3SOF

Quote from: boatguy on October 11, 2006, 11:36:32 PM
News!! Up .20 cents to $1.32 AH

Transmeta files patent infringement suit against Intel

boatguy,

Drat!   

I would much rather have seen a gap up after TMTA completed a W-bottom here, by eventually printing 1.37.

On August 8, 2005 (chart below), TMTA completed a nice 4-month W-bottom by printing 1.00.  That put 1.37 IN PLAY, for a gain of 37%.  Stop: 0.77, the last low, prior to the breakout.  Risk: a loss of 23%.

Not quite a 1:2 risk:reward, but "good enough," and the chart looked nice.

Two days later, TMTA gapped up to 1.51, so it was a 51% gain if we sold it right there.  The close was 1.35, just below the target of 1.37 IN PLAY.

After that, though, it went on a screamer to 2.50.    

Before we move on to the current time-frame, note that the gap up out of the W-Bottom left a gap on the chart at 1.07.  That comes into play in the current W-Bottom.

Thanks for the news alert.  Applause.

Quote from: Melf Elf on October 12, 2006, 04:22:15 AM
Before we move on to the current time-frame, note that the gap up out of the W-Bottom left a gap on the chart at 1.07. That comes into play in the current W-Bottom.

The Left and Right Legs of the current "possible" W-Bottom are 1.07 and 1.09, so that gap from August, 2005 has been filled.  Gaps don't have to get filled, and sometimes it takes awhile if they do get filled, especially if they are in a sustained Bull Market (AAPL is a good example...several gaps from awhile back are not filled). 

But, when a stock is in a Bear Market, like TMTA has been, you have to be thinking about the threat of that gap eventually getting filled, if you're thinking about getting long.  It's filled now, so that threat is out of the way.

Another threat is that 0.92 still is IN PLAY from the July 13 Symmetrical Triangle breakdown.  Like gaps not always getting filled, targets don't always get MADE, but unless/until TMTA completes a Bullish pattern, which would be a print of 1.37 to take out the middle of the W-Bottom, 0.92 still is IN PLAY.

Gap Openings are problematic: Is it going to be a "Gap And Go," or is it going to be a "Gap To Crap," meaning that it gaps into the 1.30s, and then fizzles for the remainder of the day, back toward the gap?

Last August, when TMTA gapped up to 1.51, it wasn't a problem because we already would have been long the stock two days prior, when it printed 1.00, taking out the middle leg of the "W," at 0.99.

Curently, if we gap up even to 1.37 at the open, which would be a technical breakout of the W-Bottom, we'll be leaving an "empty" Right Leg, essentially (a big gap).  That's possible, like a "No Right Shoulder" in a H&S pattern, but how strong does this chart look?

This W-Bottom is a 2-month base since the August 9 Symmetrical Triangle breakdown, and its not a completed pattern.  The August, 2005 W-Bottom was a 4-month base, it it was a completed pattern, prior to the gap up opening.

If we gap up and print 1.37 this morning, a technical breakout, is there any nearby resistance?  Yes.  DOUBLE resistance at 1.47-1.49 from the upper trendline off the May-July, 2006 Symmetrical Triangle, and the 200DMA.

Where would we put our stop?  1.06.  If we pay 1.37 for the breakout, the risk is a loss of 22.6% if we're stopped out.  The anticipated gain if the 1.65 pattern target gets MADE would be only 20.4%.  Not nearly good enough risk:reward.

Even if we get a "Gap And Go" to 1.65, or higher, I have to pass.

You see why I said Drat! at the beginning of my first post. 

Thanks again for the alert, boatguy.  I appreciate having notice so I can give a lot of thought to whether or not I want to take a trade.

EDIT: Sorry, I added wrong.  The target would be 1.63, not 1.65

Looks like is isn't going to take-off after all.

Gap to Crap it is!

Thanks for the TA Melf. Applaud

Quote from: boatguy on October 12, 2006, 10:56:16 AM
Looks like is isn't going to take-off after all.
Gap to Crap it is!

boatguy,

Yeah, buyers of the 1.30 gap up opening probably are saying, "Aw, crap!" to the 1.27 close.

I wonder why they call it a "Gap To Crap?"      

What if this guys wins 

Transmeta Takes On Intel

Transmeta Corp. (TMTA)
Share price as of Wednesday's close: $1.12
Share price now: $1.27
Percent change: 13.4%
Volume: 14.5 million shares, daily average 1.4 million

The News
In a move that echoes David's challenge of Goliath, microprocessor maker Transmeta (TMTA: 1.27, +0.15, +13.4%) is taking the giant of its industry, Intel (INTC: 21.49, +0.60, +2.9%), to court.

