Transmeta’s move to an IP business model proved it was a good one in the company’s second quarter.

Just six months after its initial announcement that the company would shift its gears to licensing, Transmeta, once thought to be a goner,  has reported record sales and positive earnings.

Revenue for the quarter was $24.7m, compared to $6.9m in Q1 and $6m in Q4 2004. Sales were comprised of $10m  in license revenue, $7.6m in service revenue, and $7.1m in product revenue. This compares with no licence revenue, $0.3m  of service revenue, and $5.7m of product revenue in Q2 2004. In addition, the company reported deferred revenue of $15.5m as of June 30, an increase of $1m compared to the March quarter.

"Our performance during the second quarter clearly reflects the positive steps we have taken and the continued execution of our transformation plan," said Arthur Swift, president and CEO. "The strategic decisions we took earlier this year regarding the evolution of our business model, and the means of bringing our technology to market, are already delivering measurable positive results.

"Although we are still in a transitional period, the progress we are making with our partners gives us confidence in our ability to win and successfully execute additional projects for new customers and strategic partners."

Transmeta further reported gross margin of 99.8 per cent for the license business, 45.6 per cent for the service business, and 44.1 per cent for the product business. On a consolidated basis, the company's gross margin was 67.1 per cent for the quarter, compared to 28.3 per cent for Q1 and a negative 54.4 per cent for the year-ago period.
 
Net income improved significantly to $6.8m, or 4 cents per share, compared with a net loss of $21.1m or a loss of 11 cents per share in Q1, and a net loss of $26.8m or a loss of 15 cents per share Q2 2004.

www.transmeta.com