Conexant Reports Financial Results for the Fourth Quarter of Fiscal 2007

NEWPORT BEACH, Calif.—(BUSINESS WIRE)—November 1, 2007— Conexant Systems, Inc. (NASDAQ: CNXT), a worldwide leader in semiconductor solutions for broadband communications and the digital home, today announced financial results for the fourth quarter of fiscal 2007 that were consistent with the expectations established at the beginning of the quarter. In addition, the company announced that it will terminate further investments in "stand-alone" products for wireless networking but will continue to support DSL gateway solutions that incorporate wireless-networking capability. During the quarter, Conexant also completed a series of restructuring actions that will result in significantly reduced core operating expenses beginning in the current quarter.

Financial Results

Conexant presents financial results based on accounting principles generally accepted in the United States of America (GAAP) as well as selected non-GAAP financial measures intended to reflect its core results of operations. The company believes these core financial measures provide investors with additional insight into its underlying operating results. Core financial measures exclude non-cash and other non-core items as fully described in the GAAP to non-GAAP reconciliation in the accompanying financial data.

Fourth quarter fiscal 2007 revenues were $183.9 million, including a non-recurring royalty of approximately $4 million related to an existing license agreement. Core gross margins were 44.7 percent of revenues. Core operating expenses were $90.3 million. The core operating loss was $8.0 million, and the core net loss was $18.5 million, or $0.04 per share.

On a GAAP basis, gross margins for the fourth quarter of fiscal 2007 were 44.0 percent of revenues. The company recorded a non-cash impairment charge of $192.5 million during the quarter to reduce the carrying value of goodwill, intangible assets, and property, plant, and equipment associated with its broadband media processing and wireless networking product lines. In addition, the company recorded special charges of $26.4 million primarily related to a litigation settlement and restructuring. As a result, GAAP operating expenses were $319.2 million, the GAAP operating loss was $238.2 million, and the GAAP net loss was $234.8 million, or $0.48 per share.

The company ended the quarter with $235.6 million in cash and cash equivalents.

Wireless Networking

Effective immediately, Conexant is discontinuing further investment in stand-alone wireless networking product development and will eliminate approximately 140 positions worldwide. Beginning in the second quarter of fiscal 2008, the company expects these actions to save approximately $5 million in quarterly operating expenses.

The company plans to maintain the staffing levels required to support existing wireless networking customers with current solutions. Conexant's remaining wireless employees will join the company's Broadband Access organization and support DSL gateways that incorporate wireless connectivity.

Fourth Quarter Restructuring and Expense-reduction Actions

In September, Conexant completed a broad-based set of headcount reductions that eliminated approximately 500 positions in the U.S., India, and China. As a result of these actions, the company expects to save approximately $4.8 million per quarter beginning in the current quarter. The company also narrowed its product-development focus during the fourth fiscal quarter by discontinuing further investments in developing network processor solutions and packet switch products, and terminating its investment in HomePlug networking. In each case, the company will support current customers that are using existing products.

Business Perspective

"In the fourth fiscal quarter, we made solid progress across multiple fronts," said Dan Artusi, Conexant president and chief executive officer. "We delivered on the performance expectations we established at the beginning of the quarter, we restructured our business and took action that will significantly reduce expenses, and we narrowed our business and product focus.

"Including the wireless networking actions announced today, we have reduced our worldwide workforce by approximately 20 percent over the past five weeks," Artusi said. "We will continue working to narrow our product-development focus in order to improve our engineering execution and our ability to deliver innovative, cost-effective solutions to customers on schedule. At this point, our most important company priority is to return to breakeven financial performance as quickly as possible."

Business Outlook

Subsequent to the end of the fourth quarter, the company negotiated a buyout of a future royalty stream totaling approximately $14 million. Consequently, the company's guidance for the first quarter includes the anticipated impact of this non-recurring event on revenues.

For the first quarter of fiscal 2008, Conexant expects revenues to be in a range between $194 and $196 million.

Conference Call Today

Financial analysts, members of the media, and the public are invited to participate in a conference call that will take place today at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time. Dan Artusi, president and chief executive officer, and Karen Roscher, senior vice president and chief financial officer, will discuss fourth fiscal quarter financial results and provide the company's outlook.

To listen to the conference call via telephone, dial 866-650-4882 (in the US and Canada) or 706-679-7338 (from other international locations); security code: Conexant. To listen via the Internet, visit the Investor Relations section of Conexant's Web site at Playback of the conference call will be available shortly after the call concludes and will be accessible on Conexant's Web site at or by calling 800-642-1687 (in the US and Canada) or 706-645-9291 (from other international locations); pass code: 20300937.

