Shares of Newport Beach chipmaker Conexant Systems Inc. soared Friday, a day after it surprised analysts with an improved outlook for the current quarter.
The stock jumped more than 15% in mid-day New York trading on a recent market value of about $271 million.
Conexant is in the midst of a massive overhaul headed by Chief Executive Scott Mercer, who started in April.
The company is reorganizing into two business units, the imaging and media business and a broadband chip division.
The June quarter marks the first time the company reported results for each unit.
It appears to be buying up product lines that will generate a steady stream of revenue and build out the two divisions. It’s selling off ones that are unprofitable or not growing.
The company upped its outlook for the current quarter.
It’s looking for September quarter revenue of $120 million and $125 million, up from its previous outlook of $115 to $120 million.
It’s expecting to turn a profit of $6 million to $8 million for the first time in more than a year.
The rosier outlook comes on the heels of its June quarter results, the last that included Conexant’s business making chips for set-top TV boxes.
The company said in May it’s set to sell the unit for up to $145 million to NXP Semiconductors, the former chip arm of Royal Philips Electronics NV.
The deal is expected to close this month.
Including results from the set-top box business, Conexant reported $171 million in sales for the June quarter, coming in at the high end of the outlook it gave a few months ago.
Excluding the business unit, the company had sales of $115 million.
Including some $140 million in charges related to the sale of the unit and write downs on assets, the company posted a loss of $24 million.
Wall Street’s betting that the turnaround is paying off.
“Conexant reported positive results, with better-than-expected margins and earnings per share,” said Allan Mishan, analyst at Oppenheimer & Co. in New York, in a note to clients. “Guidance for September was better than the preliminary extimates. We applaud Conexant’s execution in reducing operating expenses, and we believe the company is on track to driving sustainable profitability.”
