president and CEO, in a statement.

In early 2005, Transmeta shifted its business focus from designing and manufacturing chips to licensing the IP behind them. “We understood that in some cases we might need to pursue enforcement through the courts,” stated Arthur Swift, Transmeta president and CEO. And late last year Transmeta fulfilled its promise, requesting an injunction against Intel’s continuing sales of Pentium III, Pentium 4, Pentium M, and Core and Core 2 Duo processors, which incorporate patented Transmeta technologies, and sought monetary damages including royalties. Several media reports noted that those Intel products have generated more than $100 billion in revenue to date.

But last month Intel responded with a countersuit of its own, denying those claims, and contending that Transmeta is actually infringing some of Intel’s own patents.

Investors are already voting with their feet — Transmeta stock was down 13% in early trading after the news, as Wall Street mulls the newly lowered profitability ceiling, but questions a lack of clarity about revenue streams to break through it.