NEWPORT BEACH, Calif.-- In a move to create a third independently-traded chip company from its operations, Conexant Systems Inc. here today announced plans to spin off and merge its wireless IC business with Alpha Industries Inc. to form a new supplier of integrated radio-frequency solutions for all major standards in 2.5 and 3G cellular phones.
Under an agreement between the two companies, Conexant will spin off its wireless business--including its gallium-arsenide (GaAs) wafer fab in Newbury Park, Calif.--which will then be immediately merged with Alpha Industries of Woburn, Mass. The new merged company will then purchase Conexant's semiconductor assembly, module manufacturing, and testing facility in Mexicali, Mexico, for $150 million in cash.
Under the plan, the new unnamed company will have 140 million fully-diluted shares outstanding, with current Alpha stockowners owning 33% and Conexant shareholders owning 67% of the new wireless chip supplier, once the merger transaction is completed. The transaction is expected to be finalized in the second quarter of 2002, with a new company name and stock-trading symbol being announced in the next few months.
Conexant said the move is part of an overall evolution plan to split itself into three independently-traded companies with each serving wireless mobile communications, broadband access, and Internet infrastructure applications.
Last year, Conexant announced it was spinning off operations serving Internet infrastructure applications into a new company (see Sept. 13, 2000, story). The Internet infrastructure chip company has been named Mindspeed Technologies Inc. A planned initial public offering for Mindspeed was postponed this year by Conexant when stock markets continued their sharp decline, but the IPO is now likely be held as soon as business conditions improve, according to the company.
After spinning off its wireless business in the new company with Alpha, Conexant said it will then concentrate on broadband access products.
"Conexant began life as a publicly traded company three years ago," said Dwight W. Decker, the chairman and chief executive officer of the Newport Beach chip supplier, which was spun out of Rockwell International Corp. "At that time, we were a broad-based supplier of semiconductor solutions for all important communications applications."
Decker said Conexant initially organized itself to concentrate on three "distinct growth markets," and, "in September 2000, we took the first step to structure our business in alignment with this market-focused strategy by announcing our plan to separate our Internet infrastructure business in order to sharpen its unique customer focus, enhance its competitive position, and realize its full growth potential," he said.
"Today we launch the next step in our strategy by announcing the separation of our mobile communications and broadband access businesses," Decker added "We are convinced that these three planned pure-play semiconductor companies--focused on delivering integrated solutions for mobile communications, broadband access and Internet infrastructure applications--will address the highest growth opportunities and provide Conexant shareowners, employees and customers with the greatest value over time."
The new wireless chip company will have executive offices in Woburn and Newport Beach. It will start out with 4,000 employees worldwide, according to Conexant and Alpha. The new company will also have a stock value of $3 billion, based on Alpha's share closing price of $21.20 per share on Friday (Dec. 14), the companies said.
Conexant's Decker will serve as chairman of the board at the new company. Alpha president and CEO David Aldrich will be chief executive officer of the merged the new company.
"This merger of two highly complementary wireless businesses will create the world's pure-play leader in mobile communications semiconductors, with the industry's broadest technology capability and most complete product offering," Aldrich declared. "For RF systems, this portfolio will include combination switch and filter products, multi-chip power-amplifier modules, and highly integrated transmit-and-receive devices for all major air-interface standards."
"For complete handset systems, the combined company will deliver the world's most comprehensive 2.5G GSM/GPRS solution, including the complete radio as well as all baseband processing, protocol stack and user interface software, plus complete reference designs and development platforms," he added. "For infrastructure applications, we are excited about the opportunity to leverage Conexant's integrated RF product and technology capabilities across Alpha's existing strong channel relationships and broad customer engagements."
Decker said Conexant's wireless business has grown from about $50 million in annual revenues five years ago to more than $250 million in 2001.
"The new company will have an expanded GaAs wafer manufacturing capability, including both PHEMT and InGaP HBT, for RF switch and power-amplifier applications," Decker said. "In addition, the company will have long-term assured access to Conexant's advanced SiGe and BiCMOS wafer manufacturing for integrated RF applications. The company will also own a high-volume, low-cost RF module assembly and test facility that has manufactured nearly 150 million power-amplifier modules to date."
Separately today, Conexant increased its estimate for revenues in the current fiscal quarter, primarily because of stronger-than-expected sales of wireless products. The company said its wireless revenues were 35% over the previous quarter instead of last month's estimate of 25% (see today's story).