Conexant Confirms Guidance for the Third Fiscal Quarter and Provides Expectations for the Fourth Quarter
Monday June 2, 8:00 am ET
Company Also Announces That Previously Approved Reverse Stock Split Will Occur on June 27, 2008
NEWPORT BEACH, Calif.--(BUSINESS WIRE)--Conexant Systems, Inc. (NASDAQ:CNXT - News) today announced that it expects financial results for the third quarter of fiscal 2008 to be at the high end of the guidance range established entering the quarter. The company also provided guidance for the fourth fiscal quarter based on the expected performance of its two continuing businesses, which consist of Imaging and PC Media and Broadband Access. On April 29, 2008, Conexant announced a definitive agreement to sell its Broadband Media Processing product lines to NXP Semiconductors for up to $145 million. That transaction is expected to close within approximately 45 days.
In addition, the company announced today that it plans to execute a reverse stock split at a split ratio of 1-for-10, effective after the close of trading on June 27, 2008.
Third Quarter Fiscal 2008 Expectations
Entering the third quarter of fiscal 2008, the company expected revenues to be in a range between $167 million and $171 million, core gross margins to be between 44.5 percent and 45.5 percent of revenues, core operating expenses to be in a range between $72 million and $74 million, and core operating income to be in a range between breakeven and $5 million. Including the effects of the reverse stock split, the company anticipated a core net loss of between $0.17 and $0.06 per share.
The company now expects to deliver performance at the high end of the ranges provided for revenues and core gross margins, and at the low end of the range on core operating expenses.
Fourth Quarter Fiscal 2008 Expectations
For the September-ending fourth fiscal quarter, excluding results from its Broadband Media Processing product lines, Conexant expects revenues to be in a range between $115 million and $120 million, core gross margins to be between 49.5 percent and 50.5 percent of revenues, and core operating expenses to be between $45 million and $47 million. As a result, and including the effects of the reverse stock split, the company anticipates core operating income of $12 million to $14 million, and core net income of $0.08 to $0.12 per share.
“Over the past three quarters, the Conexant team has done an outstanding job of reducing operating expenses,” said Scott Mercer, Conexant’s chief executive officer. “As part of our strategic restructuring, we also exited several unprofitable product segments. When we complete the sale of our Broadband Media Processing assets, we will be a new company with a dramatically improved cost structure, higher gross margins, and lower operating expenses, which is reflected in our expectations for the fourth fiscal quarter.”
The New Conexant
The new Conexant will consist of two business units delivering semiconductor solutions for a total available market that is greater than $3 billion today and expected to grow over the next three years. The Imaging and PC Media team will be focused on providing products targeted at high-volume, high-growth applications that include imaging, audio, PC video, and video surveillance. The Broadband Access team will continue to deliver DSL products for client-side and central-office applications, and for higher-speed, next-generation technologies that include VDSL2 and passive optical networking.
The company holds a top-three leadership position in each of the major segments it addresses.
“We are focused on strengthening our market-leading positions by accelerating investments in the areas that offer the best opportunities for profitable growth in the future,” Mercer said. “For the next fiscal year, we expect to deliver moderate revenue growth. We also anticipate that we will maintain core gross margins of approximately 50 percent of revenues and deliver additional savings in core operating expenses, which should enable us to generate cash consistently on an operating basis.”
Conexant’s Reverse Stock Split
In February 2008, Conexant shareholders approved a proposal giving the company’s board of directors the authority to effect a reverse stock split. In May, the board approved a reverse stock split at a 1-for-10 split ratio that will take effect on Friday, June 27, 2008 after the close of trading on the NASDAQ Stock Market. At that time, shareholders will be entitled to receive one new share for each 10 shares held, and cash consideration for any resulting fractional shares. All Conexant common stock, stock options, and restricted stock will be proportionally adjusted to reflect the reverse split.
The reverse stock split will increase the per-share trading price of the company’s common stock, which is intended to make the stock more attractive to a broader range of investors and satisfy NASDAQ’s “minimum-bid” listing requirement.
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