Transmeta News

"We are disappointed with the slowdown in our third quarter revenues," said Dr. Matthew R. Perry, president and CEO of Transmeta. "The overall economic picture continued to constrain end-user spending on computing devices. Our results were affected by adjustments our customers made to their short-term forecasts late in the quarter," he said.

"However, design win activity gained momentum across many geographies in the third quarter. We began our first major shipments to China, and we gained new design wins with other Chinese customers. Interest in Crusoe is very strong in Taiwan, where we won numerous designs for our TM5800 and are seeing very strong interest in our next-generation processor. We also continued to win new designs in Japan," he said. "Customers everywhere tell us they are choosing Crusoe processors because they like the balance only we can provide of low maximum power, low cost, long battery life and high performance--in that order."

The company said that its first processor based on the next-generation 256-bit Crusoe architecture, the TM8000, remains on plan to ship in the third quarter of next year. "Customers are very excited about the value proposition this product offers over competing technologies. We are already in discussions with several potential customers regarding design-ins," Dr. Perry said.

"Our goal remains to be profitable by the fourth quarter of next year, as we believe we are well positioned with our new products and market focus to achieve growth in the second half of 2003," Dr. Perry said.

On November 7, Transmeta will join Microsoft and Hewlett-Packard in New York as Microsoft officially introduces the Windows XP Tablet PC Edition software, and as Hewlett-Packard debuts its HP Compaq Tablet PC, which is powered by Transmeta's 1-GHz Crusoe TM5800 processor. Later in the month, the company will be showcasing its technology at Comdex in Las Vegas. Transmeta's products will be featured both at its suites and at some of its customers' and partners' booths, including those of Microsoft, Hewlett-Packard and Antelope Technologies.

   Highlights:

   China

   --  Transmeta won new designs from Chinese customers in the third
       quarter. The company believes that China, with its rapidly
       growing electronics marketplace, is a key part of its
       geographic expansion strategy.

   --  SVA Group, a leading Chinese electronics manufacturer, is
       using Crusoe TM5800 processors in its new Classic Silver
       3.3-pound notebook computer. This is the second Crusoe-based
       product to be introduced in China, and will help to continue
       to increase Transmeta's presence in the fast-growing Chinese
       marketplace.

   Japan

   --  Transmeta's Crusoe processors continue to generate interest in
       Japan. In the third quarter, several customers designed the
       Crusoe TM5800 processor into their products.

   --  Sharp recently introduced its Mebius Muramasa mobile computer
       in Japan. Using the Crusoe TM5800 processor, this sub-notebook
       weighs only 950 grams.

   --  Sony introduced the autumn models of its VAIO C1 and VAIO U
       notebooks, which use Transmeta's Crusoe TM5800 processors.

   --  Fujitsu announced new models of its LOOX-T and LOOX-S mobile
       computers in Japan, which use Crusoe TM5800 processors.

   --  JMnet announced its Wake blade style compact server and Ultra
       PC-X board, which use Crusoe TM5800 processors.

   U.S.

   --  NEC Solutions America announced that its PowerMate eco(TM)
       desktop computer is now available in the U.S. The PowerMate
       eco, which won PC Magazine's Editor Choice award in October
       2002, uses the Crusoe TM5800 processor.

   --  Casio, Inc. recently introduced the Cassiopeia Fiva MPC-701
       series of pen tablet computers to the U.S. market. The pen
       tablets are powered by the Crusoe TM5800 processor and weigh
       only 3.1 pounds.

   Taiwan

   --  Transmeta gained significant traction into Taiwan-based
       products in Q3. Many customers incorporated the Crusoe TM5800
       processor into their designs and expressed very strong
       interest in the company's Crusoe TM8000 processor. Taiwan
       remains a very important region for Transmeta and the company
       expects momentum for its processors there to continue to grow.

   --  PaceBlade upgraded its three-in-one PC PaceBook, which uses
       the Crusoe TM5600 processor.

   Corporate

   --  Transmeta shipped its one millionth Crusoe processor.

   --  Microsoft Corporation certified Transmeta's Crusoe processors
       for the Windows CE .NET operating system, which enables
       Transmeta to attract new opportunities for mobile and embedded
       markets.

   --  Transmeta began shipping the Crusoe TM5800 System Development
       Kit that enables design engineers to quickly develop new
       mobile and embedded computing platforms using the Crusoe
       processor.

