Honing its focus, communications semiconductor maker Conexant Systems
A previous attempt to do so in 2001, was pulled back because of harsh market conditions.
Following the split, Conexant will provide technology for set-top boxes, residential gateways, PCs and game consoles to connect to broadband feeds, while Mindspeed will develop chips for enterprise, access, metropolitan and wide area networks.
“This decision represents the final step in Conexant’s transformation from a broad-based communications supplier into a family of focused, pure-play semiconductor businesses,” said Dwight W. Decker, Conexant chairman and CEO.
Internally, the units already function separately, making the transition uncomplicated from an operations standpoint, Decker said.
Mindspeed will trade on the American Stock Exchange. It will receive an initial capital funding of $100 million in cash from Conexant, plus an additional $50 million cash in contingent financing.
“Although Mindspeed is not yet profitable, the $150 million flexible financing structure provided by Conexant will yield a solidly capitalized new company,” Mindspeed CEO Raouf Halim said in a statement.
In addition, Mindspeed will reduce operating cost structure another further 25 percent. A company spokesman was not immediately available to detail the cuts.
But with the restructuring over the past six months, the actions are expected to lower Mindspeed’s operating break-even point from $55 million in revenue per quarter to approximately $45 million per quarter.
Despite “challenging” industry conditions, Mindspeed is encouraged by improving order rate in the current quarter, which is stronger than it was both last quarter and a year ago. Investors, looking forward to the spinout of the money-losing Mindspeed unit, sent Conexant stock up in afternoon trading Monday.