Conexant Delivers 21 Percent Sequential Revenue Growth and Completes First Phase of Recovery Plan

Revenue Increased from $140M to $170M; Two-quarter $70M Channel Inventory Reduction Initiative Completed

NEWPORT BEACH, Calif.—(BUSINESS WIRE)—April 20, 2005— Conexant Systems, Inc. (NASDAQ: CNXT) today announced revenues of $169.7 million for the second quarter of fiscal 2005, which ended April 1, 2005. The company had previously guided for second fiscal quarter revenues of approximately $160 million. Conexant also accomplished the first phase of its recovery plan by successfully completing its two-quarter channel inventory reduction initiative. Over this period, the company drove the consumption of approximately $70 million of inventory at distributors and direct customers in order to balance revenues with end-customer demand as rapidly as possible.

Second fiscal quarter 2005 revenues of $169.7 million increased 21 percent from first fiscal quarter 2005 revenues of $140.6 million, and decreased 30 percent compared to second fiscal quarter 2004 revenues of $243.8 million. The second fiscal quarter 2005 pro forma operating loss was $29.2 million, compared to a pro forma operating loss of $85.9 million in the first quarter of fiscal 2005, and a pro forma operating profit of $19.9 million in the year-ago quarter. On a pro forma basis, the net loss for the second fiscal quarter of 2005 was $0.08 per diluted share and in line with expectations, compared to a net loss of $0.20 in the first fiscal quarter, and a net profit of $0.04 per diluted share in the second fiscal quarter of 2004.

Based on generally accepted accounting principles (GAAP), the net loss for the second quarter of fiscal 2005 was $73.2 million, or $0.16 per diluted share, compared to a net loss of $120.7 million, or $0.26 per diluted share, in the first quarter of fiscal 2005, and a net loss of $143.4 million, or $0.41 per diluted share, in the second quarter of fiscal 2004.

Conexant provides pro forma results as a supplement to financial statements based on GAAP. The company uses pro forma information to evaluate its operating performance and believes this presentation provides investors with additional insight into its underlying operating results. A full reconciliation between pro forma and GAAP results is included in the accompanying financial data.

"Conexant's second fiscal quarter revenues of $169.7 million were nearly $10 million higher than previously expected, primarily due to greater-than-anticipated demand in our DSL business," said Dwight W. Decker, Conexant chairman and chief executive officer.

"During the quarter, we continued our focus on working capital management. We reduced internal inventory by $26 million, bringing the two-quarter reduction in this metric to $40 million, excluding the impact of charges," Decker said. "We collected $180 million in receivables during the quarter, reducing DSOs by 15 percent from 60 to 51 days. We achieved our targeted reduction from $93 million to $89 million in quarterly pro forma operating expenses. We also achieved our goal of holding our cash level flat, excluding any change in the value of our equity holdings, by capturing a gain of approximately $50 million through a refinancing of our headquarters building that covered our operating losses and restructuring costs.

"Our only disappointment during the quarter was that the timely completion of our two-quarter inventory reduction initiative required a number of out-of-the-ordinary channel actions," Decker continued. "These included selectively placing higher-cost products into more price-sensitive applications, and special pricing for certain customers on selected slower moving products. This dynamic depressed second fiscal quarter gross margins to 35.3 percent of revenues, a level below our expectations entering the quarter.

"From a broader perspective, by quickly returning channel inventory to normalized levels, we successfully executed on the first phase of our three-stage recovery plan," Decker said. "We are now focused on the second phase of this plan, which is to grow revenues, complete in-process cost reductions, and achieve profitability before the end of the calendar year. In order to reach this critical milestone, we are targeting a revenue level of $220 million, gross margins of 40 percent, and quarterly operating expenses of $80 million.

"Once accomplished, we will turn to our third phase, in which we will focus on differentiating Conexant by leveraging our unique broadband media and communications processing capabilities to develop new converged digital consumer electronics products and maximize our profitability," Decker said.

Third Fiscal Quarter 2005 Outlook

"We expect to deliver third fiscal quarter revenues of approximately $190 million, up approximately 12 percent sequentially from the $170 million in revenue we recorded in the just concluded quarter," Decker said.

