Troubled intellectual property (IP) licensing companyTransmeta Corp. has received a $7.5 million investment from chipmaker Advanced Micro Devices Inc. (AMD) in exchange for preferred stock and has seen its stock grow more than 47 percent since the companies announced the deal Friday. 

There is no doubt that Transmeta could use the monetary boost. The Santa Clara, Calif.-based company has been navigating rough financial waters for some time now. Last year, the company reported quarter after quarter of slumping profits, and saw former CFO Mark Kent resign in May. In January, AMD rival and industry-leading chipmaker Intel Corp. hit Transmeta with a patent infringement suit in response to a similar suit filed by Transmeta in October 2006. Also in January, Transmeta's board voted to replace then-CEO Arthur Swift with Les Crudele in a move to head the company with an executive who had "more operational experience."

Crudele has not wasted any time in working to bring the company back into the black. In February, days after Crudele's appointment became effective, the company cut 39 percent of its workforce and launched a plan to focus entirely on intellectual property licensing in an attempt to regain profitability. Transmeta is still going through with plans to cut an additional 15 percent to 20 percent of its workforce throughout its current Q2. The changes have yet to become apparent at the company's bottom line, however. Indeed, in May Transmeta posted a Q1 financial report with a net loss of $18.7 million, down from its Q4 net loss of $15.9 million.

Despite the obvious existing troubles, executives for AMD and Transmeta expressed optimism over the company's future prospects. "We are very pleased that AMD has made a strategic investment in the future of Transmeta," Crudele said in a joint statement from the companies.

"Transmeta has been an innovative force in the industry for more than a decade," Dirk Meyer, AMD's president and COO, added in the statement. "Our investment will support Transmeta's technology development work and AMD's efforts to leverage Transmeta's innovative energy-efficient technologies to the benefit of AMD's customers."

Since news of the deal began to spread on Friday, Wall Street has shown a clearly favorable reaction to the investment. As of 10:30 a.m. ET this morning, Transmeta's stock was trading at $1.03 a share, up a whopping 47.1 percent from its closing price Thursday of 70 cents per share. Meanwhile, AMD's stock was trading at $14.60 a share, up 3.1 percent from its closing price Thursday of $14.16.

In other news today, Intel has invested $218.5 million in virtualization software firm VMWare Inc. After VMWare's upcoming IPO, Intel will own 2.5 percent of the company's outstanding stock and hold a board seat at the company.

By: DocMemory
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