Conexant To Sell Off Wireless Unit - InformationWeek

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Conexant To Sell Off Wireless Unit

Company execs say the deal will not affect plans to spin off Conexant's Internet infrastructure business, which were restated less than two weeks ago.

Communications chipmaker Conexant Systems Inc. is spinning off its wireless communications business and merging it with radio-frequency component maker Alpha Industries Inc. in an all-stock deal. Investor reaction fueled the potential value of the combined company, which will have a new name and stock symbol. Shares of Alpha were up more than 24% Monday, to $26.35, while Conexant shares were up a more modest 4.5%, to $16.57.

The deal comes less than two weeks after Conexant restated its year-old intent to spin off its Internet infrastructure business, Mindspeed. Conexant execs say the sale of the wireless communications business will not affect the spin-off plan. But with Mindspeed expected to generate declining revenue during the first quarter of next year, Conexant will wait for a bit more recovery in the Internet infrastructure market, says Dwight Decker, Conexant's chairman and CEO. "We want to see sequential revenue growth for Mindspeed" before the spin-off becomes a reality, Decker said Monday during a conference call.

As part of the wireless communications deal, which is expected to close by late March, pending regulatory and shareholder approval, the new company will purchase Conexant's semiconductor-assembly, module-manufacturing, and test facility in Mexicali, Mexico, for $150 million in cash. Alpha CEO David Aldrich said during the conference call that the proximity of the Mexico plant to Alpha's design facilities in California would help the new company slash costs now absorbed in shipping designs to Asia for testing and assembly. "We can shave a week and a half to two weeks off the supply chain," Aldrich said. "This gives us a real competitive weapon in terms of logistics." Aldrich is slated to become CEO of the new company, and Decker would serve as chairman.

Forward Concepts analyst Will Strauss says Conexant is aligning its businesses for pending recovery in the telecommunications market. "The cellular and telecom equipment market were hit the hardest last year," he says. "But they will be first to recover."

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