Selling Transmeta (tmta)

Reflexivity Capital Group Europe Tel: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]

A favourite device with him was to institute inquiries in the presence of the crowd around him as to roads and watercourses in a direction which he did not intend to take; even to order maps to be prepared, and roads laid down, as though for instant uses. Having thus set every gossip talking and predicting his intentions, he would calmly march directly in the opposite direction. “Mystery, mystery, is the secret of success!” By a Virginia admirer from The life of Stonewall “…Value in an investment is like character in an individual. It stands up better against adversity and overcomes that adversity more readily”. Bernard M. Baruch My own Story Based in Santa Clara, California, Transmeta Corporation was founded five years ago by well-known chip designer David Ditzel. Operating in stealth mode all the while, more mysterious than the deliberations of the Federal Reserve Board meetings, Transmeta has had the whole of Silicon Valley speculating as to what the company was doing. Add to this frenzy and mystery, the source of funding. Mr. Paul Allen co-founder of Microsoft and third richest man in the world had his venture capital fund Vulcan Ventures scramble for a huge steak in this unknown company (7%). Then came the sultan of speculation Mr. George Soros reading the writings on the wall. There are times when you cannot help but make money, just as you cannot help getting wet if you went out into a rainstorm without an umbrella. These are such times. Quantum Industrial Partners (a Branch of Soros Fund Management) invested heavily in the remaining available private shares (5%). Both Vulcan Ventures and Quantum Industrial Partners let Transmeta know there banks were open to supply further liquidity should the need arise. I tried several times inquiring for private shares. Their answer “We do not need any money right now and if we ever did we have two of the largest Funds at our service.” This does indeed give meaning to the expression. “It is not how right or how wrong you are that matters but how much you make when right and how much you do not lose when wrong!” When the wise find something good, they want it all. Sulphur, charcoal and saltpeter are the ingredients required, but it takes a spark to ignite the mixture. This spark came all the way from Helsinki. The name Linus Torvald is a house hold name to all Computer and programming Engineers, hackers and teens alike. He is the founder of the Linux operating system (From Linus came the name Linux). His unconventional ways led a hobby freeware operating system to become the most powerful one to date. Literally millions had been offered to him to leave his Swedish university and join fortune 500 companies or form his own. All were turned down as he continued to work for next to nothing at the Swedish university. His acceptance to leave Helsinki and join Transmeta shocked the technology world. What in the world was Transmeta up to? This indeed was the spark that ignited everything.

Reflexivity Capital Group Phone number: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]

Reflexivity Capital Group Europe Tel: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]