   Current Financial Outlook for Fourth Quarter 2002


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

Currently, the company expects that market demand in the fourth quarter will continue to be sluggish. Consequently, the company anticipates that its Q4 financial results will be as follows:

   --  Q4 2002 revenue is expected to be in the range of $5 million
       to $6 million.

   --  Pro forma net loss per share is expected to be $0.13 to $0.15.

   --  Operating expenses will remain flat at approximately $20
       million.

   --  Cash at the end of December should be approximately $129
       million after a scheduled $6 million payment to IBM in
       accordance with our technology license agreement.

   Conference Call


The company will hold a conference call at 2 p.m. Pacific Time today, October 16, 2002, to discuss the third quarter results. To participate, please dial (719) 457-2625 at approximately 1:50 p.m. A live webcast of the conference call will be available via the company's website at www.transmeta.com. A replay of the call will be available one hour after the completion of the call for one week. To access the recording, please dial 888 203-1112, passcode 361383. For callers outside the U.S., please dial 719 457-0820, with the same passcode.

   About Transmeta Corporation


Transmeta develops and sells software-based microprocessors and develops additional hardware and software technologies that enable computer manufacturers to build computers that simultaneously offer long battery life, high performance and x86 compatibility. Transmeta's family of Crusoe microprocessors is targeted at the notebook, Tablet PC and Internet appliance segments of the mobile Internet computer market, as well as a range of embedded applications.

   To learn more about Transmeta visit www.transmeta.com.

   Safe Harbor Statement


This release contains forward-looking statements regarding future events or the future financial performance of the company, which statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements are only predictions, which may differ materially from actual results or future events. All such forward-looking statements are based upon our current expectations but involve inherent risks and uncertainties. Such forward-looking statements speak only as of the date of this release, and the company will not necessarily provide updates of its forward-looking projections or forecasts. Risks and uncertainties that may have material effects on our future performance include general economic conditions, including the significant continuing slowdowns in the technology sector and semiconductor industry, the timing, rescheduling or cancellation of significant customer orders, potential fluctuations in our quarterly results, dependence on increasing demand for our Crusoe products, difficulties in developing or manufacturing new products in a timely and cost effective manner, market acceptance of our new products and of our customers' systems using our products, the growth of emerging markets, our customer concentration, the loss of revenue if a major customer were to cancel, reduce or delay a product order, inventory write-offs from a failure to forecast product demand accurately, our dependence on third parties for sourcing materials and providing manufacturing services, delays in product deliveries as we transition to smaller geometry process technologies, intense competition from Intel and others, rapid technological change, patents and intellectual property rights, volatility of our stock price, and the cyclical nature of the semiconductor market. We urge investors to review our regular filings with the Securities and Exchange Commission, including specifically our most recently filed reports on Form 10-K and 10-Q, which identify and describe many of these and other important risk factors that could cause our actual results to differ from those contained in these forward-looking statements.


                        TRANSMETA CORPORATION
                  PRO FORMA CONDENSED CONSOLIDATED
                      STATEMENTS OF OPERATIONS
              (In thousands, except per share amounts)

The following pro forma supplemental information excludes the
amortization of deferred charges and intangible assets, non-cash stock
compensation awards, in-process research and development, inventory
related charges, restructuring charges, and effects of previously
recorded inventory purchase commitments.


                           Three Months Ended     Nine Months Ended
                          --------------------- ---------------------
                           Sept. 27,  Sept. 28,  Sept. 27,  Sept. 28,
                              2002       2001       2002       2001
                          ----------- --------- ----------- ---------
                                (unaudited)           (unaudited)

Net revenue                    $6,443    $5,027     $18,129   $34,129
Cost of sales                   5,296     5,377      14,332    21,653
                          ----------- --------- ----------- ---------
Gross margin                    1,147      (350)      3,797    12,476
Operating expenses
 Research and development     13,707    17,029      50,971    51,388
 Selling, general and
  administrative               6,255     8,776      22,926    26,625
                          ----------- --------- ----------- ---------
      Total operating
       expenses               19,962    25,805      73,897    78,013
                          ----------- --------- ----------- ---------
Operating loss                (18,815)  (26,155)    (70,100)  (65,537)
 Interest and other, net       1,045     3,105       3,823    11,542
                          ----------- --------- ----------- ---------
Loss before provision
(benefit) for income taxes   (17,770)  (23,050)    (66,277)  (53,995)
 Provision (benefit) for
  income taxes                    (2)        5          23        22
                          ----------- --------- ----------- ---------
Net loss                     $(17,768) $(23,055)   $(66,300) $(54,017)
                          =========== ========= =========== =========

