Conexant Retires Debt - Analyst Blog

Conexant Systems, Inc. (CNXT) recently announced that it will redeem the remaining $61.4 million of outstanding floating rate senior secured notes due in November 2010 on Dec18, 2009. Earlier, the company retired an aggregate amount of $80 million of its senior secured notes due in November 2010.

The notes will be redeemed at a cash redemption price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to the redemption date.

Management plans to use the cash balance on the balance sheet to fund the redemption of debt and strengthen its capital structure. The company had earlier raised $21.2 million by offering 8,050,000 shares to the public.

As a result of this retirement of debt, Conexant will reduce its annual interest burden by more than $5 million. As of July 3, 2009, Conexant had a total debt of $422.1 million and cash and equivalents of $123.4 million.

While Conexant continues to face challenges with eroding sales in WLAN, a flattening ADSL market and declining revenue in its modem business, new management is making drastic changes to overhaul the company’s strategic positioning and return to profitability.

Management undertook significant restructuring activities to transform the business into a smaller but profitable enterprise. In August 2009, the company divested its Broadaband Access Product lines. The company also terminated new investments in wireless networking and divested its Broadband Media Processing business. Management will now target acquisitions to strengthen its product portfolio.

Conexant will now apply its capabilities in analog and mixed-signal design and firmware and software development to capitalize on new opportunities in adjacent markets.

Last month, the company reported revenues of $56.2 million in the fourth quarter of fiscal 2009, up 10% sequentially but down 31% year over year. Profitability improved due to cost cutting activities undertaken by the management.

The company also provided an upbeat outlook for the coming quarter. Revenues are expected to increase 7% sequentially.

Headquartered in Newport Beach, California, Conexant Systems designs and develops semiconductor solutions that enable consumers to access the digital world. It operates in an intensely competitive market with many rivals in and outside the United States, including Analog Devices (ADI), Broadcom Corp. (BRCM) and Texas Instruments (TXN).

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