Profits Surge as Conexant’s Roll Continues

Conexant Systems Inc., the Newport Beach chip maker that moved into the black much earlier than expected after being shed by Rockwell International Corp. in December, blew past analysts’ earnings projections in the fourth fiscal quarter as revenue surged 71%.

The company’s net income for the three months ended Sept. 30 leaped to $38 million, or 36 cents a share. A year ago, Conexant lost $233.8 million when it was still a Rockwell unit. Analysts had expected the company to report earnings of 28 cents a share, according to a survey by IBES International.

“They’re benefiting from growth of the Internet and demand for cell phones,” said Mark Edelstone, an analyst at Morgan Stanley Dean Witter & Co. “This company is on a roll, and there’s no sign of it letting up in the near term.”

Conexant’s revenue totaled $452.2 million, up from $264.7 million a year ago.

Dwight Decker, Conexant’s chief executive, told analysts that the company’s strong growth came from a combination of increasing sales and diversifying its product line.

He noted that Conexant’s non-PC units--which provide chips for such areas as network access, digital infotainment and wireless communication--grew 89% for the year.

These businesses, which help Conexant diversify its product line, have been one of the keys to the company’s financial success, enabling it to quickly return to profitability, said Jeff Lipton, a financial analyst with Hambrecht & Quist. “Yet the company’s PC business was also [performing] ahead of expectations,” Lipton said.

Conexant expects to grow an additional 8% to 10% in the next quarter, Decker said.

For the fiscal year, Conexant posted net income of $12.9 million, or 13 cents a share, compared with a net loss $262.2 million, or $2.65 per share, for the previous year. Revenue totaled $1.44 billion, up 20%.

The financial results were announced after the U.S. markets closed. Conexant’s stock, which has more than quadrupled this year, moved up $6.31 a share to $69.94 in Nasdaq trading.

The stock, however, has slipped from a 52-week high of $83.88 late last month, in part because of industrywide concern over manufacturing and supply problems after the Sept. 21 earthquake in Taiwan.

In the conference call with analysts Wednesday, Decker insisted that the earthquake would not affect the company’s finances.

In related news, Conexant announced a $150-million deal with the Taiwan Semiconductor Manufacturing Co. to boost Conexant’s manufacturing abilities to meet the increasing demand for its chips.

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Conexant Gains

Conexant Systems’ net income climbed to $38 million on record revenues in the fourth quarter. Quarterly sales and net income, in millions:

Sales

Fiscal 19991st qtr. $294.68

2nd qtr. 316.93

3rd qtr. 380.33

4th qtr. 452.17

Net income (loss)1st qtr. -57.12

2nd qtr. 7.62

3rd qtr. 24.39

4th qtr. 38.05

Source: Bloomberg News