Conexant Announces Profitability Ahead of Schedule With Second-Quarter Results; Expansion Platform Businesses Up 18 Percent Sequentially

Business Wire, April 21, 1999

NEWPORT BEACH, Calif.--(BUSINESS WIRE)--April 21, 1999--

Conexant Systems Inc. (Nasdaq:CNXT) Wednesday announced revenues of $316.9 million for the second fiscal quarter ended March 31, 1999, up 8 percent sequentially over the $294.7 million in revenues reported for the first quarter of fiscal 1999.

The company reported a return to profitability with net income of $7.6 million, or $0.08 per diluted share, compared with a net loss of $57.1 million, or $.60 per share on a pro-forma basis, in the prior quarter.

Revenues were up 16 percent over the $274.2 million in the second quarter of fiscal 1998. In the period a year ago, the company incurred a net loss of $15.6 million, or $.16 per share on a pro-forma basis.

"Returning to profitability a full six months ahead of our original plan, especially during our traditionally weak second quarter, clearly demonstrates the performance momentum of our four expansion platforms: the Wireless Communications, Network Access, Personal Imaging and Digital Infotainment divisions," said Dwight W. Decker, chairman and chief executive officer of Conexant.

"In the aggregate, these businesses grew 18 percent sequentially and 34 percent year-over-year, and are now contributing more than 50 percent of total revenues."

Second-quarter revenue momentum was led by Conexant's Wireless Communications and Network Access divisions. Wireless Communications revenues were up 26 percent sequentially to $57.1 million. The division had record shipments of power amplifiers for cellular phones and strong demand for other products, including cellular base station receivers, wireless data and global positioning system (GPS) solutions.

Network Access revenues were up 13 percent sequentially to $47.0 million, driven by record sales of all high-speed digital networking products which include synchronous optical network (SONET), T1/E1, asynchronous transfer mode (ATM) and digital subscriber line (DSL) solutions.

Revenue from the Digital Infotainment Division increased 8 percent sequentially to $42.6 million, with solid growth in both the consumer and computer market segments, including satellite set-top box tuners and demodulators, video encoders and peripheral component interconnect (PCI) decoders for PC-TV applications. The Personal Imaging Division returned to growth with revenue up 29 percent sequentially to $20.6 million.

During the quarter, the division commenced volume production of the industry's most complete multi-function peripheral (MFP) chipset.

In a traditionally weak second quarter, Personal Computing Division revenue was essentially flat at $149.6 million. Record modem shipments, driven by continuing share gains in the PC original equipment manufacturer (OEM) and retail aftermarket segments, were offset by normal pricing trends.

"Based on our current performance and order visibility, we expect to grow overall revenues by 5 to 10 percent in the current quarter, with continued strong growth across each of our expansion platforms and supported by an essentially flat Personal Computing Division revenue base," Decker said.

"Our Newport Beach and Newbury Park, Calif., fabs are operating at full capacity. Combined with a somewhat more favorable product mix, we expect gross margins to be up modestly this quarter at between 41 and 43 percent of revenue. At the same time, we expect operating expenses to remain at current levels as a percentage of revenue, resulting in continued sequential improvement in operating margin performance.

"We are off to a great start as a public company and I am enormously pleased with our performance to date. The Conexant team is fully committed to maintaining this momentum going forward," Decker added.

Second-Quarter Product Highlights

-- The Wireless Communications Division announced two new radio

frequency (RF) modules for Code Division Multiple Access (CDMA)

digital cellular telephones. These new modules provide highly

integrated transmit/receive subsystems for Personal

Communications Services (PCS) solutions and cellular CDMA/AMPS

handsets. The division shipped a record number of CDMA power

amplifiers for cellular handsets, with a run rate now exceeding 7

million units per quarter. Significantly expanding its product

portfolio for the Global System for Mobile Communications (GSM)

digital cellular communications marketplace, the division

announced a GSM software stack and a family of dual-band GSM

power amplifier (PA) chips.

-- The Network Access Division introduced the industry's first

single-chip, dual and tri-port line interface units (LIUs)

targeted at high-bandwidth, wide-area networking (WAN)

applications addressing E3, DS3 and STS-1 specifications. The

division also commenced volume production of 155

megabytes-per-second ATM physical-layer products.

-- The Digital Infotainment Division announced the InfoSurge(TM)

cable modem, the industry's first single-chip, programmable cable

modem solution. The division also announced a set-top box system

solution combining a single, highly integrated chip and