Transmeta filed a lawsuit in the federal district court in Delaware that said Intel had violated 10 of its patents. Transmeta claims that Intel used its technology in its Pentium III, Pentium 4, Pentium M, Core and Core 2 products. Both companies are based in Santa Clara, Calif.

Those processors, says Transmeta, have accounted for more than $100 billion in revenue for Intel over the years, and Transmeta believes it has a right to claim some of that revenue in the form of royalties. The company is also seeking an injunction that would bar Intel from selling the microprocessors that allegedly infringe on Transmeta's patents.

Transmeta says that it tried to reach an amicable agreement with Intel before heading to the courts, but it didn't pan out. "After endeavoring to negotiate with Intel for fair compensation for the continued use of our intellectual property, we have concluded that we must turn to the judicial system to be fairly compensated for our inventions," said John O'Hara Horsely, Transmeta's general counsel, in a statement.

News of the legal action, which was released after the markets closed Wednesday, led Transmeta's shares 13% higher to $1.27 Thursday. For Intel's shares the lawsuit held no sway. The chip maker's stock closed nearly 3% higher.

The Analysis
Transmeta investors hoping for a big settlement payment from Intel should be ready for a long and costly legal battle.

"We're continuing to study the complaint. But after preliminary analysis, we dispute the claims of infringement and we plan to conduct a vigorous defense," says Intel spokesman Chuck Mulloy.

Transmeta is not only asking for an undisclosed amount of royalties that could reach into the billions of dollars, but it's also trying to stop Intel from selling some of its most popular and lucrative microprocessors. No company would take that lying down, and Intel, which reported $38.8 billion in revenue last year, has enough cash behind it to build its legal defense.

The case probably won't be heard before the court in Delaware for another 12 to 18 months. And if it goes to trial — a big if — it won't be until 2008.

"We suspect that if there is no settlement and the case does proceed through discovery to trial, Transmeta might incur meaningful legal costs in 2007 and 2008," wrote A.G. Edwards analyst David Wong in a research report Thursday.

Patent-infringement suits often trigger countersuits, adds Wong. That could make the whole affair even more complicated and costly, especially for a company that's having a hard time turning a profit. According to Thomson First Call, a consensus estimate of analysts expects Transmeta to report a loss of 10 cents a share in 2006 and a loss of eight cents in 2007.

Wong has a Sell rating on the stock, noting that the company is currently trading at 4.5 times his 2007 sales estimate of $51 million when it should be trading closer to three to four times revenue. The analyst also cited the company's projected losses and negative cash flows. (A.G. Edwards makes a market in Transmeta's shares.)

The Bottom Line
The lawsuit filed against Intel is part of a broader move by Transmeta to transition its business toward the licensing of its intellectual property and away from the selling of microprocessors. Thus far, the gambit has proven somewhat fruitful for the company.

In 2003, Transmeta recorded just $1 million of its $17.3 million in revenue from the licensing of its technology and services. Last year, $48.1 million of its $72.7 million in revenue came from licensing agreements. Among its client roster are tech heavyweights Sony (SNE: 39.05, +0.41, +1.1%), Microsoft (MSFT: 28.22, +0.68, +2.5%) and Toshiba.

But being in the intellectual-property business means sometimes things get sticky. "As a part of our business decision last year to increasingly focus on monetizing our IP through technology licensing, we understood that in some cases we might need to pursue enforcement through the courts," said Arthur L. Swift, Transmeta's president and chief executive, in a statement. The patent-infringement suit against Intel is the first such case.

In this instance, though, Transmeta might've underestimated just what it'll take to take down this giant

Quote from: njshiva on October 12, 2006, 11:48:07 PM
What if this guys wins 

njshiva,

I would imagine that the stock would go up quite a bit, but it sounds like no easy task from the interesting article that you presented.  Applause. 

Quote
Transmeta Corp. (TMTA)
Share price as of Wednesday's close: $1.12
Share price now: $1.27
Percent change: 13.4%
Volume: 14.5 million shares, daily average 1.4 million

That's a nice percentage gain, but the market is very fickle, as we know.  Players buy the momo on news, then interest tends to wane fairly quickly, unless it's news that is a bit more tangible than this is.

Quote
Those processors, says Transmeta, have accounted for more than $100 billion in revenue for Intel over the years, and Transmeta believes it has a right to claim some of that revenue in the form of royalties. The company is also seeking an injunction that would bar Intel from selling the microprocessors that allegedly infringe on Transmeta's patents.

That certainly was enough to whet one's appetite!  But...

