Transmeta (Semiconductor) (TMTA)

[DewDiligence]

>> I see [TMTA] reaching $50 MM/quarter for the beginning and that is enough for break even, imho. I expect margins to improve with increased unit sales, improvement in the chip plus lower production costs due to increased competition on on the contract manufacture side. <<

I agree. To reiterate: $50M of quarterly sales at a 40% gross margin produces break-even with $20M of quarterly overhead.

I consider a 40% gross margin to be a middle-of-the-road figure for a company like TMTA during a normal industry environment. Unfortunately, now is not a normal period and hence gross margins are depressed.

But your point about increased aggressiveness in foundry pricing is germane. Some of the margin contraction from the “semiconductor nuclear winter” [ka-ching for Hseitz] will flow back to the foundries, giving more breathing room to the fabless designers such as TMTA. This will ease the pressure on TMTA somewhat while they wait for the overall business environment to recover. JMHO. Dew