Prospects Dimming on Conexant IPO
Conexant Systems Inc. is unlikely to spin off its Internet infrastructure division with an initial public offering as planned this month, industry experts say.
Conexant, a Newport Beach maker of high-speed communications chips, saw its stock jump 42% in September after it disclosed plans to spin off its fastest-growing business unit in conjunction with a public offering.
In a document filed in November with the Securities and Exchange Commission, it said it intends to sell 20% of the shares in the new company and eventually distribute the remainder to Conexant shareholders. The idea is to unlock shareholder value by allowing the promising Internet infrastructure business to shine on its own.
But Conexant officials have kept a low profile since and have not met with analysts to market the new company in so-called road shows that are customary in the weeks preceding an offering.
Conexant officials declined to comment publicly on the matter.
Even if the public offering were to be postponed or canceled, Conexant still could spin off the unit by distributing all the new company’s stock to existing Conexant shareholders.
Several analysts said they continue to believe that creating a separate company out of the unit is the right thing to do, but they acknowledged that the current market climate makes an initial offering uncertain for now.
“I think there is definitely some question about whether it will happen” as scheduled, said analyst Nathaniel Cohn of Goldman Sachs. Nonetheless, Cohn said, canceling or postponing the offering could put additional pressure on Conexant’s stock.
Conexant stock lost 6 cents Wednesday to close at $19.81 a share on Nasdaq. The price has plunged 83% from its trading high of $132.50 last February. The company, which itself was spun off from Rockwell International Corp. two years ago, will report earnings for its fiscal first quarter, ended Dec. 31, after the market closes today.
Conexant’s chief executive, Dwight W. Decker, warned in late December that the company expects to report a loss on sharply lower revenue than previously predicted. Conexant’s revised outlook calls for a loss of 5 cents to 10 cents a share, primarily because of the steep drop in consumer demand for personal computers.
Analysts on average expect the company to post a loss of 7 cents a share, according to a First Call/Thompson Financial survey.
In revising Conexant’s its quarterly projections, Decker said the Internet infrastructure business would be down modestly because networking companies like Cisco Systems Inc. have placed fewer orders this quarter.