Net loss per share--basic
and diluted                   $(0.13)   $(0.18)     $(0.49)   $(0.42)

Weighted average shares
outstanding--basic and
diluted                       135,561   131,560     134,079   128,582

The pro forma amounts have been adjusted to
eliminate the following:

Stock compensation            $(1,651)   $4,046        $595   $15,823
Amortization of deferred
charges and
 intangible assets             2,848     5,024       8,544    12,512
Restructuring charges           4,102         -      14,726         -
In-process research and
development                        -         -           -    13,600
Excess inventory and
purchase commitment
charge                       $(1,302)  $(2,540)    $(1,885)  $25,591


                        TRANSMETA CORPORATION
                       CONDENSED CONSOLIDATED
                      STATEMENTS OF OPERATIONS
              (In thousands, except per share amounts)


                          Three Months Ended     Nine Months Ended
                         --------------------- ----------------------
                           Sept. 27,  Sept. 28,  Sept. 27,  Sept. 28,
                             2002       2001       2002       2001
                         ----------- --------- ----------- ----------
                               (unaudited)           (unaudited)

Net revenue                   $6,443    $5,027     $18,129    $34,129
Cost of sales                  3,994     2,837      12,447     47,244
                         ----------- --------- ----------- ----------
Gross margin                   2,449     2,190       5,682    (13,115)
Operating expenses
 Research and development    13,707    17,029      50,971     51,388
 In-process research and
  development                     -         -           -     13,600
 Selling, general and
  administrative              6,255     8,776      22,926     26,625
 Restructuring charges        4,102         -      14,726          -
 Amortization of deferred
  charges and intangible
  assets                      2,848     5,024       8,544     12,512
 Stock compensation          (1,651)    4,046         595     15,823
                         ----------- --------- ----------- ----------
    Total operating
     expenses                25,261    34,875      97,762    119,948
                         ----------- --------- ----------- ----------
Operating loss               (22,812)  (32,685)    (92,080)  (133,063)
 Interest and other, net      1,045     3,105       3,823     11,542
                         ----------- --------- ----------- ----------
Loss before provision
(benefit) for income
taxes                       (21,767)  (29,580)    (88,257)  (121,521)
 Provision (benefit) for
  income taxes                   (2)        5          23         22
                         ----------- --------- ----------- ----------
Net loss                    $(21,765) $(29,585)   $(88,280) $(121,543)
                         =========== ========= =========== ==========

Net loss per share--basic
and diluted                  $(0.16)   $(0.22)     $(0.66)    $(0.95)

Weighted average shares
 outstanding--basic and
  diluted                   135,561   131,560     134,079    128,582


                        TRANSMETA CORPORATION
                CONDENSED CONSOLIDATED BALANCE SHEETS
                           (In thousands)


                                                Sept. 27,   Dec. 28,
                                                   2002     2001 (1)
                                               ----------- ---------
Assets                                          (unaudited)
Current assets
 Cash and short-term investments                 $155,751  $241,688
 Accounts receivable, net                           4,082     1,749
 Inventories                                        8,329     1,388
 Prepaid and other current assets                   3,546     7,091
                                               ----------- ---------
    Total current assets                          171,708   251,916
Property and equipment, net                          8,790    11,622
Other assets                                        40,330    45,486
                                               ----------- ---------
    Total assets                                 $220,828  $309,024
                                               =========== =========

Liabilities and Stockholders' Equity
Current liabilities
 Accounts payable and other current liabilities   $11,739   $17,103
 Current portion of accrued restructuring costs     2,964         -
 Current portion of long-term obligations          15,640    17,661
                                               ----------- ---------
    Total current liabilities                      30,343    34,764
Long-term accrued restructuring costs                5,947         -
Long-term payables                                  23,313    29,295
Stockholders' equity                               161,225   244,965
                                               ----------- ---------
    Total liabilities and stockholders' equity   $220,828  $309,024
                                               =========== =========


(1) Derived from audited financial statements included in the
Company's Form 10-K for the fiscal year 2001 filed with the Securities
and Exchange Commission.


CONTACT: Transmeta Corporation
S. Olav Carlsen, 408/919-3000
or
Stapleton Communications Inc.
Deborah Stapleton, 650/470-0200