COMPANY PRESS RELEASE: Conexant Systems announced revenues of $229.5 million for the first quarter of fiscal 2002, which ended Dec. 28, 2001. Revenues increased 14 percent from fourth quarter fiscal 2001 revenues of $201.0 million, exceeding the 10 percent sequential growth expectation established in the company’s mid-December updated outlook.
First fiscal quarter revenues were driven by strong performance in the company’s wireless communications business, which recorded sequential growth of 42 percent, and supported by solid sequential growth in its broadband access business of 8 percent.
The pro forma net loss for the first quarter was $107.7 million, or $0.42 per share, an improvement of 21 percent over the pro forma net loss of $136.6 million, or $0.54 per share, in the prior quarter. Pro forma results exclude amortization of intangible assets and special charges.
During the course of the quarter, as our business strengthened progressively, we increased our revenue guidance twice, first from our original expectation of 3 to 5 percent growth to 5 to 7 percent, said Dwight W. Decker, Conexant chairman and chief executive officer. In December we again raised our outlook, this time to 10 percent sequential growth. Exceeding these expectations, Conexant’s first fiscal quarter sequential revenue increased by 14 percent, driven primarily by the sequential growth of 42 percent in our wireless communications business, a result of our strong competitive position in power amplifiers, radio-frequency subsystems, and complete GSM system solutions.
Our broadband access business recorded growth of 8 percent sequentially, our second consecutive quarter of increased broadband-access revenues, driven by strong demand for our broadcast video decoder/encoder and set-top box solutions, as well as revenue traction in ADSL and cable modems. Mindspeed Technologies, which experienced the revenue decline we anticipated, continued to operate in a weak Internet infrastructure market environment, although we believe this business is now clearly showing the initial signs of recovery.
Operating expenses were reduced for the third consecutive quarter, resulting in a total decline of nearly 25 percent from the expense level of three quarters ago. On a pro forma basis, the level of the company’s operating loss improved 23 percent sequentially, significantly better than the 15 percent guidance provided in October. Working capital management yielded days sales outstanding (DSOs) of less than 50, an improvement of 20 percent over the prior quarter, and inventory turns improved 10 percent sequentially, to 5.7 times.
In December, Conexant announced its intent to merge its wireless business with Alpha Industries, Inc. The transaction is expected to create the pure-play world leader in radio frequency and complete semiconductor system solutions for mobile communications applications. Documents have been filed with the Internal Revenue Service requesting a tax-free distribution of assets in conjunction with this transaction, and pre-merger documents have been filed with the Department of Justice and the Federal Trade Commission. The transaction is expected to be completed in the second calendar quarter of this year.
As previously announced, the new merged wireless semiconductor company will purchase Conexant’s Mexicali, Mexico semiconductor assembly, module manufacturing and test facility for $150 million in cash. In addition, also as previously announced, $150 million in cash on deposit with a key foundry partner will be refunded to Conexant by mid-year. These two actions are expected to add $300 million of additional liquidity for the company by the middle of 2002.
The company’s wireless communications business introduced the world’s first quad-band global system for mobile communications (GSM) power amplifier (PA) module, as well as a new family of PA modules for code division multiple access (CDMA) cellular handsets, personal communications system (PCS) and wireless local loop applications.
The wireless business also announced an embedded stack development platform for its Bluetooth wireless technology system solution. Tality Corporation, Impulsesoft and Stonestreet One selected this development platform, which allows them to embed their own upper layer protocol stack and applications directly onto the Conexant baseband controller.
Broadband access highlights included the first shipments of the next-generation single-chip cable modem and supporting reference designs. In addition, seven customers received CableLabs DOCSIS 1.0 certification, and three customers received tComLabs EuroDOCSIS certification for new products based on Conexant’s InfoSurge single-chip cable modem.
Broadband access introduced a single-chip dual-stream demodulator for satellite receiver systems. This device is ideal for applications such as personal video recorders (PVRs) that process dual incoming video streams to simultaneously play and record two television programs.
The broadband access business also expanded its portfolio of products that enable the PC home entertainment center. The peripheral component interconnect (PCI) audio/video broadcast decoder is the industry’s first 10-bit video solution and the first to support worldwide broadcast audio decoding. In the home networking powerline market, the company introduced an integrated physical-layer transceiver device that enables up to 14 megabits-per-second networking rates over a home’s existing electrical wiring.