"With the effects of our inventory reduction initiative behind us, we anticipate that gross margins for the current quarter will improve to a level of approximately 38 percent, despite significant and continuing price pressure in our DSL and wireless networking businesses," Decker continued. "We expect to further reduce pro forma operating expenses from $89 million in the March quarter to $86 million in the current quarter. Driven by these improvements, we anticipate that we will reduce our pro forma operating loss by more than 50 percent sequentially, from $29 million in the March quarter to a loss of approximately $14 million in the current quarter, resulting in a pro forma net loss of approximately $0.05 per share, based on approximately 470 million fully diluted shares."

Note to Editors, Analysts and Investors

Conexant's conference call will take place on Wednesday, April 20, 2005, at 5 p.m. Eastern time/2 p.m. Pacific time. To listen to the conference call via telephone, dial 866-710-0179 (domestic) or 334-323-9854 (international); security code: Conexant. To listen via the Internet, visit the Investor Relations section of Conexant's Web site at www.conexant.com/ir. Playback of the conference call will be available shortly after the call concludes and will be accessible on Conexant's Web site at www.conexant.com/ir or by calling 877-919-4059 (domestic) or 334-323-7226 (international); pass code: 59844236.

About Conexant

Conexant's innovative semiconductor solutions are driving broadband communications, enterprise networks and digital home networks worldwide. The company has leveraged its expertise and leadership position in modem technologies to enable more Internet connections than all of its competitors combined, and continues to develop highly integrated silicon solutions for broadband data and media processing networks.

Key products include client-side xDSL and cable modem solutions, home network processors, broadcast video encoders and decoders, digital set-top box components and systems solutions, and dial-up modems. Conexant's suite of networking components includes a leadership portfolio of IEEE 802.11a/b/g-compliant WLAN chipsets, software and reference designs, as well as solutions for applications based on HomePlug(SM) and HomePNA(TM). The company also offers a complete line of asymmetric and symmetric DSL central office solutions, which are used by service providers worldwide to deliver broadband data, voice, and video over copper telephone lines.

Conexant is a fabless semiconductor company that recorded more than $900 million in revenues in fiscal year 2004. The company has approximately 2,400 employees worldwide, and is headquartered in Newport Beach, Calif. To learn more, please visit us at www.conexant.com.

Safe Harbor Statement

This press release contains statements relating to our future results (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: the substantial losses the company has incurred recently; the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions and product quality; the company's 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 product mix; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the uncertainties of litigation and the demands it may place on the time and attention of company management; and the risk that the businesses of Conexant and GlobespanVirata have not yet been completely and may not be integrated successfully, as well as other risks and uncertainties, including those detailed from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and 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 Consolidated Statements of Operations
                 (Unaudited,  in  Thousands,  Except  Per  Share  Amounts)

                                                              Three  months  ended      Six  months  ended
                                                              March  31,  March  31,  March  31,  March  31,
                                                                      2005            2004            2005            2004

Net  revenues  (See  Note  1)            $169,738    $243,781    $310,359    $421,114
Cost  of  goods  sold  (See  Note  2)  109,766      142,116      243,231      240,312
Gross  margin                                          59,972      101,665        67,128      180,802

Operating  expenses:
  Research  and  development                70,539        53,734      143,080        92,888
  Selling,  general  and
    administrative                                  28,362        30,602        58,368        53,411
  Amortization  of  intangible
    assets                                                    8,140          3,653        16,433          4,608
  In-process  research  and
    development                                                --      160,818                --      160,818
  Special  charges  (See  Note  3)        13,596          5,514        32,853          6,119
      Total  operating  expenses          120,637      254,321      250,734      317,844

Operating  loss                                    (60,665)  (152,656)  (183,606)  (137,042)

Other  expense  (income),  net            11,892        (9,736)        9,137      (35,017)

Loss  before  income  taxes                (72,557)  (142,920)  (192,743)  (102,025)

Provision  for  income  taxes                    630              459          1,162              707

Net  loss                                              $(73,187)$(143,379)$(193,905)$(102,732)

Basic  and  diluted  loss  per
  share                                                      $(0.16)      $(0.41)      $(0.41)      $(0.33)

Number  of  shares  used  in  per
  share  computation  -  basic  and
  diluted                                                470,189      349,968      469,279      313,580

The  GAAP  consolidated  statements  of  operations  include  the  results
of  operations  of  GlobespanVirata,  Inc.  from  Feb.  27,  2004,  the  date  of
the  company's  merger  with  GlobespanVirata.  No  restatement  has  been
made  to  earlier  periods.

