Transmeta Corporation, the developer of Crusoe CPU, announced financial results for its second quarter of fiscal 2003 ended June 27, 2003.

Net revenue for the second quarter of fiscal 2003 was $5.1 million, compared with $6.0 million reported in the first quarter of 2003 and $7.5 million in the second quarter of 2002. GAAP net loss for the second quarter of 2003 was $22.0 million, or a loss of $0.16 per share. This compares with a GAAP net loss of $20.1 million, or a loss of $0.15 per share in the first quarter of 2002 and a GAAP net loss of $35.6 million, or a loss of $0.27 per share a year ago.

On a pro forma basis, which excludes the effects of non-cash charges totaling $3.7 million, the net loss for the second quarter was $18.3 million, or a net loss of $0.13 per share. This compares with a pro forma net loss of $17.0 million, which excludes non-cash charges of $3.1 million, or a net loss of $0.12 per share in the first quarter of 2003, and a pro forma net loss of $25.3 million, which excludes restructuring and non-cash charges of $10.3 million, or a net loss of $0.19 per share in the second quarter of 2002.

Dr. Matthew R. Parry, president and CEO of Transmeta said that revenues and loss for this quarter is in line with company's guidance. He said that his company lowered operating expanses and improved cash usage in this quarter. He also said that plans for TM8000 CPU production remains unchanged. Production of this CPU is scheduled for the third quarter of 2003 year. In the second quarter Transmeta sampled 1.1GHz TM8000 and received positive customer feedback, Dr. Perry added.

Transmeta continues to expect notebook design activity to shift to TM8000 processor in the fall with the volume systems availability in the spring of 2004.

Selected Highlights

Mobile Computing Products

• HP plans to begin selling its Compaq Tablet PC TC1000, which is powered by a Transmeta Crusoe TM5800 processor, to the retail market in a pilot program. The TC1000 was recently awarded second place in Datamation's Client Systems Product of the Year category.
• Sharp Systems of America's Actius MM10 notebook, the thinnest and lightest full-featured notebook computer available in the U.S., has been Sharp's most successful ultra portable PC product to date. The Actius MM10, featuring a Transmeta Crusoe TM5800 processor, is currently available through national and regional retail channels as well as through Sharp's online store.
• TDV Vison recently announced that in September it will ship the first Tablet PC priced below $1,000 to China, Europe and North America. The V800XPT Tablet PC, which uses a Transmeta Crusoe TM5800 processor, is a 2.6-pound, one inch thick, full-featured Tablet PC with an 8.4-inch screen that will be priced at $900.

Embedded Products

• HP announced its new HP Compaq Thin Client t5700, an affordable enterprise-quality thin client solution utilizing Transmeta's efficient Crusoe TM5800 processor. The t5700 operates at about twice the megahertz of competitive products within a design that is about half the size.
• Microsoft named Transmeta as a reference design partner for the next generation of Smart Displays - touch screen monitors that allow users to access Microsoft Windows XP-based PCs from remote locations in the home or office. Microsoft designated Transmeta a Smart Displays reference platform partner after OEM customers expressed interest in developing for the Transmeta processor architecture.
• IBASE Technology of Taiwan launched its FWA7000, a fast and fanless firewall/VPN platform that uses a Transmeta Crusoe TM5800 processor. With Transmeta's processor the FWA7000 is able to perform about four times the VPN encryption speed of existing network security applications.

Corporate

• Transmeta signed an agreement to license its Midori version of the Linux operating system to Chinese 2000 Holdings, a China-based company whose mission is to further develop and enhance the Chinese Linux-based operating system for mobile and embedded computing products.
• Transmeta established strategic agreements with IO Technologies, Marek Micro and Technology Rescue - three highly respected, European-based design firms. Each firm will provide support infrastructures for customers developing a multitude of innovative, x86-compatible embedded designs based on Transmeta processors.
• The company announced that Plexus Corporation, a global provider of Electronic Manufacturing Services, chose Transmeta's TM5800 processor as a key component in embedded product design applications for Plexus's OEM customers.

Current Financial Outlook for Third Quarter 2003

The following outlook statements are based upon current expectations. These statements are forward looking, and actual results could differ materially.

The company currently expects third quarter revenue to be about the same as Q2, with a GAAP net loss per share of $0.16 to $0.17 and a pro forma net loss per share of $0.13 to $0.14. The expected pro forma net loss per share does not include the effect of non-cash amortization and deferred compensation charges, which are expected to total $3.3 million for the third quarter. Operating expenses will remain flat at approximately $18.5 million. Cash at the end of September should be approximately $74.0 million.