Conexant Reports Financial Results for the First Quarter of Fiscal 2008


GAAP to Non-GAAP Core Adjustments:

(a) Stock-based compensation expense is based on the fair value of all stock options and employee stock purchase plan shares in accordance with SFAS No. 123(R), which we adopted on October 1, 2005.

(b) Transitional salaries and benefits represent amounts earned by employees who have been notified of their termination as part of our restructuring activities, from the date of their notification.

(c) Amortization of intangible assets resulting from business combinations.

(d) Asset impairment charges for the three months ended September 28, 2007 totaled $192.5 million and were primarily comprised of non-cash goodwill and intangible asset impairment charges.

(e) Special charges for the three months ended December 28 and September 28, 2007 and December 29, 2006 included restructuring charges of $6.8 million, $4.1 million and $2.9 million, respectively. In addition, legal settlements totaling $20.0 million were incurred during the three months ended September 28, 2007.

(f) Other gains and losses which are not part of our core, on-going operations.

(g) Represents a write-down of an equity investment.

(h) Unrealized gains and losses associated with the change in the fair value of our warrant to purchase 30 million shares of Mindspeed Technologies, Inc. common stock, which is accounted for as a derivative instrument.

(i) Gains on sales of equity securities or on the liquidation of companies in which we held equity securities.

(j) Represents other income which is not part of our core, on-going operations including investment credits for asset disposals in the three months ended September 28, 2007.

(k) The dilutive effect of stock options and warrants under the treasury stock method and the dilutive effect of shares issuable upon conversion of convertible subordinated notes under the if-converted method are added to basic weighted average shares to compute diluted weighted average shares. For the fiscal quarters ended December 28 and September 28, 2007 and December 29, 2006, 1.6 million, 4.0 million and 6.6 million shares, respectively, have been added to basic weighted average shares to arrive at diluted weighted average shares for purposes of the non-GAAP core diluted net income per share computations.

(l) Our first quarter fiscal 2008 financial results included $14.7 million of non-recurring revenue that resulted from the buyout of a future royalty stream.

Non-GAAP Financial Measures:

We have presented non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP basic and diluted net income per share, on a basis consistent with our historical presentation to assist investors in understanding our core results of operations on an on-going basis. These non-GAAP financial measures also enhance comparisons of our core results of operations with historical periods. We are providing these non-GAAP financial measures to investors to enable them to perform additional financial analysis and because it is consistent with the financial models and estimates published by analysts who follow our company. Management believes that these are important measures in the evaluation of our results of operations. Investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by us may be different than non-GAAP financial measures presented by other companies.

GAAP Guidance:

We do not present GAAP guidance due to our inability to project (i) future market prices of the common stock of a third party underlying a derivative financial instrument, (ii) realized gains or losses from the sale of equity securities in third parties, and (iii) the financial results of investments accounted for using the equity method of accounting.
                        CONEXANT SYSTEMS, INC.
                Condensed Consolidated Balance Sheets
                      (unaudited, in thousands)

                                          December 28,   September 28,
                                              2007           2007
                                        -------------- ---------------
                    ASSETS
Current assets:
  Cash and cash equivalents              $     232,141  $      235,605
  Restricted cash                                8,800           8,800
  Receivables                                   71,727          80,906
  Inventories                                   60,899          63,174
  Other current assets                          23,917          20,361
                                        -------------- ---------------
          Total current assets                 397,484         408,846

  Property, plant and equipment                 58,222          67,967
  Goodwill                                     405,737         406,323
  Intangible assets                             21,531          26,067
  Other assets                                  66,634          76,766
                                        -------------- ---------------
          Total assets                   $     949,608  $      985,969
                                        ============== ===============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current portion of long-term debt         $            54,900    $              58,000
    Short-term  debt                                                              70,973                    80,000
    Accounts  payable                                                            75,613                    80,667
    Accrued  compensation  and  benefits                          25,716                    26,154
    Other  current  liabilities                                          49,886                    70,631
                                                                                --------------  ---------------
                    Total  current  liabilities                        277,088                  315,452

    Long-term  debt                                                              470,100                  467,000
    Other  liabilities                                                          62,391                    57,002
                                                                                --------------  ---------------
                    Total  liabilities                                        809,579                  839,454
                                                                                --------------  ---------------

              Shareholders'  equity                                        140,029                  146,515
                                                                                --------------  ---------------
                    Total  liabilities  and
                      shareholders'  equity                    $          949,608    $            985,969
                                                                                ==============  ===============
 


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