Conexant Comeback: More to Come or All Done?
By ANDREW SIMONS
Newport Beach-based Conexant Systems Inc. is back in Orange County’s billion-dollar club, but can the chipmaker stay there?
In the past year, shares of Conexant have nearly tripled, bringing the company’s market value to $1.7 billion as of last week.
That could be as good as it gets.
“It will depend on whether they’re going to get upside for all those numbers,” said Drake Johnstone, an analyst who covers Conexant for Richmond, Va.-based Davenport & Co.
That’s analyst-speak for whether or not Conexant can beat Wall Street’s expectations with upcoming quarterly results.
After a long restructuring, Conexant’s quarterly conference calls have gotten less painful than they used to be, back when the company was bogged down in losses and slumping sales.
For the June quarter, Conexant reported a 14% rise in sales to $151 million from a year earlier.
The company’s operating profit was $3.2 million, versus a $9.2 million loss a year earlier.
Dwight Decker (photo), Con-exant’s chief executive, has been beating the drum lately.
He recently told an industry trade magazine he’s looking to take on Irvine-based Broadcom Corp. and others in the chip market for high-speed modems, set-top boxes and other devices.
“I’m particularly excited because we see ourselves competing with Broadcom or TI or STMicroelectronics,” Decker said. “It might turn out over the next couple of years that there’s a lot of interest in exactly the kind of market that Conexant plans to focus on.”
But some analysts say they’re not so sure Conexant has many surprises in store.
“Conexant continues to derive approximately half of its quarterly revenues from analog modems, which is a slow-growth business,” wrote Brett Miller, an analyst with A.G. Edwards Inc., in a research note.
That’s pretty much where Conexant started out. The company, which spun off from what then was Rockwell International Inc. in 1999, cornered the market for analog modem chips in the early 1990s. Then came acquisitions and diversification, and, more recently, downsizing.
Last year, Conexant shed three businesses. Its digital imaging unit was split off as Pictos Technologies Inc., which later was bought by Fremont-based ESS Technology Inc. Conexant’s wireless chip unit was combined with Woburn, Mass.-based Alpha Industries to create Skyworks Solutions Inc. And Conexant’s Newport Beach chip wafer plant became Jazz Semiconductor Inc.
In June, Conexant completed the spin off of Newport Beach-based Mindspeed Technolo-gies Inc., a maker of networking chips.
What’s left of Conexant has a sizable share of the market for modem chips used in personal computers. Conexant also sells chips to Sony Corp. for its PlayStation 2 video game console.
In fact, Conexant said Sony was its largest customer in the June quarter with orders for PlayStation and its PCs.
The company’s modem business is profitable and has managed to land contracts, analyst Johnson said.
