Conexant Reports Sequential Revenue Growth of 14 Percent for First Quarter of Fiscal Year 2002; Wireless Communications Increases 42 Percent, Broadband Access Up 8 Percent.

Business Editors and High-Tech Writers

NEWPORT BEACH, Calif.--(BUSINESS WIRE)--Jan. 16, 2002

Conexant Systems, Inc. (Nasdaq:CNXT) today announced revenues of $229.5 million for the first quarter of fiscal 2002, which ended Dec. 28, 2001.

Revenues increased 14 percent from fourth quarter fiscal 2001 revenues of $201.0 million, exceeding the 10 percent sequential growth expectation established in the company's mid-December updated outlook. First fiscal quarter revenues were driven by strong performance in the company's wireless communications business, which recorded sequential growth of 42 percent, and supported by solid sequential growth in its broadband access business of 8 percent.

The pro forma net loss for the first quarter was $107.7 million, or $0.42 per share, an improvement of 21 percent over the pro forma net loss of $136.6 million, or $0.54 per share, in the prior quarter. Pro forma results exclude amortization of intangible assets and special charges.

"During the course of the quarter, as our business strengthened progressively, we increased our revenue guidance twice, first from our original expectation of 3 to 5 percent growth to 5 to 7 percent," said Dwight W. Decker, Conexant chairman and chief executive officer. "In December we again raised our outlook, this time to 10 percent sequential growth. Exceeding these expectations, Conexant's first fiscal quarter sequential revenue increased by 14 percent, driven primarily by the sequential growth of 42 percent in our wireless communications business, a result of our strong competitive position in power amplifiers, radio-frequency subsystems, and complete GSM system solutions.

"Our broadband access business recorded growth of 8 percent sequentially, our second consecutive quarter of increased broadband-access revenues, driven by strong demand for our broadcast video decoder/encoder and set-top box solutions, as well as revenue traction in ADSL and cable modems. Mindspeed Technologies, which experienced the revenue decline we anticipated, continued to operate in a weak Internet infrastructure market environment, although we believe this business is now clearly showing the initial signs of recovery."

Operating expenses were reduced for the third consecutive quarter, resulting in a total decline of nearly 25 percent from the expense level of three quarters ago. On a pro forma basis, the level of the company's operating loss improved 23 percent sequentially, significantly better than the 15 percent guidance provided in October. Working capital management yielded days sales outstanding (DSOs) of less than 50, an improvement of 20 percent over the prior quarter, and inventory turns improved 10 percent sequentially, to 5.7 times.

In December, Conexant announced its intent to merge its wireless business with Alpha Industries Inc. The transaction is expected to create the pure-play world leader in radio frequency and complete semiconductor system solutions for mobile communications applications. Documents have been filed with the Internal Revenue Service requesting a tax-free distribution of assets in conjunction with this transaction, and pre-merger documents have been filed with the Department of Justice and the Federal Trade Commission. The transaction is expected to be completed in the second calendar quarter of this year.

As previously announced, the new merged wireless semiconductor company will purchase Conexant's Mexicali, Mexico semiconductor assembly, module manufacturing and test facility for $150 million in cash. In addition, also as previously announced, $150 million in cash on deposit with a key foundry partner will be refunded to Conexant by mid-year. These two actions are expected to add $300 million of additional liquidity for the company by the middle of 2002.

First Quarter Product and Technology Highlights

Wireless Communications

The company's wireless communications business introduced the world's first quad-band global system for mobile communications (GSM) power amplifier (PA) module, as well as a new family of PA modules for code division multiple access (CDMA) cellular handsets, personal communications system (PCS) and wireless local loop applications.

The wireless business also announced an embedded stack development platform for its Bluetooth(TM) wireless technology system solution. Tality Corp., Impulsesoft and Stonestreet One selected this development platform, which allows them to embed their own upper layer protocol stack and applications directly onto the Conexant baseband controller.

Broadband Access

Broadband access highlights included the first shipments of the next-generation single-chip cable modem and supporting reference designs. In addition, seven customers received CableLabs(R) DOCSIS 1.0 certification, and three customers received tComLabs(R) EuroDOCSIS certification for new products based on Conexant's InfoSurge(TM) single-chip cable modem.

Broadband access introduced a single-chip dual-stream demodulator for satellite receiver systems. This device is ideal for applications such as personal video recorders (PVRs) that process dual incoming video streams to simultaneously play and record two television programs.

