Conexant soars on spinoff plans

Analysts and investors cheered Conexant Systems Inc.'s (Nasdaq: CNXT) decision to spin off its Internet infrastructure business, sending its stock up 35 percent Thursday.

Shares in the modem chip maker were up 12.88 to 49.938. The company said Wednesday its board of directors had approved the plan, which aims for an initial public offering for the new company in January. Internet infrastructure product sales are expected to exceed $550 million in Conexant's current fiscal year ending Sept. 29, making that division worth about 30 percent of total company revenues

SG Cowen analyst Rick Billy raised his rating to "strong buy" from "buy" Thursday. Merrill Lynch analyst Joe Osha reiterated his ratings of "near-term accumulate" and "long-term buy," stating in a report that the Conexant move "makes sense.'' Chase H&Q raised shares to "buy" from "market perform," and CE Unterberg Towbin from to "strong buy" from "buy."

As part of the plan, the companies will enter into a multi-year technology and marketing alliance. The IPO will be followed within 6 months by a tax-free distribution of the remaining shares to Conexant shareowners. Completion of the spin-off is conditional upon receiving an IRS ruling that it will qualify as a tax-free distribution.