Note  1  -  Includes  $9.6  million  and  $17.5  million  of  pricing
adjustments  to  inventories  in  the  channel  during  the  three  and  six
months  ended  March  31,  2005,  respectively.

Note  2  -  Includes  $45.0  million  of  charges  related  to  internal
inventory  in  the  six  months  ended  March  31,  2005.

Note  3  -  Special  charges  consist  of  asset  impairments,
restructuring  charges,  integration  costs,  and  other  special  items.

                                                CONEXANT  SYSTEMS,  INC.
            Pro  Forma  (Non-GAAP)  Consolidated  Statements  of  Operations
                    (Unaudited,  in  Thousands,  Except  Per  Share  Amounts)

                                                                Three  months  ended    Six  months  ended
                                                              March  31,  March  31,  March  31,  March  31,
                                                                        2005          2004            2005            2004

Net  revenues  (See  Note  4)            $169,738    $243,781    $310,359    $421,114
Cost  of  goods  sold  (See  Note  5)  109,766      141,304      243,231      239,500
Gross  margin                                          59,972      102,477        67,128      181,614

Operating  expenses:
  Research  and  development                63,909        52,863      130,574        91,994
  Selling,  general  and
    administrative                                  25,225        29,746        51,586        52,555
      Total  operating  expenses            89,134        82,609      182,160      144,549

Pro  forma  operating  income
  (loss)                                                  (29,162)      19,868    (115,032)      37,065

Other  expense,  net                                6,741          4,686        15,670          9,289

Pro  forma  income  (loss)  before
  income  taxes                                      (35,903)      15,182    (130,702)      27,776

Provision  for  income  taxes                    630              459          1,162              707

Pro  forma  net  income  (loss)        $(36,533)    $14,723  $(131,864)    $27,069

Basic  income  (loss)  per  share
  pro  forma  (non-GAAP)                        $(0.08)        $0.04        $(0.28)        $0.09

Diluted  income  (loss)  per  share
  pro  forma  (non-GAAP)                        $(0.08)        $0.04        $(0.28)        $0.08

Number  of  shares  used  in  per
  share  computation  -  basic            470,189      349,968      469,279      313,580

Number  of  shares  used  in  per
  share  computation  -  diluted        470,189      377,993      469,279      339,087

The  pro  forma  (non-GAAP)  consolidated  statements  of  operations
include  the  results  of  operations  of  GlobespanVirata,  Inc.  from
Feb.  27,  2004,  the  date  of  the  company's  merger  with
GlobespanVirata.  No  restatement  has  been  made  to  earlier  periods.

Pro  forma  operating  income  (loss),  pro  forma  net  income  (loss),
and  basic  and  diluted  income  (loss)  per  share  pro  forma  (non-GAAP)
excludes  certain  non-cash  and  special  items  related  to  operations,  and
certain  non-operating  gains  and  losses.  The  company  believes  these
measures  of  income  provide  a  better  understanding  of  its  underlying
operating  results  and  the  company  uses  these  measures  internally  to
evaluate  its  underlying  operating  performance.  These  measures  of
income  are  not  in  accordance  with,  or  an  alternative  for,  generally
accepted  accounting  principles  and  may  be  different  from  pro  forma
measures  used  by  other  companies.

A  reconciliation  of  GAAP  consolidated  statements  of  operations  and
per  share  information  as  determined  under  generally  accepted
accounting  principles  with  the  pro  forma  net  income  (loss)  and  pro
forma  per  share  information  presented  above  is  presented  in  the
following  table.