The broadband access business also expanded its portfolio of products that enable the PC home entertainment center. The peripheral component interconnect (PCI) audio/video broadcast decoder is the industry's first 10-bit video solution and the first to support worldwide broadcast audio decoding. In the home networking powerline market, the company introduced an integrated physical-layer transceiver device that enables up to 14 megabits-per-second networking rates over a home's existing electrical wiring.

Mindspeed Technologies

Mindspeed Technologies(TM) introduced two 144 x 144 crosspoint switches for next-generation, high-capacity optical cross-connect switching systems. One version includes integrated clock-and-data recovery (CDR) and both feature input equalization, offering customers crosspoint switches with the highest performance and lowest power consumption in the industry.

Mindspeed also announced two serializer/deserializer (SerDes) transceivers for high-speed networking systems. The Octal SkyRail(TM) is the industry's fastest and lowest power eight-channel complementary metal oxide semiconductor (CMOS) SerDes transceiver, enabling an unprecedented 27.2 Gbps of bandwidth over all eight channels and consuming only 1.6 watts of power. The new Quad SkyRail extends Mindspeed's broad SerDes family into 10 Gigabit Ethernet specific-systems, offering data rates up to 3.4 Gbps per channel and delivering the performance and reliability required for carrier-class and enterprise applications.

Process Technology

The company demonstrated a silicon germanium (SiGe) wafer fabrication process technology that features the highest performance reported to date for silicon-based transistors. Conexant's SiGe200 process will bring the cost advantages of silicon technology to a broad range of highly integrated optical networking devices, and will provide low noise, low power and improved linearity benefits for wireless communications devices.

Second Quarter Fiscal 2002 Outlook

"We made solid progress this past quarter, delivering higher sequential revenue growth than originally planned as a result of market share gains across a number of key segments and revenue traction from the launch of new products," Decker said.

"We are entering our March quarter, a seasonally weak period, with a sequentially higher backlog. As a result, we expect to build on our higher first fiscal quarter revenue base. In particular, we anticipate that both our wireless and broadband businesses will be flat to slightly up on a sequential basis," Decker continued. "For Mindspeed, we indicated 90 days ago that we expected the December-ending quarter to represent the bottom for this business. Today, with improvements in both backlog and customer order trends, we believe this business will now begin its recovery with sequential revenue growth of more than 10 percent.

"In total, despite a seasonally weak environment, we expect Conexant's second fiscal quarter revenues to be up modestly over the prior quarter.

"From an operations perspective, we anticipate that gross margins will improve by 3 to 5 percentage points, primarily as a result of higher manufacturing utilization, and we plan to hold operating expenses approximately flat. In total, we expect to deliver a further 10 percent sequential improvement in the level of our pro forma operating loss," Decker concluded.

Note to Editors, Analysts and Investors

The Conexant first quarter fiscal 2002 conference call will take place Wednesday, Jan. 16, 2002, at 2 p.m. PST, 5 EST. To listen to the conference call via telephone, call 800/680-9685 (domestic) or 334/323-9854 (international), security code: Conexant. To listen via the Internet, visit www.conexant.com.

Playback of the conference call will begin at 5 p.m. PST on Wednesday, Jan. 16, and end at 5 p.m. PST on Friday, Jan. 18. The replay will be available on Conexant's Web site at www.conexant.com, or by calling 800/858-5309 (domestic) or 334/323-9869 (international), access code: 40313, pass code: 16809.

About Conexant

Conexant Systems, Inc. is a worldwide leader in semiconductor system solutions for communications applications. Conexant leverages its expertise in mixed-signal processing to deliver integrated systems and semiconductor products through three separate businesses that address the wireless communications, broadband access and Internet infrastructure markets.

Conexant's wireless communications business is focused on providing power amplifiers, radio-frequency subsystems and complete systems solutions. The broadband access business develops and delivers integrated solutions that enable digital entertainment and information networks for the home and small office. Mindspeed Technologies, the company's Internet infrastructure business, designs, develops and sells a complete portfolio of semiconductor networking solutions that facilitate the aggregation, transmission and switching of data, video and voice from the edge of the Internet to linked metropolitan area networks and long-haul networks.

Conexant, headquartered in Newport Beach, Calif., delivered revenues of $1.1 billion for fiscal 2001, and has approximately 6,900 employees worldwide. The company is a member of the S&P 500 and Nasdaq-100 indices. To learn more, visit us at www.conexant.com or www.mindspeed.com.

