DEFENSE

Transmeta Corporation (Nasdaq:TMTA) announced that it is updating its outlook for its financial performance for the second quarter ending June 30, 2001. 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 and Internet appliance segments of the Mobile Internet Computer market, as well as ultra-dense servers. "We have achieved new design wins this quarter with key companies in our target markets including Toshiba, Sharp and RLX, and we've seen continued introductions of Crusoe-based notebooks into the U.S. and Europe. However, we are also seeing reductions in unit volume shipments to major customers this quarter," said Mark K. Allen, President and CEO of Transmeta. "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. Accordingly, we are decreasing our revenue expectation for the second quarter of 2001 by 40-45 percent compared with our revenue of $18.6 million for the first quarter of 2001." "In conjunction with this projected revenue decrease and our planned transition to a new manufacturing process for the second half of 2001 using 0.13 micron technology, we are also analyzing our inventory levels of existing products and expect that we will take an inventory charge during the second quarter." "We remain committed to the continued deployment of our family of Crusoe microprocessors targeted at the notebook and Internet appliance segments of the Mobile Internet Computer market, as well as ultra-dense, low power servers." Said Allen, "We remain committed to the continued deployment of Crusoe into our target markets, including mobile computing, high density, low power servers, and information appliances. We are pleased with the market reception of our Crusoe brand and the acceptance that our customers are experiencing in the market. We are also pleased that our major customers are actively working with our new 0.13 micron TM5800 processor. We believe that we are well positioned to compete effectively and resume our growth plans as the economy recovers." For further information visit www.transmeta.com