Analysts Not Discouraged by Conexant Earnings Loss
In its debut earnings report since setting out on its own, chip-maker Conexant Systems Inc. posted a loss for its first fiscal quarter, as the semiconductor industry struggles to rebound from a lengthy slump.
Although the Newport Beach-based firm reported a pro forma loss of $57.1 million, or 60 cents a share, larger than Wall Street expectations, analysts remained optimistic. The company had earnings of $20.6 million a year earlier, when it was a unit of Rockwell International Corp.
Revenue fell 23% to $294.7 million from $383.4 million.
Wall Street expected the firm to lose 41 cents a share, according to analysts polled by First Call Corp.
“Generally, they did well,” said Jeff Lipton, a financial analyst with Hambrecht & Quist. “The gross margin beat my expectations. It looks like they’re on track, or even little ahead, to becoming profitable.”
Despite recent heavy losses--Conexant reported a loss of $262 million on revenue of $1.2 billion for fiscal 1998--industry watchers say the firm has a promising future. Analysts expect the company to post losses for the first three quarters of 1999 and a profit of 2 cents per share for the fourth quarter, according to a First Call survey.
Conexant’s first-quarter loss on a pretax basis was $97.3 million, but about $91 million came from one-time and special charges.
“We think we’re making significant progress toward a break-even level of performance,” said Dwight Decker, chairman and chief executive.
Conexant left Rockwell debt-free, with a $350-million bank credit line in place, Decker said.
The company, which makes chips for numerous digital devices, has diversified its product line.
About 51% of Conexant’s quarterly sales came from modem chip sales, the company said, down from as much as 80% in previous years.
For 1999, Decker predicts that the company will see its fastest growth in its wireless communication and network access businesses.
In the first fiscal quarter, the wireless and network groups brought in $87 million, or 29% of Conexant’s overall sales, up from $77 million, or 20%, a year earlier.
