Transmeta Corporation
(NDAQ:TMTA) shares are up over 200 percent today on news that the
company finally struck a deal with Intel (NDAQ:INTC) to settle
all claims between them and to license its patent portfolio for use in
current and future Intel products. The move follows several years of
patent disputes between the two companies related to processor design.
"We
are very pleased to have reached this agreement with Intel," said Les
Crudele, president and CEO of Transmeta. "We believe that this
arrangement will create value for Transmeta stockholders both by
realizing immediate financial value for our intellectual property
rights and by supporting our technology development and licensing
business going forward."
The agreement grants Intel a perpetual
non-exclusive license to all Transmeta patents and applications now and
during the next ten years. Transmeta will also transfer technology and
grant Intel a non-exclusive license to its LongRun and LongRun2
technologies along with any future improvements. However, Intel will
not be able to sue Transmeta for developing and licensing these
technologies to third parties.
So, why are shares up so much
today? Well, the new agreement calls for Intel to make an initial $150
million payment to Transmeta as well as to pay Transmeta an annual
license fee of $20 million for each of the next five years. Given the
fact that the company's current market cap (even after today's jump) is
$140 million, this is great news for shareholders and investors. The
move also removes any concerns about selling its microprocessors and
technologies in the future.
In the end, Transmeta is potentially
still undervalued given the magnitude of this deal that promises to
result in a payment greater than its existing market cap plus ongoing
royalties for ten years. It also removes a legal cloud that has been
impacting the company's shares for some time now. Combined, these
factors make TMTA a stock
worth watching!
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