Quote
For Intel's shares the lawsuit held no sway. The chip maker's stock closed nearly 3% higher.

INTC shareholders didn't take it as a serious threat.  INTC made a new high for the move, out of a THIRD pattern breakout.

Quote
Transmeta investors hoping for a big settlement payment from Intel should be ready for a long and costly legal battle.

Wall Street isn't long-suited in patience, particularly with stocks in this price range.  Players tend to want to a lot of momo, and big, quick percentange gains.   

Quote
"We're continuing to study the complaint. But after preliminary analysis, we dispute the claims of infringement and we plan to conduct a vigorous defense," says Intel spokesman Chuck Mulloy.

And, Goliath has the big bucks, with which to do that. 

Quote
The case probably won't be heard before the court in Delaware for another 12 to 18 months. And if it goes to trial — a big if — it won't be until 2008.

UGH...That's a "Waiting For Godot," and traders hate waiting.  Just ask those of us who have played stocks like DNDN. 

Quote
"We suspect that if there is no settlement and the case does proceed through discovery to trial, Transmeta might incur meaningful legal costs in 2007 and 2008," wrote A.G. Edwards analyst David Wong in a research report Thursday.

And, what if this guy loses? 

Quote
Patent-infringement suits often trigger countersuits, adds Wong.

UGH...

Quote
That could make the whole affair even more complicated and costly

UGH...

Quote
especially for a company that's having a hard time turning a profit.

UGH...

Quote
According to Thomson First Call, a consensus estimate of analysts expects Transmeta to report a loss of 10 cents a share in 2006 and a loss of eight cents in 2007.

UGH...

Quote
Wong has a Sell rating on the stock, noting that the company is currently trading at 4.5 times his 2007 sales estimate of $51 million when it should be trading closer to three to four times revenue. The analyst also cited the company's projected losses and negative cash flows. (A.G. Edwards makes a market in Transmeta's shares.)

UGH...

Quote
The Bottom Line
The lawsuit filed against Intel is part of a broader move by Transmeta to transition its business toward the licensing of its intellectual property and away from the selling of microprocessors. Thus far, the gambit has proven somewhat fruitful for the company.

Hmm-mm...I really don't like the sound of that.

Each of us has a read of articles like this, and frankly, each of us is taking our "best guess" at what it all means because if a company is in trouble, they never are going to scare shareholders to death by saying:

"We're totally screwed.  INTC is the 500 lb. gorilla, and we're getting crushed.  We estimate that we're going to lose 10 cents in 2007, and that we're going to lose eight cents in 2008, and we don't see that changing beyond 2008. It's constant blood-letting.  We expect to continue to get crushed unless we can find some other way out of this horrible mess, but we'll have to soft peddle that to our shareholders as "transitioning our business" or they'll freak out on us, and crash our stock.

We are so short-stacked at the moment, that we have no other choice but to go ALL IN against INTC, and sue the lousy #%$&, or we aren't even going to be around to transition anything!  Yes, it's going to be expensive to sue them, but we have nothing to lose.  We're just about down for the count."

Are we ever going to read something like that?  No.  Could "some" version of that actually be the case?  Anything's possible. 

Quote
In this instance, though, Transmeta might've underestimated just what it'll take to take down this giant

Might've not.  I'd guess that TMTA knows exactly what the risk is, but that they felt that they had no choice but to go ALL IN against INTC before they got put out of the game entirely.  TMTA traded over $50 in November, 2000.  It's now at $1.27.  Something obviously has gone very wrong here.

All of the above is speculation and conjecture on my part, of course.  Transitioning the business to the licensing of intellectual property could work out just fine. 

Who knows?   

Bottom line:  I rely more on the chart anyway.  If there's some kind of pattern and breakout, etc., I'll try to catch it and play it, regardless of what "the truth" is about the company's business prospects.

It will be fun to watch David vs. Goliath in the coming months.  Thanks again for the interesting article, njshiva.

nice explanation Melf Elf    applaude

Huge technical breakout across 50dma and a few resistance levels on 5m shares in 2 hours when average volume is only around 2m.  If it can close above 1.29 today, tomorrow could be an interesting day.

chart:

looks good, needs to break 1.30....

hi  ScottishTrader
This is one of my buy pick's on Wrangler's trading zone. I bought it last time it hit 1.30 hoping for the breakout then. Maybe this time it will be it,,notice how the last three times it fell back it made a higher support each time but didn't break thru the resistance that show's breakout will happen and it should be a good one when it does. The way the volume is coming in is a good sign ,,I'm hoping the close for the day will be at the high of the day if it does tomorrow should be a good day for the breakout.
Goodluck to all holding

1. Introduction

TMTA cut through my technical filter and since it was one of my picks in the past probably now is a good time to take a fresh new look at it.

