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Conexant to split in two
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September 13, 2000: 6:28 p.m. ET
Communications chip supplier plans spin-off of its Net infrastructure business
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Conexant Systems Inc., a chip maker that specializes in communications, said Wednesday it will split into two separate companies.
The Newport Beach, Calif.-based company, itself a spin-off of Rockwell International, said it will spin off the operations of its network access division into a separate company with a focus on manufacturers of Internet infrastructure equipment.
Its remaining operations will become a separate "personal networking" company focusing on making chips for mobile communications and home networking products, the company said.
Conexant (CNXT: Research, Estimates) shares, which added $3.31 to $37.06 in regular trading ahead of the announcement, soared another 17 percent to $43.25 in after-hours activity.
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Dwight W. Decker, Conexant's chief executive, called the move a strategic milestone for the company, which was formed when Rockwell International spun off its semiconductor business in 1998.
"Separating these two strong businesses into two separate companies will help them sharpen their focus on the unique requirements of their specific markets," Decker said in a teleconference Wednesday evening.
Conexant intends to spin off the network access business as an independent public company through a two-step process. The first will consist of an initial public offering of stock in the new company targeted for January 2001.
 That will be followed within six months by a tax-free distribution of the remaining shares to Conexant shareowners, the company said. The company has not decided which of the two new companies will retain the Conexant name.
Since the company was spun off from Rockwell, its Internet infrastructure business has posted 100 percent annual revenue growth, Decker said.
Internet infrastructure product sales are expected to exceed $550 million in Conexant's current fiscal year, ending Sept. 29, accounting for roughly 30 percent of total company revenue. The company lists Cisco Systems, Lucent Technologies and Nortel Networks among its top Internet infrastructure customers.
Conexant also has been aggressively building up its network access business, augmenting its product portfolio with six acquisitions in the past eight months.
"We believe this business now is capable of reaching over $1 billion of revenue over the next calendar year," Decker said.
The new Internet infrastructure company will farm out its manufacturing to outside contractors, while the personal networking company will retain Conexant's manufacturing assets, the company said.
Conexant said the two new companies will enter into a multi-year technology and marketing alliance.
Personal networking product sales are expected to exceed $1.5 billion in Conexant's current fiscal year, accounting for roughly 70 percent of the company's total revenue.
The new personal networking company's product portfolio will focus on markets including broadband cable and DSL modems, home networking and digital cable and satellite set-top boxes. Home and small-office applications include chips for digital imaging and video devices, as well as data and fax modems. 
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