Note  4  -  Includes  $9.6  million  and  $17.5  million  of  pricing
adjustments  to  inventories  in  the  channel  during  the  three  and  six
months  ended  March  31,  2005,  respectively.

Note  5  -  Includes  $45.0  million  of  charges  related  to  internal
inventory  in  the  six  months  ended  March  31,  2005.

                                                CONEXANT  SYSTEMS,  INC.
        Reconciliation  of  GAAP  Consolidated  Statements  of  Operations  to
            Pro  Forma  (Non-GAAP)  Consolidated  Statements  of  Operations
                    (Unaudited,  in  Thousands,  Except  Per  Share  Amounts)

                                                              Three  months  ended      Six  months  ended
                                                              March  31,  March  31,  March  31,  March  31,
                                                                      2005            2004            2005            2004

Net  loss  (unaudited)                      $(73,187)$(143,379)$(193,905)$(102,732)

Non-cash  and  special  items:
  Amortization  of  intangible
    assets                                                    8,140          3,653        16,433          4,608
  In-process  research  and
    development                                                --      160,818                --      160,818
  IP  litigation  support  costs            2,148              570          4,345              570
  Special  charges  (See  Note  6)        13,596          5,514        32,853          6,119
  Stock  compensation                              3,019          1,157          6,008          1,180
  Transitional  salaries  and
    benefits    (See  Note  7)                    4,600                --          8,935                --
  Equity  in  losses  (earnings)  of
    equity  method  investees                  3,371            (651)        6,460      (10,816)
  Unrealized  gain  on  note
    receivable  from  Skyworks                      --      (16,456)              --      (11,545)
  Unrealized  (gain)  loss  on
    Mindspeed  warrant                            13,492          2,085        (1,281)    (22,545)
  Inventory  impairment                                --              812                --              812
  Gain  on  sale  of  equity
    securities                                        (11,112)              --      (11,112)              --
  Write-down  (recovery)  of
    investments                                            (600)            600            (600)            600
Pro  forma  net  income  (loss)        $(36,533)    $14,723  $(131,864)    $27,069

Income  (loss)  per  share,  basic:
  Net  loss  (GAAP)                                  $(0.16)      $(0.41)      $(0.41)      $(0.33)
  Non-cash  and  special  items                0.08            0.45            0.13            0.42
  Pro  forma  (non-GAAP)  income
    (loss)                                                  $(0.08)        $0.04        $(0.28)        $0.09

Income  (loss)  per  share,
  diluted:
  Net  loss  (GAAP)                                  $(0.16)      $(0.41)      $(0.41)      $(0.33)
  Non-cash  and  special  items                0.08            0.45            0.13            0.41
  Pro  forma  (non-GAAP)  income
    (loss)                                                  $(0.08)        $0.04        $(0.28)        $0.08

Note  6  -  Special  charges  consist  of  asset  impairments,
restructuring  charges,  integration  costs,  and  other  special  items.

Note  7-  Transitional  salaries  and  benefits  of  $4,600  for  the  three
months  ended  March  31,  2005,  and  $8,935  for  the  six  months  ended  March
31,  2005,  represent  amounts  earned  by  employees,  who  have  been
notified  of  their  termination  as  part  of  our  restructuring  activities,
from  the  date  of  their  notification.  Included  in  the  above  amounts  for
the  three  and  six  months  ended  March  31,  2005,  are  $632  and  $928,
respectively,  of  facilities  related  costs.

                                                CONEXANT  SYSTEMS,  INC.
                                  Consolidated  Condensed  Balance  Sheets
                                              (Unaudited,  in  Thousands)

                                                                                March  31,    Dec.  31,    Sept.  30,
                                                                                    2005              2004              2004
                                                                ASSETS
Current  assets:
  Cash  and  cash  equivalents  (See  Note  8)  $141,206      $132,326      $139,031
  Marketable  securities  (See  Note  8)            104,613        135,597        163,040
  Receivables,  net                                                  94,706          92,864        185,037
  Inventories                                                          110,098        136,438        194,754
  Mindspeed  warrant  -  current  portion              3,250            5,634            3,599
  Other  current  assets                                          22,608          17,521          20,768
      Total  current  assets                                    476,481        520,380        706,229