2. Profile

Transmeta Corporation (TMTA) engages in the development and licensing of computing, microprocessor, and semiconductor technologies, and related intellectual property in the United States, Japan, China, Hong Kong, and Taiwan (complete profile here)

3. Technical Analysis
3.1. All History Chart



One really should be careful about buying IPO's in general, but especially after a big speculative bubble, is the lesson we can take out from this all history chart from TMTA.

3.2. Medium Term Chart



The stock opened an enormous gap in August 05, then it spent the next 13 months coming down to exactly close it on September the 7th, 2006. It seems to be building a base to push higher now ... perhaps it will move to close another huge gap, between $1.81 and $2.27.

3.3. Short Term Chart



Yes, as ScottishTrader and wrangler say, $1.3 - $1.36 is a crucial short term resistance area. I like it when, derived from some positive news item, a stock makes a gap up but closes with a black candle, then it comes down to close the gap on low volume and then it challenges the highs again. Usually stocks indeed breakout after this behaviour.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



After spending 6 years diluting shareholders value, I would say surprisingly, TMTA bought back some shares in 2006. This is a good sign.

Current market cap is 197,447,768*$1.27 = $250.8 M

4.2. Liquidity



TMTA's balance sheet is healthy. Nice reduction in debt in 2006. Almost no debt now ...

4.3. Revenues



The company reduced its guidance for fiscal 2006 revenues:
«Full year revenue within a range of $48.0 to $54.0 million, versus prior guidance of $48.0 to $58.0 million»

So, revenues are expected to decline from 2005. The revenue multiple is 4.92. The industry's average is 2.38.

4.4. Profits



The company gave this guidance for profits:

«Net loss of $22 million to $18 million, or a loss of $0.11 to $0.09 per share, compared to prior guidance of $26 to $16 million, which includes non-cash charges of $7 million of patent amortization and $6 million of stock option compensation expense»

EPS is expected to decline from ($0.03) to ($0.10), or, in net income terms, from ($6 M) to ($20 M).

5. General Overview

Although there's been some improvement on the share count and balance sheet, revenues are expected to decline and losses to grow in 2006 when compared to 2005. The price to sales ratio is quite rich, for a company that is still losing money.

I think TMTA has a strong base around $1.07 and probably won't fall much below that, given that the company isn't printing anymore shares and the balance sheet is pretty strong. So we have a fundamental base for it not to go any lower. But I also don't expect all that much upside, because there's revenue and net income deterioration, and I don't see a catalyst for this to change soon.

If the company continues losing money, someday it will need to get back to the old practices of making private placements and issuing shares. Or else increase debt.

On any sign of profits TMTA may shoot higher, but I guess that scenario is already a bit priced in because of the high Price to Sales Ratio.

I see TMTA trading between a range of $1 to $1.50 until there's new relevant information, so with the stock at $1.27 my outlook is basically neutral.

I'm making 3 analysis a day on US traded stocks, as I look for opportunities for the 3 Stocks on Fire Portfolio. If you would like to receive my analysis on your mailbox and join the 3 Stocks on Fire Community, please register.

"TMTA" Threads have been Merged.
Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.                                                       
All history on a stock pick in 1 thread is awesome.                                                        
Just trying to get threads together,so we don't have a numerous amount floating around on the same stock.                                                     
Thank You....and good luck with all your trades....make some $$$     

Note, and so many threads to merge....   

Friday's closing chart.......

setravis, doing a great job merging threads!   

You are the 3SOF moderator/coordinator/traffic controller so we can all make money stock trading!   

=applaud=  =applaud=  =applaud=  =applaud=  =applaud=


As to TMTA, share price has experienced a long and painful fall from $2.23 in May of 2006 to $0.30 in June of 2007 ($38 in Nov 2000).  It appears that since early 2007, TMTA has continue to fall with almost no sign of rebound.

Since June 6th, initial rebound has taken TMTA from $0.30 to $0.39.

If you look at TMTA RSI 2 chart, Friday RSI 2 hit 94 (previous RSI 2 peak of June 11 was 87) indicating short-term profit taking.  Friday's gain was followed by light after hours gains (see TMTA day and AH charts).

I will be monitoring to see if rebound continues after the anticipated price correction to complete the "W" rebound pattern.  If the rebound continues, I will be buying.  If you are the gambling type, you can buy on the next dip.   

Next resistance set at $0.41.

Bought this morning at $0.39.   

Resistance of $0.41 broken within 30 minutes of market open.

Now, we move higher.