Conexant Systems Inc. (NASDAQ: CNXT)

Conexant Systems Inc. (CNXT) designs, develops and sells semiconductor system solutions, consisting of semiconductor devices, software and reference designs, for imaging, video, audio and modem applications. These include a portfolio of imaging solutions for multifunction printers (MFPs), fax platforms, and digital photo frame market segments. The Company’s video solutions are targeted at personal computer television (PCTV) applications that enable consumers to watch broadcast television on a personal computer and the video surveillance and security market. In addition, it provides audio solutions that are targeted at personal computer (PC) audio, speakers and audio subsystems.

On August 11, 2008, it completed the sale of certain assets related to its Broadband Media Processing (BMP) business to NXP B.V. (NXP). The Company also offers broadband access products, including digital subscriber line and passive optical network technologies that enables broadband data traffic over twisted pair copper telephone lines and optical cables. It enables services, such as high-speed Internet access, voice and telephone services, real-time video distribution and gaming applications.

The Company also provides various products, including combinations of digital signal processors, network processors, integrated software, analog front-ends and line drivers. It markets and sells its products and system solutions to original equipment manufacturers of communication electronics products through electronic components distributors, as well as to third-party electronic manufacturing service providers. The Company operates in the Americas, the Asia-Pacific region, Europe, the Middle East and Africa.

Conexant Systems Inc. was founded in 1996 and is headquartered in Newport Beach, California.

Source: Reuters.com, SEC Filings.

Financial Summary

CNXT presents financial results based on Generally Accepted Accounting Principles (GAAP) as well as select 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 certain non-cash and other non-core items as fully described in the GAAP to non-GAAP reconciliation in the accompanying financial data.

On August 24, 2009, CNXT announced the completion of the sale of its Broadband Access product lines to Ikanos Communications Inc. for $54 million. The financial results of the Broadband Access business unit have been classified as discontinued operations in CNXT’s fourth fiscal quarter financial statements. CNXT’s core net revenues for the fourth quarter of fiscal 2009 were $56.2 million. Core gross margins were 60.2 percent of revenues. Core operating expenses were $25 million, and core net income was $3.5 million, or $0.07 per share. On a GAAP basis, net revenues for the fourth quarter of fiscal 2009 were $56.2 million. GAAP gross margins were 60.4% of revenues. GAAP operating expenses of $37 million included restructuring charges of $5.6 million associated with unutilized leases and a previously announced reduction in force, and asset impairments of $5.6 million. GAAP loss from continuing operations was $7.7 million. GAAP loss from discontinued operations was $5.5 million, offset by a gain of $36.7 million on the sale of the Broadband Access business. GAAP net income was $23.5 million, or $0.47 per diluted share. The Company ended the quarter with $125.4 million in cash and cash equivalents, compared to $123.4 million in the previous quarter. Fourth fiscal quarter cash and cash equivalents included the initial proceeds of $18.4 million from a public offering of common stock that raised a total amount of $21.2 million. During the quarter, the Company retired an aggregate amount of $80 million of its senior secured notes due in November 2010.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among 4 polled investment analysts. Against the Conexant Systems Inc company.

The 3 analysts offering 12-month price targets for CNXT have a median target of 3.00, with a high estimate of 5.00 and a low estimate of 0.80. The median estimate represents a 7.14% increase from the last price of 2.80.

Source: www.ft.com

Consensus Estimates Analysis

Source:

Investment Highlights

Yesterday CNXT announced that Phillip E. Pompa has joined the Company in the newly created position of senior vice president of product marketing. Pompa will lead the Company’s worldwide marketing effort to gain share in all targeted segments and work closely with Conexant’s sales and engineering teams to define differentiated new products. He will report to Christian Scherp, Conexant co-president. Prior to serving as president and CEO at Rational Semiconductor, Pompa, spent four years with SigmaTel Inc. in positions that included president and CEO, senior vice president of the Portable Media Player Group, and vice president and general manager of the Integrated Products Group. Pompa also worked in marketing, corporate strategy, and strategic planning at Advanced Micro Devices, Inc., Umax Computer Corp., Motorola Inc., IBM/Rolm Systems, and Southwestern Bell Telephone Company. In 1999, he co-founded Alchemy Semiconductor, which was later acquired by Advanced Micro Devices. He earned a bachelor’s degree in electrical engineering and a master’s degree in business administration, both from Stanford University.

CNXT recently announced the availability of a jointly developed speaker and speakerphone reference design. The new solution is based on CNXT’s innovative CX2070X audio system-on-chip (SoC) product family and the OZMO1000 ultra-low-power Wi-Fi PAN SoC. CNXT’s CX2070X SoCs feature proprietary technical innovations that dramatically improve audio and voice quality. Ozmo’s highly integrated OZMO1000 dual-band radio features “instant-on” radio technology and a unique power-management approach that enables ultra-low power consumption while maintaining very low latency.

CNXT also offers a complete hardware and software evaluation kit (EVK) that includes a fully populated board, software, and supporting technical documentation. CNXT’s next-generation CX2070X SoCs include an integrated audio/voice digital signal processor (DSP), multi-bit codec, digital and analog input/out interfaces, and a power efficient 2.5-watt per channel Class-D amplifier to drive stereo speakers or optional post-width modulation (PWM) and differential line-out for external speaker systems amplifiers. Proprietary technical innovations include sub-band echo cancellation to eliminate speaker-to-microphone feedback, beam-forming technology to eliminate background noise, and BrightSound(TM), which uses dynamic range compression and equalization to “brighten” audio quality when source sound levels are low, and reduce speaker “clipping.” The CX2070X product family is packaged in a compact 76-pin quad flat no-lead (QFN) package. The highly integrated OZMO1000 features Ozmo’s Wi-Fi PAN technology and can be used in a wide range of Wi-Fi-enabled devices including speakers, speakerphones, headsets and mobile consumer electronics devices. The device is compatible with Ozmo-enabled IEEE 802.11g and IEEE 802.11a wireless local area network hosts. The Company also recently announced its plans for supporting the new Wi-Fi CERTIFIED Wi-Fi Direct specification in its products. The small form-factor OZMO1000 is packaged in a 48-pin QFN package, and manufactured using a standard CMOS technology.

Source: http://www.conexant.com/

Technical Analysis

Source: http://stockcharts.com

CNXT is trading above its 50-day moving average. While this is normally considered to be a bullish sign, the moving average is downward sloping which means that investors have been liquidating shares during this time period and tempers the bullishness of the signal.

CNXT’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, CNXT is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for CNXT currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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