In its preliminary prospectus, the Newport Beach, Calif.-based Conexant Spinco said it plans to raise as much as $100 million through its IPO. Credit Suisse First Boston and Morgan Stanley Dean Witter will jointly handle the sale.
Conexant Spinco will sell chips for network infrastructures, while Conexant will continue to sell chips for modems, cell phones and other consumer electronics.
After September's announcement--which included Conexant's plans to distribute its stock in the spinoff to shareholders after the IPO--several analysts upgraded Conexant Systems, stating that spinning off its Network Access division would unlock greater value in the company. It would give investors the opportunity to invest in portions of Conexant, while allowing the company itself to focus more strategically on its different units.
Banc of America Securities analyst Alex Guana reiterated a "strong buy" rating on Conexant. "We believe the move should be good for the stock by drawing a higher evaluation for the network access unit and allowing investors to value each company separately," he wrote in a research note.
Chase Hambrecht & Quist analyst Jeffrey Lipton raised his rating to "strong buy" from "buy."
"We had previously rated the stock 'market perform' due to risks in the wireless and personal computing parts of the business," Lipton wrote in a research note. "However, with the planned spinoff, we expect investors to de-emphasize weak performances in these businesses and isolate these risks from the valuation of network access."
SG Cowen analyst Rick Billy said the network access division was clearly the most attractive part of Conexant's business and would likely fetch a higher price-to-earnings multiple than the existing Conexant.
In its fiscal year that ended Sept. 30, Conexant Spinco lost $232.8 million on revenue of $579.2 million. The year before, it earned $12.4 million on revenue of $277.6 million.
The IPO is expected to take place in January. Conexant said that in the months after the IPO, it plans to distribute all of its shares of Conexant Spinco to shareholders.
The company has not yet specified how many shares will be sold.