Transmeta's Risk Factors

Statements of risk explained:

1. RISKS RELATED TO OUR BUSINESS AND INDUSTRY WE HAVE A HISTORY OF LOSSES, EXPECT TO INCUR FURTHER SIGNIFICANT LOSSES AND MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY
2. OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE RECOGNIZED OUR FIRST PRODUCT REVENUE IN  THE FIRST HALF OF 2000
3. WE DEPEND ON INCREASING DEMAND FOR OUR CRUSOE MICROPROCESSORS
4. IF WE FAIL TO PENETRATE THE NOTEBOOK COMPUTER MARKET, OUR OPERATING RESULTS WOULD BE IMPAIRED
5. IF THE INTERNET APPLIANCE MARKET FAILS TO GROW AS WE ANTICIPATE OR IF WE FAIL TO MEET THE NEEDS OF THIS MARKET, OUR GROWTH WOULD BE IMPAIRED
6. OUR OPERATING RESULTS ARE DIFFICULT TO PREDICT IN ADVANCE AND MAY FLUCTUATE SIGNIFICANTLY, AND A FAILURE TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS WOULD LIKELY RESULT IN A SUBSTANTIAL DECLINE IN OUR STOCK PRICE
7. COMPETITION IN THE SEMICONDUCTOR MARKET IS INTENSE; MANY OF OUR COMPETITORS AND POTENTIAL COMPETITORS ARE MUCH LARGER THAN WE ARE AND HAVE SIGNIFICANTLY GREATER RESOURCES; WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY
8. OUR PRODUCTS MAY HAVE DEFECTS, WHICH COULD HARM OUR REPUTATION, DECREASE MARKET ACCEPTANCE OF OUR PRODUCTS, CAUSE US TO LOSE CUSTOMERS AND REVENUE, AND RESULT IN LIABILITY TO US
9. WE EXPECT TO DERIVE A SUBSTANTIAL PORTION OF OUR REVENUE FROM A SMALL NUMBER OF CUSTOMERS, AND OUR REVENUE WOULD DECLINE SIGNIFICANTLY IF ANY MAJOR CUSTOMER CANCELS, REDUCES OR DELAYS A PURCHASE OF OUR PRODUCTS
10. IF WE FAIL TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH KEY PARTICIPANTS IN OUR TARGET MARKETS, WE MAY HAVE DIFFICULTY SELLING OUR PRODUCTS
11. IF OUR PRODUCTS ARE NOT COMPATIBLE WITH THE OTHER COMPONENTS THAT OUR CUSTOMERS DESIGN INTO THEIR SYSTEMS, SALES OF OUR PRODUCTS COULD BE DELAYED OR CANCELLED AND A SUBSTANTIAL PORTION OF OUR PRODUCTS COULD BE RETURNED
12. IF OUR CUSTOMERS ARE NOT ABLE TO OBTAIN THE OTHER COMPONENTS NECESSARY TO BUILD THEIR SYSTEMS, SALES OF OUR PRODUCTS COULD BE DELAYED OR CANCELLED
13. THERE MAY BE SOFTWARE APPLICATIONS THAT ARE NOT COMPATIBLE WITH OUR PRODUCTS, WHICH MAY HARM OUR REPUTATION, PREVENT OUR PRODUCTS FROM ACHIEVING MARKET ACCEPTANCE AND IMPAIR OUR REVENUE GROWTH
14. IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS MAY NOT SUCCEED
15. OUR LENGTHY AND VARIABLE SALES CYCLES MAKE IT DIFFICULT FOR US TO PREDICT WHEN AND IF A DESIGN WIN WILL RESULT IN VOLUME SHIPMENTS
16. IF WE DO NOT KEEP PACE WITH TECHNOLOGICAL CHANGE, OUR PRODUCTS MAY NOT BE COMPETITIVE AND OUR REVENUE AND OPERATING RESULTS MAY SUFFER
17. OUR DEPENDENCE ON IBM TO FABRICATE WAFERS AND TO PROVIDE ASSEMBLY AND TEST SERVICES LIMITS OUR CONTROL OVER THE PRODUCTION, SUPPLY AND DELIVERY OF OUR PRODUCTS
18. WE MAY NOT ACHIEVE ACCEPTABLE MANUFACTURING YIELDS, WHICH COULD INCREASE THE COST AND REDUCE THE SUPPLY OF OUR PRODUCTS
19. IF WE FAIL TO FORECAST DEMAND FOR OUR PRODUCTS ACCURATELY, WE COULD LOSE SALES AND INCUR INVENTORY LOSSES
20. OUR PRODUCTS MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH MAY CAUSE US TO BECOME SUBJECT TO EXPENSIVE LITIGATION, CAUSE US TO INCUR SUBSTANTIAL DAMAGES, REQUIRE US TO PAY SIGNIFICANT LICENSE FEES OR PREVENT US FROM SELLING OUR PRODUCTS
21. OUR FAILURE TO PROTECT OUR PROPRIETARY RIGHTS, OR THE COSTS OF PROTECTING THESE RIGHTS, MAY HARM OUR ABILITY TO COMPETE
22. THE LOSS OF KEY MANAGEMENT AND TECHNICAL PERSONNEL, ON WHOSE KNOWLEDGE, LEADERSHIP AND TECHNICAL EXPERTISE WE RELY, WOULD HARM OUR ABILITY TO EXECUTE OUR BUSINESS PLAN
23. IF WE ARE UNABLE TO HIRE, TRAIN AND RETAIN ADDITIONAL SALES, MARKETING, OPERATIONS, ENGINEERING AND FINANCE PERSONNEL, OUR GROWTH WILL BE IMPAIRED
24. SEVERAL OF OUR EXECUTIVES AND OTHER EMPLOYEES HAVE JOINED US ONLY RECENTLY, AND IF THEY ARE UNABLE TO WORK TOGETHER EFFECTIVELY, WE MAY NOT BE ABLE TO MANAGE OUR GROWTH AND OPERATIONS
25. WE MAY MAKE ACQUISITIONS, WHICH COULD PUT A STRAIN ON OUR RESOURCES, CAUSE DILUTION TO OUR STOCKHOLDERS AND ADVERSELY AFFECT OUR FINANCIAL RESULTS
26. THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY COULD CREATE FLUCTUATIONS IN OUR OPERATING RESULTS
27. WE PLAN TO EXPAND OUR INTERNATIONAL OPERATIONS, AND THE SUCCESS OF OUR INTERNATIONAL EXPANSION IS SUBJECT TO SIGNIFICANT UNCERTAINTIES
28. RISKS RELATED TO THIS OFFERING THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR STOCK; THE STOCKS OF TECHNOLOGY COMPANIES HAVE EXPERIENCED EXTREME PRICE AND VOLUME FLUCTUATIONS; AND OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD ADVERSELY AFFECT YOUR INVESTMENT
29. OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES OWN A LARGE PERCENTAGE OF OUR COMPANY AND COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS IN WAYS THAT COULD ADVERSELY IMPACT OUR STOCK PRICE
30. MANAGEMENT WILL HAVE DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING AND COULD SPEND OR INVEST THOSE PROCEEDS IN WAYS WITH WHICH YOU MIGHT NOT AGREE
31. SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK
32. YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE OF THE SHARES YOU PURCHASE IN THIS OFFERING
33. OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE OR PREVENT A TAKEOVER, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS
34. IF WE NEED ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO RAISE FURTHER FINANCING OR IT MAY ONLY BE AVAILABLE ON TERMS UNFAVORABLE TO US OR OUR STOCKHOLDERS
35. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS