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Conexant sets Mindspeed free, girds for more layoffs

Posted: 26 Mar 2003 ?? ?Print Version ?Bookmark and Share

Keywords:conexant systems? networking ic? mindspeed technologies? wireless? communication?

Conexant Systems took the next step in making its networking IC subsidiary, Mindspeed Technologies, a standalone operation, announcing that the company would operate independently beginning this summer.

But, in making the move, Conexant is also preparing the market for more job cuts and the loss of its top financial executive.

Spinning off Mindspeed was expected. To better deal with the market, Conexant decided to divest its wireless and networking operations in order to better focus its efforts on the broadband communications sector. With the telecommunications sector still reeling and the networking segment on shaky ground, spinning off the networking ICs unit could be a risky for Conexant.

Dwight Decker, Conexant's CEO, said three factors made the timing right for Conexant. Most significantly was the payoff of a loan by Skyworks Solutions - the wireless entity Conexant spun off last year. In a conference call, Decker said that Skyworks repaid the $215 million loan early, allowing Conexant to fund the Mindspeed spin-off.

Conexant said it would provide Mindspeed with $100 million in cash for the spin-off while also allowing the spin-off to borrow an additional $50 million in cash.

Conexant said another reason for the move was profitability in its broadband business and a more stable market. Decker said the company's broadband unit has turned a profit the past five quarters. "The broadband group has reached profitability and is growing," Decker said. The "worst is behind us" on the infrastructure side.

Consequently, Conexant plans to complete the spin-off of Mindspeed by summer-time. Its stock will be traded on the American Stock Exchange.

Mindspring currently has approximately 800 employees. Once the spin-off is complete, Mindspeed will again seek savings by reducing its work force to 625 employees while reducing its operating costs to $45 million. "We will reduce our operating costs by 25 percent," said Raouf Halim, Mindspeed's CEO.

Balakrishnan Iyer, Conexant's CFO, will leave that position to take the same spot at Mindspeed until the end of 2003. After retiring, Iyer will remain a member of Conexant's board.

Once the spin-off is completed, Mindspeed will focus on three product areas: T/E carrier products, multiservice access products and ATM/MPLS packet processing. Completion of the spin-off is subject to regulatory approval.

- Robert Keenan

EE Times

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