Conexant to Offer Exchange
With its stock down 70% in the last year, Conexant Systems Inc. moved Tuesday to boost morale and keep key employees on the payroll by offering workers the chance to exchange worthless options they have on 30.2-million shares.
The Newport Beach communications chip maker also took the first step in its previously announced plan to transfer its basic in-house manufacturing overseas. The company said a Taiwanese manufacturer that has been making about half of Conexant’s basic semiconductors will take over all such production.
Conexant also said the Chinese government has certified one of its high-speed communications technologies for use in three manufacturing and home computer modem products.
The series of actions, however, did little to impress Wall Street. The company’s stock lost 57 cents to close at $11.34 a share on Nasdaq.
Conexant, which lost $744.9 million in its fiscal third quarter as revenue plunged 62% to $200.1 million, makes chips used in computers, mobile phones and fiber-optic networking equipment.
Like rival Broadcom Corp. in Irvine and others, Conexant is taking steps to shore up morale. Stock options are a key part of salary packages in the industry, and employees count on cashing in options to augment their salaries. But no one cashes in options when the exercise price--the cost of buying a share--is higher than the stock price.
Under its exchange program, employees and board members can replace options that have an exercise price of $25 or higher with new options. The new exercise price will be the closing price of the stock on April 3, said Conexant spokeswoman Gwen Carlson.
The company’s stock hasn’t traded above $20 a share since last December. During the run-up in high-tech stocks, Conexant’s stock--and the exercise price of its options--rose to $124.42 a share in February, 2000.
Few, if any, of the 1,900 employees that Conexant dismissed this year will be eligible to exchange options, Carlson said.
As part of a major shift in its manufacturing strategy, Conexant will transfer the manufacturing of its digital CMOS wafers, basic semiconductors, to United Microelectronics Corp. in Hsinchu, Taiwan. UMC, which has been making integrated circuits for Conexant since 1998, now will handle nearly all the CMOS manufacturing for its personal networking business. Conexant’s Internet equipment business, Mindspeed Technologies, is still negotiating to have its CMOS manufacturing handled by contractors, Carlson said.
Conexant’s Newport Beach manufacturing facility will continue to make specialty chips, Carlson said. The manufacturing change was anticipated in the previous layoffs, which included about 180 Newport Beach factory workers, she said.
