(Adds company spokesperson comments, background, updates share movement)
By Jennifer Robin Raj
BANGALORE, Oct 24 (Reuters) - Shares of Transmeta Corp TMTA.O nearly quadrupled in value after the company said it reached an agreement with Intel Corp (INTC.O), on a patent lawsuit, to settle all claims between them and license the Transmeta patent portfolio to Intel.
Under the terms, Intel will make an initial $150 million payment to Transmeta, which licenses computing, microprocessor and semiconductor technologies.
Santa Clara, California-based Transmeta will also receive an annual license fee of $20 million from Intel for each of the next five years.
“The settlement will not affect third-quarter results. The first payment will not be received till the fourth quarter, or prospectively in January,” John Horsley, Transmeta’s general counsel and secretary said by phone.
The agreement grants Intel a perpetual non-exclusive license to all Transmeta patents and patent applications, including any patent rights later acquired by Transmeta during the next 10 years.
Transmeta sued Intel in October 2006 claiming that Intel infringed 10 of its patents covering computer architecture and power efficiency technologies.
Intel denied the allegations and hit back in January with a counterclaim that Transmeta had infringed seven of Intel’s patents.
The legal problems compounded the financial woes of the company, which has posted a loss for the last three quarters and has seen its stock shed about 81 percent of its value year-to-date before Wednesday’s recovery.
Transmeta, which went public in 2000, was a much hyped chip maker and saw its shares rise to as much as $1,017.5 on Dec. 30, 2000.
The past year has seen the company attempting to make several changes to address its liquidity and capital resource needs.
It has streamlined its operations by cutting jobs and shifting focus to developing and licensing power management technologies.
Transmeta has wound down its engineering services, ceased its operations relating to microprocessor production support and exited the business of selling microprocessor products.
Transmeta’s Horsley declined to specify if the company has started to receive royalty from these licenses.
In July, microprocessor maker Advanced Micro Devices Inc AMD.N bought a $7.5 million stake in Transmeta.
Transmeta shares were trading up nearly 236 percent at $14.04 in late afternoon trade, making them the highest percentage gainer on the Nasdaq. The shares touched a high of $15.70 earlier in the session.
Intel shares were among the many semiconductor companies that were trading down Wednesday, losing nearly 4 percent to trade at $25.80 in late afternoon trade on the Nasdaq. The Philadelphia Semiconductor Index .SOXX was down more than 4 percent at 459.20. (Reporting by Jennifer Robin Raj in Bangalore)