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Chipmaker Conexant's loss meets lowered expectations

The communications chipmaker also announces it will postpone the previously announced spinoff of its Internet infrastructure chip business.

Communications-chip maker Conexant Systems on Thursday posted a loss in line with lowered expectations for its fiscal first quarter and said it will postpone the announced spinoff of its Internet infrastructure chip business.

Including a $57.5 million pretax charge for excess inventory but excluding amortization and other charges, Conexant said it lost $57.4 million, or 24 cents per share, on revenue of $410.4 million.

Excluding all the charges, Conexant said it lost $17.2 million, or 7 cents per share. That is in the range of the 5 cent to 10 cent operating loss, excluding charges, that the company said to expect in a December earnings warning. A consensus of analysts had been predicting a loss of 7 cents per share, according to First Call.

"Our disappointing performance for the first quarter of fiscal 2001 reflected a steep drop in consumer demand and resulting excess channel inventories in a number of our personal networking end-markets," CEO Dwight Decker said in a statement. "The dramatic pullback in the technology equity capital markets, coupled with our weakened performance and near-term visibility, dictated that we postpone the initial public offering of our Internet infrastructure business originally targeted for late January."

Decker said the Newport Beach, Calif.-based company continues to believe a spinoff of that unit, which makes chips for high-speed networking gear, is still best for the company. Conexant will look to make the split when market and business conditions improve, he added. Beginning next month, the company will operate its Internet infrastructure and personal networking businesses as separate units internally.

Conexant said its Internet infrastructure business produced revenues of $165.9 million during the quarter, up 40 percent year-over-year. The other half of the company, its personal networking business that makes chips for modems, cell phones and digital cameras, took in $244.5 million in revenue during the quarter, down 38 percent year-over-year.

The company forecast that both units will see revenue decline 10 to 15 percent in the current quarter. Gross margins should be about 35 percent, the company said, reflecting lower revenue and underutilization of the company's chipmaking plants.

"We expect our business to return to growth in the June quarter, and we expect to return to profitability in the second half of the calendar year," Decker said.