About Conexant

Conexant's innovative semiconductor solutions are driving broadband communications and digital home networks worldwide. The company's comprehensive portfolio includes products for broadband access and media processing applications. Conexant is a fabless semiconductor company that recorded revenues of $809 million in fiscal year 2007. The company is headquartered in Newport Beach, Calif. To learn more, please visit

Safe Harbor Statement

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Conexant or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements in this release that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

These risks and uncertainties include, but are not limited to: the risk that capital needed for our business and to repay our indebtedness will not be available when needed; the risk that the value of our common stock may be adversely affected by market volatility; general economic and political conditions and conditions in the markets we address; the substantial losses we have incurred; the cyclical nature of the semiconductor industry and the markets addressed by our products and our customers' products; continuing volatility in the technology sector and the semiconductor industry; demand for and market acceptance of our new and existing products; our successful development of new products; the timing of our new product introductions and our product quality; our ability to anticipate trends and develop products for which there will be market demand; the availability of manufacturing capacity; pricing pressures and other competitive factors; changes in our product mix; product obsolescence; the ability of our customers to manage inventory; our ability to develop and implement new technologies and to obtain protection for the related intellectual property; the uncertainties of litigation, including claims of infringement of third-party intellectual property rights or demands that we license third-party technology, and the demands it may place on the time and attention of our management and the expense it may place on our company; and possible disruptions in commerce related to terrorist activity or armed conflict, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings.

The forward-looking statements are made only as of the date hereof. We undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Conexant is a registered trademark of Conexant Systems, Inc. Other brands and names contained in this release are the property of their respective owners.

                        CONEXANT SYSTEMS, INC.
         GAAP Condensed Consolidated Statements of Operations
         (unaudited, in thousands, except per share amounts)

                        Three Months Ended        Twelve Months Ended
                  ------------------------------ ---------------------

                      September    June  29,    September  September    September
                                            28,                                  29,                28,                29,
                                          2007            2007            2006              2007              2006
                                    ----------  ---------  ---------  ----------  ----------

Net  revenues            $  183,921    $179,549    $245,863    $  808,869    $  970,787
Cost  of  goods
  sold                              102,973      101,503      133,385        450,537        542,309
Gain  on
  cancellation  of
  supply  agreement
  (Note  1)                                --                --                --                  --        (17,500)
                                    ----------  ---------  ---------  ----------  ----------
Gross  margin                  80,948        78,046      112,478        358,332        445,978

    Research  and
      development              69,000        68,890        70,450        278,685        269,736
      general  and
      administrative        26,517        26,234        29,268        107,030        131,226
    Amortization  of
      assets                          4,784          4,823          7,520          22,099          30,705
      impairments            192,498          3,415                --        350,913                  85
    Special  charges
      (Note  2)                    26,359          1,656              865          36,034          73,159
                                    ----------  ---------  ---------  ----------  ----------
              expenses          319,158      105,018      108,103        794,761        504,911
                                    ----------  ---------  ---------  ----------  ----------

Operating  income
  (loss)                        (238,210)    (26,972)        4,375      (436,429)      (58,933)

Interest  expense        (11,381)    (11,349)      (8,850)      (48,986)      (38,130)
Other  income
  (expense),  net
  (Note  3)                          9,771          3,656      (11,352)        36,148        (14,472)
                                    ----------  ---------  ---------  ----------  ----------
Loss  before
  income  taxes  and
  gain  (loss)  of
  equity  method
  investments              (239,820)    (34,665)    (15,827)    (449,267)    (111,535)
Provision  for
  income  taxes                  1,933              741              410            4,377            2,892
                                    ----------  ---------  ---------  ----------  ----------
Loss  before  gain
  (loss)  of  equity
  investments              (241,753)    (35,406)    (16,237)    (453,644)    (114,427)
Gain  (loss)  of
  equity  method
  (Note  4)                          6,988              179        (4,861)        51,182          (8,164)
                                    ----------  ---------  ---------  ----------  ----------

Net  loss                    $(234,765)  $(35,227)  $(21,098)  $(402,462)  $(122,591)
                                    ==========  =========  =========  ==========  ==========

Basic  and  diluted
  net  loss  per
  share                        $      (0.48)  $    (0.07)  $    (0.04)  $      (0.82)  $      (0.26)
                                    ==========  =========  =========  ==========  ==========

Shares  used  in
  basic  and
  diluted  per-
  computations              491,770      490,558      484,171        489,402        479,325
                                    ==========  =========  =========  ==========  ==========

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