Conexant Expects Profits to Top Estimates

Conexant Systems Inc., a Newport Beach-based semiconductor and chip maker, said Tuesday that it expects third-quarter earnings to “significantly” exceed analysts’ estimates because of strong sales for its wireless, computer-network and personal-imaging products.

Company officials said they expect Conexant’s revenue for the quarter, which ends June 30, to be up more than 15% from the second quarter’s$317 million.

Tuesday’s news surprised analysts, who had been told by the company in April that Conexant’s third-quarter revenue would rise 5% to 10%.

Conexant officials credited strong demand for chips used in cellular phones and computer modems, and chip prices staying firmer than expected.

Conexant was expected to earn 11 cents a share for the quarter ending June 30, based on the average estimate of analysts polled by First Call Corp.

The report mirrors bullish projections for the entire industry.

Semiconductor sales in 1999 are expected to grow faster than previously predicted because Internet usage is expanding demand for computer and communications chips, according to an industry trade association.

The Semiconductor Industry Assn. predicted that worldwide chip sales will grow to $140.8 billion in 1999, up 12% from $125.6 billion in 1998. Last October, the trade association expected sales to be up only 9% in 1999.

Under the revised forecast, the group expects sales next year will rise by about 15% to $162.5 billion. In 2001, it expects a nearly 18% rise to $191 billion, followed by a nearly 13% jump in 2002 to $215.7 billion.

Doug Andrey, the SIA’s statistician, said accelerating acceptance of the Internet and electronic commerce is driving chip sales.

Personal-computer sales also are expected to be strong, especially in the second half of the year. But chip sales will also get a big boost from growing sales of communications chips for modems, networks and cellular phones, he said.

Chip sales suffered from 1996 to 1998 because of excess manufacturing capacity, falling PC prices and economic crises in Asia.

Conexant, spun off from factory-automation equipment maker Rockwell International Corp. on Dec. 31, has watched its stock more than double this year.

News of the expected revenue boom came after the market closed. On Tuesday, Conexant shares fell $1.06, closing at $45.31.

Dow Jones News Service and Bloomberg News contributed to this report.