of Red Bank, N.J., is facing several different class action lawsuits, all announced Friday, stemming from issues the plaintiffs have with how the company handled its merger with GlobespanVirata earlier this year. That merger led to Conexant taking control of the PRISM line of Wi-Fi chipsets that were the top sellers in the WLAN world when first designed by Intersil.
The suits, brought by Murray, Frank & Sailer LLP of New York, Lerach Coughlin Stoia Geller Rudman & Robbins LLP of San Diego and Schatz & Nobel, P.C. of Hartford, Conn., all allege that the company violated the federal Securities Exchange Act of 1934 by claiming “outstanding progress toward integrating” the two companies upon completing the merger transaction on March 1, 2004.
Both say that such progress was not the case, and that instead the company faced “severe integration problems with respect to the combined companies’ parallel DSL and wireless technology offerings.”
The suits say this was the reason for the company’s decline in revenue up to the point of November 4, 2004, the end of the “class period” covered by the class actions. At that time, Conexant released fiscal reports on its fourth quarter (ending Oct. 1) earnings, stating that the company took a 20 percent decrease in revenue over the third quarter, after three quarters of gains. On that news, Conexant stock fell 10 percent on November 5, 2004 to $1.60 per share.
Conexant blamed the loss on “excess channel inventory that resulted from lower-than-expected customer demand.”
The company has also announced a cut in its Q1 revenue guidance, from $175-$185 million down to $140 million.
Each class action is open to any person who purchased Conexant stock during the class period, March 1 to Nov. 4, or to former Globespan stockholders that received Conexant shares after the merger.
When contacted, Conexant had not yet been served with the lawsuits and was unable to comment. Calls to the two law firms were not returned by press time.
Conexant’s status within the WLAN industry has taken a back seat to more vocal competitors such as Broadcom and Atheros over the last year. The company’s last WLAN-related announcement was in October, when it said that its dual-band PRISM WorldRadio chip’s miniPCI reference design had received certification from the Wi-Fi Alliance for both WPA2 security and WMM multimedia quality of service.
At press time, Conexant shares were back up to $1.95 per share, and have gone over the $2 mark several times in the last few days.