A Ray of Sunshine Amid Conexant Gloom

It’s not all bad news these days at Conexant Systems Inc.

The Newport Beach communications chip maker said last week that it would eliminate about 1,500 jobs worldwide to cut costs, but it also announced that its video encoder was selected for Microsoft Corp.’s upcoming Xbox video game system. The chip set will be used to connect the game machine to either digital or traditional analog television sets.

The Conexant encoders were part of the Xbox developer kits, which were shipped last fall to more than 40 game manufacturers that will begin creating games for the new machine.

Market projections for the new game box indicate that Microsoft could sell as many as 20 million units over the next two to three years, according to Eileen Carlson, Conexant’s product line manager. She declined to say how much that could mean for Conexant in future revenue.

The market for home video game consoles is expected to reach about 35 million units in 2001, Carlson said.

Inclusion in the Xbox is a much-needed boost for Conexant. At the end of January another video game maker, Sega Enterprises Ltd., dropped its Dreamcast game machine, which included a Conexant dial-up modem.

But a report last month by Merrill Lynch & Co. analyst Henry Blodget said Microsoft will be at a disadvantage by the time the Xbox debuts this fall in Japan and then the U.S. By then, rival Sony will have shipped more than 15 million PlayStation 2 consoles worldwide, giving Sony a substantial lead.

The Xbox also will compete with Nintendo’s Game Cube, which also is set to launch this fall, Blodget said.

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Karen Alexander covers high technology for The Times. She can be reached at (714) 966-5637 or at karen.alexander@latimes.com.