Safe Harbor Statement

This press release contains statements relating to future results of Conexant (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: global economic and market conditions, such as the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions; the availability and extent of utilization of manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; fluctuations in manufacturing yields; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the successful planned disposition of certain assets; the successful separation of the company's broadband access and Internet infrastructure businesses; the successful merger of the company's wireless communications business with Alpha Industries, Inc.; the ability to attract and retain qualified personnel; labor relations of the company, its customers and suppliers; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to the security and safety risks of our employees and of company facilities and those risks and uncertainties detailed from time to time in the company's Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Note to Editors: Conexant and Mindspeed are trademarks of Conexant Systems, Inc. Other brands and names contained in this release are the property of their respective owners.

                        Conexant Systems, Inc.
       Pro Forma Consolidated Condensed Statements of Operations
          (unaudited, in thousands, except per share amounts)

                                          Three Months Ended
                             Dec 31,   Sept 30,   June 30,   Dec 31,
                              2001       2001       2001      2000

Net revenues                $229,519   $201,048   $200,146   $410,361
Cost of goods sold           165,895    160,534    228,998    296,603

Gross margin                  63,624     40,514    (28,852)   113,758

Operating expenses:
  Research and development   110,022    116,979    115,230    116,852
  Selling, general and
   administrative             55,041     55,269     75,371     79,575

  Total operating expenses   165,063    172,248    190,601    196,427

Pro forma operating loss    (101,439)  (131,734)  (219,453)   (82,669)

Other income (expense), net   (5,230)    (4,458)      (620)       644

Pro forma loss before
 income taxes               (106,669)  (136,192)  (220,073)   (82,025)

Provision (benefit)
 for income taxes              1,000        445        367    (24,608)

Pro forma loss before
 extraordinary item        $(107,669) $(136,637) $(220,440)  $(57,417)

Pro forma loss per
 share before
 extraordinary item,
 basic and diluted         $   (0.42) $   (0.54) $   (0.89)  $  (0.24)

Number of shares
 used in per share
 computation                 254,362    252,427    246,777    236,119

Pro forma operating loss, pro forma loss before extraordinary
item, and pro forma loss per share before extraordinary item exclude
the amortization of intangible assets, special charges, stock
compensation and certain non-operating gains and losses. We believe
these measures of earnings provide a better understanding of our
underlying operating results and we use these measures internally to
evaluate our underlying operating performance. These measures of
earnings are not in accordance with, or an alternative for, generally
accepted accounting principles and may be different from pro forma
measures used by other companies.

A reconciliation of pro forma loss before extraordinary item
presented above with our loss before extraordinary item as determined
under generally accepted accounting principles is presented in the
following table.


                        Conexant Systems, Inc.
                Reconciliation of Pro Forma Loss Before
                Extraordinary Item to Reported Results
          (unaudited, in thousands, except per share amounts)

                                        Three Months Ended
                             Dec 31,   Sept 30,   June 30,   Dec 31,
                              2001      2001       2001       2000

Pro forma loss before
 extraordinary item        $(107,669) $(136,637) $(220,440) $ (57,417)

Amortization of intangible
 assets and special items:
 Amortization of
  intangible assets           89,607     89,013     85,307     82,304
   Special charges(1)          1,000     26,255    432,462      7,927
   Stock compensation          2,327      2,102      2,585      2,487
   Equity in losses of equity
    method investees             749         --         --         --
   Gains on sales of
    certain investments
    and assets                (2,537)   (23,251)        --         --
   Write-down of investments   5,675      8,051         --      5,000
   Write-off of terminated
    credit facility costs         --         --      4,146         --
   Debt conversion costs          --         --         --     42,584
   Income taxes                   --         --         --      9,141

Loss before extraordinary
 item                      $(204,490) $(238,807) $(744,940) $(206,860)

Loss per share, basic and diluted:
  Pro forma loss before
   extraordinary item      $   (0.42)  $ (0.54)  $   (0.89)  $  (0.24)
  Amortization of
   intangible assets
   and special items           (0.38)    (0.41)      (2.13)     (0.64)

  Loss before extraordinary
   item                     $  (0.80)  $ (0.95)  $   (3.02)  $  (0.88)

(1)  Special charges consist of asset impairments, restructuring
     charges, separation costs incurred in connection with the
     proposed separation of our Personal Networking and Mindspeed
     Technologies businesses and losses on the disposal of certain
     assets.


