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Transmeta sees 2Q drop
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June 20, 2001: 6:02 p.m. ET
Upstart chip maker says revenue will fall as much as 45 percent
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NEW YORK (CNNfn) - Upstart microprocessor maker Transmeta Corp. added its name to the growing list of chipmakers that will fall short of their second-quarter financial targets, citing weakening demand among its primarily Japan-based customers.
After the close of trading, Transmeta, which makes low-power microprocessors designed for lightweight notebook computers and information appliances, said it expects second-quarter revenue to be as much as 45 percent below the $18.6 million it reported during the first quarter.
Transmeta most recently had expected sales to be flat-to-slightly up in the current quarter, and analysts generally had expected the company's top line in the second quarter to come in at roughly $19.6 million, suggesting a 5.4 percent increase.
Executives at Transmeta in Santa Clara, Calif., said the economic weakness which has weighed heavily on the chip business in the United States appears to have spread to Japan. As a result, their key Japanese customers, which currently comprise all of that country's leading notebook manufacturers, have cut back their orders for Transmeta's "Crusoe" brand processors.
"We have achieved new design wins this quarter with key companies in our target markets ... and we've seen continued introductions of Crusoe-based notebooks into the U.S. and Europe," Mark K. Allen, Transmeta's president and chief executive, said in a statement.
"However, we are also seeing reductions in unit volume shipments to major customers this quarter," Allen added. "Our business is presently based primarily in Japan, which now appears to be experiencing the economic weakness that affected other parts of the world earlier this year."
The company also will take an unspecified inventory charge during the quarter because of the revenue shortfall and its transition to a new manufacturing process, Allen said.
Earlier Wednesday, Toshiba -- Japan's biggest chipmaker -- said it will temporarily cut its chip output this summer, and analysts recently have said they expect profits at the semiconductor divisions of Japan's five biggest chipmaking companies will fall well short of official targets for the year as semiconductor demand remains stubbornly sluggish.
Transmeta, whose Crusoe processors are made specifically for portable computers and Internet access devices where low-power is important because it improves battery life, has embarked on a strategy to establish a foothold in Japan, and then pushing into the United States and Europe.
The company, which first began shipping the Crusoe chips in September 2000, currently lists the six largest Japanese notebook manufacturers on its roster of customers, including Toshiba NEC, Fujitsu, Sony, Hitachi and Sharp.
Transmeta has yet to get a design win at a U.S.-based company.
Shares of Transmeta (TMTA: Research, Estimates) fell $1 to $12.60 in Nasdaq trade ahead of the warning. They plunged $3.60 to $9 in extend-hours trade. 
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