Property,  plant  and  equipment,  net                51,052          53,266          55,741
Goodwill                                                                  718,335        714,852        708,544
Intangible  assets,  net                                      122,597        128,947        135,241
Mindspeed  warrant                                                  24,316          35,737          23,000
Marketable  securities  -  long  term
  (See  Note  8)                                                        117,981        123,266        137,604
Other  assets                                                          109,049        112,936        114,163
      Total  assets                                              $1,619,811  $1,689,384  $1,880,522

                                  LIABILITIES  AND  SHAREHOLDERS'  EQUITY
Current  liabilities:
  Accounts  payable                                                $92,392        $89,171      $141,533
  Accrued  compensation  and  benefits                33,708          44,511          40,423
  Restructuring  and  reorganization
    liabilities                                                          24,919          28,205          22,427
  Other  current  liabilities                                58,546          51,502          67,044
      Total  current  liabilities                          209,565        213,389        271,427

Convertible  subordinated  notes                      711,825        711,825        711,825
Other  liabilities                                                105,590          64,741          68,883
      Total  liabilities                                      1,026,980        989,955    1,052,135

Shareholders'  equity                                          592,831        699,429        828,387
      Total  liabilities  and
        shareholders'  equity                            $1,619,811  $1,689,384  $1,880,522

Note  8  -  Total  cash,  cash  equivalents  and  marketable  securities  at
March  31,  2005,  Dec.  31,  2004,  and  Sept.  30,  2004,  are  as  follows:

                                                                                    March  31,  Dec.  31,  Sept.  30,
                                                                                            2005          2004            2004

Cash  and  cash  equivalents                                  $141,206  $132,326    $139,031
Other  short-term  marketable  securities
  (primarily  mutual  funds,  domestic
  government  agencies  and  corporate  debt
  securities)                                                                10,222        2,587        13,764
Long-term  marketable  securities
  (primarily  domestic  government
  agencies  and  corporate  debt  securities)      117,981    123,266      137,604
Subtotal                                                                      269,409    258,179      290,399
Equity  securities  -  Skyworks  Solutions,
  Inc.  (6.2  million  shares  at  March  31,
  2005,  Dec.  31,  2004  and  Sept.  30,  2004)        38,643      58,305        61,767
Equity  securities  -  SiRF  Technologies,
  Inc.  (5.0  million  shares  at  March  31,
  2005  and  5.9  million  shares  at  Dec.  31,
  2004  and  Sept.  30,  2004)                                      55,748      74,705        87,509
Subtotal  Skyworks  and  SiRF  (See  Note  9)          94,391    133,010      149,276
Total  cash,  cash  equivalents  and
  marketable  securities                                        $363,800  $391,189    $439,675

Note  9  -  The  decrease  in  value  of  Skyworks  and  SiRF  shares  from  
Dec.  31,  2004,  to  March  31,  2005,  was  approximately  $28.3  million,    
excluding  the  sale  of  0.9  million  shares  of  SiRF  for  net  proceeds  of    
$10.2  million  during  the  three  months  ended  March  31,  2005.  

                                                CONEXANT  SYSTEMS,  INC.
                                                    Selected  Other  Data
                                              (Unaudited,  in  Thousands)

                                                                    Three  months  ended    Six  months  ended
                                                                                March  31,                  March  31,
                                                                          2005          2004          2005          2004
Selected  Data:
  Depreciation  (See  Note  10)                $4,692      $3,670      $9,530      $6,825
  Capital  expenditures                            10,280        5,045      12,362        9,902


Revenues  By  Region:
  Americas                                                  $21,267    $25,542    $39,706    $47,943
  Asia-Pacific                                          132,585    198,298    238,057    338,660
  Europe,  Middle  East  and  Africa        15,886      19,941      32,596      34,511
                                                                  $169,738  $243,781  $310,359  $421,114

Note  10  -  Does  not  include  amortization  of  intangible  assets,  as
applicable.
 


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