                        Conexant Systems, Inc.
            Consolidated Condensed Statements of Operations
          (unaudited, in thousands, except per share amounts)

                                     Three Months Ended
                      Dec 31,      Sept 30,      June 30,      Dec 31,
                       2001          2001          2001          2000

Net revenues          $229,519      $201,048     $200,146    $410,361
Cost of goods sold     166,003       160,534      228,998     296,603

Gross margin            63,516        40,514      (28,852)    113,758

Operating expenses:
  Research and
   development         111,594       118,450      117,128     118,538
  Selling, general
   and administrative   55,688        55,900       76,058      80,376
  Amortization of
   intangible assets    89,607        89,013       85,307      82,304
  Special charges        1,000        26,255      432,462       7,927

    Total operating
     expenses          257,889       289,618      710,955     289,145

Operating loss        (194,373)     (249,104)    (739,807)   (175,387)

Debt conversion costs       --            --           --     (42,584)
Other income
 (expense), net         (9,117)       10,742       (4,766)     (4,356)

Loss before income
 taxes                (203,490)     (238,362)    (744,573)   (222,327)

Provision (benefit)
 for income taxes        1,000           445          367     (15,467)

Loss before
 extraordinary item   (204,490)     (238,807)    (744,940)   (206,860)

Extraordinary gain
 on extinguishment
 of debt, net of income
 taxes of $4,426            --            --           --       7,284

Net loss             $(204,490)    $(238,807)   $(744,940)  $(199,576)

Loss per share,
 basic and diluted:
 Loss before
  extraordinary item $   (0.80)    $   (0.95)   $   (3.02)  $   (0.88)
 Extraordinary item         --            --           --        0.03

    Net loss         $   (0.80)    $   (0.95)   $   (3.02)  $   (0.85)

Number of shares
 used in per share

 computation           254,362       252,427      246,777     236,119


                        Conexant Systems, Inc.
                 Consolidated Condensed Balance Sheets
                       (unaudited, in thousands)

                                     December 31,      September 30,
                                        2001              2001

                                ASSETS
Current assets:
  Cash, marketable securities
   and refundable deposits(1)        $ 436,082         $ 338,920
  Receivables, net                     120,233           133,685
  Inventories                          116,243           122,397
  Deferred income taxes                 77,369            75,710
  Other current assets                  44,868            54,639

          Total current assets         794,795           725,351

Property, plant and equipment, net     360,025           387,433
Goodwill and intangible assets, net  1,167,991         1,251,253
Other assets                           113,940           267,999
Deferred income taxes                  184,095           183,444

          Total assets              $2,620,846        $2,815,480

                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                  $  111,483        $   98,141
  Deferred revenue                      21,531            27,149
  Accrued compensation and benefits     58,933            50,407
  Other current liabilities             82,790           107,300

          Total current liabilities    274,737           282,997

Convertible subordinated notes         709,849           709,849
Other long-term liabilities             56,256            49,458

          Total liabilities          1,040,842         1,042,304

Shareholders' equity                 1,580,004         1,773,176

          Total liabilities and
          shareholders' equity      $2,620,846        $2,815,480

(1) Includes a $150 million refundable deposit expected to be received
    by the middle of calendar year 2002, which was previously included
    in other assets.


                        CONEXANT SYSTEMS, INC.
                        Selected Corporate Data
                       (unaudited, in thousands)

                                      Three Months Ended
                          Dec. 31,      Sept. 30,         Dec. 31,
                           2001           2001             2000
                     % of             % of             % of
                     Revenue Revenue  Revenue Revenue  Revenue Revenue

Revenue by Business

Mindspeed Technologies   6% $ 14,178    11% $ 22,031    40% $165,905
Broadband Access        54%  123,024    57%  113,792    39%  160,619
Wireless Communications 40%   92,317    32%   65,225    21%   83,837


Revenue by Region
Americas                12% $ 28,877    19% $ 38,494    39% $158,966
Europe                   9%   19,950     8%   16,743    15%   60,817
Japan                    6%   13,312     8%   15,997     6%   26,332
Asia-Pacific            73%  167,380    65%  129,814    40%  164,246


                                     Three Months Ended
                       December 31,     September 30,     December 31,
Other Data:               2001             2001              2000

Depreciation(1)        $ 26,033         $ 25,912           $ 47,691
Capital expenditures      8,088            9,080             65,665

(1)  Does not include amortization of intangible assets.