The critical stage in a new innovation is bridging the theoretical to practical gap. Soros is well aware of this and would use all the tools necessary to minimize risk. Licensing agreements were sold to major fortune 500 companies granting them rights to manufacture x86 – compatible products using Transmeta’s technology. Foremost among these were the technology powerhouse companies, IBM Corporation and Toshiba Corporation The company proceeded to operate in silence, thereafter. As the theoretical bridge was crossed, and confidence grew in the feasibility of their product, a Soros like maneuver was done right underneath the noses of these Blue Collar executives at IBM and Toshiba. This little known company Transmeta agreed to pay IBM 33 Million dollars over the next four years buying back the previous rights to manufacture x86 chips with their Technology. Over 600,000 Shares were also issued to Toshiba to likewise buy back previous sold rights! It is almost as if one was stealing candy from a baby in broad daylight. Read the prospectus Transmeta filed with the SEC and you wouldn’t believe this company is worth a penny. Mystery, mystery is indeed the key to success. The painted picture is one of compounded losses upon losses. The sultan of speculation is literally saying please do not touch this stock till I am done buying all I need. After me, come the Investment Bankers, large hedge Funds, Mutual Funds. After that rest assured I will make it my job to inform you through articles in the WSJ, discussions on CNBC and Business week how good this company is, how fortunes have been made over night. You the public can then take these shares off our hands at par and above. We have nothing to report they say! We are not even sure we know what we are doing. Yes indeed. But what about the hidden news that PC Maker Gateway, Inc. found the product incredible and have already signed to use the chip in a wireless tablet-like device it has been developing with America Online, Inc, to access the Internet. I guess they also got Alzheimer and forgot to add that the Giant Sony Corp in Japan confirmed that it will use their Chip as opposed to Intel’s in the upcoming version of the Vaio Picture Book, a 2.2 pound notebook computer. Did I forget to mention Sony and Gateway are both recent investors in Transmeta, taking part in its third round of financing of $88 million. Total funding in Transmeta is estimated at $188 million. Many other PC Makers have not yet announced using Transmeta’s products but it is typical of mystery to keep a stream of good news for aftermath of the IPO. What exactly is Transmeta’s Product? Intel, AMD and NSM have been on a race for faster and more efficient Micro Processors. There is a paradox to faster chip development. Faster chips require more circuitry and consequently produce more heat. For stand- alone computers and servers this isn’t a problem. However for laptops and mobile devices this creates a serious problem. Heat expenditure wears out the battery power of these mobile devices reducing the time life to an hour or two at the most. Pentium II laptops use up twice as fast the same amount of power required for a Pentium laptop. Development of faster processors thus required a whole new way of thinking. Sticking to old method led to a wall. Transmeta’s solution was the development of a hybrid processor. A hardware-software hybrid chip, that replaces millions of power-hungry transistors with software. It was code named “Crusoe” Reflexivity Capital Group Phone number: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]

Reflexivity Capital Group Europe Tel: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]

In June this year, Transmeta demonstrated several prototype notebook computers using Crusoe chips at its desert island-themed booth at PC Expo, a trade show in New York. IBM, Hitachi, Fujitsu and NEC all demonstrated prototypes of lightweight notebook computers, running Crusoe chips. Another potential announcement in the works could be a deal with Intel rival Advanced Micro Devices, Inc. Recently ZDNet.com reported that Transmeta is in talks with AMD for a possible patent-swapping deal, on par with AMD’s deal with Motorola where it shared its flash memory chip technology for Motorola’s copper chip-making expertise. On Friday August 17th 2000, tickets went on sale for the most expedient concert ever as Transmeta filed for an IPO. As the concert promoters, (Securities and Exchange commission), reflect over the venue, Transmeta hopes to raise over $200 Million. Aiding in the selling and scalping of tickets are the underwriters: Morgan Stanley Dean Witter, Deutsche Bank Alex Brown, Salomon Smith Barney, Bank of America Securities and SG Cowen. As the time for action nears, my mind can’t help but wonder. Which part of the puzzle will you be? • • • • •

The Performers on stage are the Engineers. With stock options they are well on their way to paradise. The concert Organizers (Soros, Paul Allen, IBM, Toshiba) have already paid for the venue, employed the best looking models, prepared the fireworks and the best promoters. Ticket master is reserving tickets (Pre-IPO shares) for V.I.P guests and those who buy in advance, before selling to the general public. They are well aware these tickets will be sold out within hours of an offering. There hasn’t been such a show since the days of Elvis or the Beatles. Last but not least, there are the gamblers who wait, see the hysteria as the crowds rush to the venue, here all the lovely gossip and try to scalp for a kosher eighths (day trade) as the stock soars past 100, 150, 200! Elvis my friend has left the building. And finally there is the outside crowd and on lookers. They see the fireworks, the after party and wonder to themselves, what in the world happened over there.

As a wise friend of mine noted! “5 % of men make things happen. 45% watch things happen. And the remaining 50%, wake up and in astonishment ask “What happened!” It is not opportunity that matters, but what you do with it. I hope we can seize this opportunity together and make a financial eureka out of it. Andrew Shawn Principal Investment Advisor Reflexivity Capital Group

Reflexivity Capital Group Phone number: +49 30 916 875 73 Fax: +49 30 916 875 87 USA Tel: +1 702 992 0389 Fax: +1 720 269 0153 Internet link: www.Reflexivityfund.com E-mail: [email protected]