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Conexant cuts outlook, blames Taiwanese WLAN chip entrants

Posted: 09 Jul 2004 ?? ?Print Version ?Bookmark and Share

Keywords:wlan? pc video? wireless lan?

Conexant Systems Inc. has reduced its earnings forecast for the third quarter citing weakness in its wireless local area network business in the face of what it says is very tough competition from Taiwanese based suppliers.

"A number of Taiwan-based chip suppliers emerged with extremely low-priced solutions, displacing incumbent suppliers in certain high-volume applications," commented Armando Geday, Conexant's CEO.

He added these additional competitors exacerbated pricing pressure in a market already characterized by severe price competition.

The company now expects third fiscal quarter revenues to be between $265 million and $270 million compared to expectations in April of revenues between $308 million and $323 million.

Geday said Conexant's other businesses, which include chips for dial-up and digital subscriber line connectivity as well as digital set-top box and PC video applications, were essentially flat. "We are absolutely confident in the long-term prospects for the combined company," said Geday, referring to Conexant's recent acquisition of GlobespanVirata.

According to Geday, because of the new entrants and the "competitive landscape", 802.11g products are currently selling at levels comparable to the more established 802.11b parts.

"Wireless LAN as a standalone business will continue to be challenging," said Geday.

For the third fiscal quarter that ended July 2nd, operating expenses came in lower than Conexant anticipated and the company said gross margins should remain in the expected range of 42 percent, despite the weakness in the wireless LAN business.

- John Walko

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