Riley seeks representation on Transmeta board

By Lisa Kerner

Charlotte, N.C., Dec. 21 - Transmeta Corp.'s largest shareholder, Riley Investment Management LLC with a 6.4% stake in the company, said it has become "exceedingly concerned about the strategic direction the company appears to be taking following its October 24, 2007 favorable settlement of patent litigation with Intel."

In a Dec. 20 letter to Transmeta board, the investor demanded changes to the board as well as other actions.

The letter was included in a schedule 13D filing with the Securities and Exchange Commission.

Specifically, Riley demanded it be allowed to designate four new board members "to replace those board members who have held their position since the company's initial public offering."

Riley said it also wants to examine the company's books and records to investigate the most recent option grants and the incentive agreement with your general counsel.

The investor cited the "disconcerted and ironic" option grants totaling 725,000 shares given to the company's top four executives, which "diluted shareholders by over 5%."

Riley noted the 97% decline in the company's stock price and Transmeta's accumulated debt of more than $718 million.

In addition, Riley reiterated its belief that shareholders would best be rewarded through a cash distribution and monetization of Transmeta's intellectual property.

"Clearly the management team and present board do not have proven time tested experience in making acquisitions; and with stock options of senior executives and board members so far under water, those steering this ship are incentivized to take risk, collect salaries, grant new options and burden shareholders with public company costs as opposed to our plan of immediate value creation for shareholders," Riley's letter said.

In a November SEC filing, Riley urged the company to "carefully review all options to enhance shareholder value."

Riley suggested Transmeta could possibly sell its intellectual property "to a company who can better leverage the costs associated with pursuing this strategy," delist from Nasdaq and/or go "dark" to reduce public company costs. Transmeta could also engage in a "significant Dutch tender," the filing stated.

Santa Clara, Calif.-based Transmeta develops computing, microprocessor, semiconductor technologies and related intellectual property.

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