Conexant spun off in 1999 from Rockwell, which at the time held a dominant
position in the voice and fax/modem chip market. Now Conexant looks as though it’s
going back to its voice heritage. The company is keen on
carving out a niche for its voice processing technology.
Consumer Electronics Show earlier this year, Conexant showed off its
proprietary far-field voice input processor SoC, which works on a voice
trigger, to turn a TV on or off even in a noisy room. The same voice
processing chip can be also used with VoIP applications such as Skype
TV, so that a user can talk to another person on Skype even while the TV
is blasting in high volume. Keys to such solutions are Conexant’s
far-field voice processing algorithms (acoustic echo cancellation, noise
reduction, beam forming as well as pre- and post-processing) and its
high performance 24-bit A-to-D converter.
Beyond voice processing, Conexant will focus on printer SoCs, headsets for gaming machines and video surveillance.
Chittipeddi noted that Conexant today has a solid customer base including Plantronics and Logitech.
also important to note that Conexant is avoiding the already crowded
market for consumer video products and set-tops, where competition is
intense and often dominated by Broadcom. The company’s new commitment is
to well-differentiated niche segments.
With its more focused
portfolio, Conexant is confident of recovery and managing its growth
more reasonably. Free of debt payments, “we can generate cash that we
can use for investing in our business, rather than for paying interest,”
What went wrong
There are a million reasons why and how things went wrong for Conexant. However, betting on the Internet boom and building its business on “networking” wasn’t one of them.
problem for Conexant in the late 1990’s was that the company’s modem
chips were built for the analog era. In order to compensate for this
weakness, the company went whole hog acquiring technologies that looked
useful for building the broadband future of the Internet. Of the nearly $2
billion Conexant spent during its shopping spree, the most
stunning was the acquisition of Maker Communications, a Massachusetts-based
software company whose chips worked with light-based technology. Maker
Communications had all of $13.6 million in annual sales at the time it
sold itself for nearly $1 billion in Conexant stock, according to
As all this happened, Conexant underestimated
the constant need for large capital that had to be fed to the companies
it had acquired. In 1999 and 2000, Conexant ended up issuing two
tranches of debt, totaling $1 billion.
Broadcom certainly benefitted by hiring away the best and brightest from Conexant, perhaps getting design, process, and customer ideas in the process.
The telecom bubble (not the dot-com bubble) was the big disaster. Stock dropped at Nortel from 100 to 1 dollar, with big 3x gains from $1 to $3 for the bottom fishers. That magnitude certainly highlighted the problem with the entire broadband vision.
1. Fiber Optic drivers and cable were put in place with great speed, giving 8x and then 4x again speed improvements, for the backbone systems from city to city, country to country. That was a 15 year glut in capacity, as nobody was working on "the last mile" at that time.
2. Instead of a 2x jump every 2 years roughly, like Moores law in chip world, these guys thought that they could create 8x improvement immediately, and then 4x more every few years, playing color games in fiber...which they did, as telecoms and cable people competed to get to each city, then each zone, and "some day" link up to my house and your house.
3. So all the old Conexant CEO's and VP's can blame the telecom industry for creating a huge short term bubble, and great opportunity for those that saw it coming. See Qualcomm who had cellular as well as internet IP in place, to weather the storm and cash in on the convergence.
5. What next for Conexant? The food is good in Newport, as is the sailing, so they should be able to hire a top notch CTO and CEO and CFO team that may take advantage of the lower debt load now, and maybe they can hire back a few of the best and the brightest and maybe change the brand name?
Having worked at the early days in both companies, I can tell you the two mgmt teams were miles apart. the Henry's were brash, disruptive, and forward looking, CNXT (names to remain nameless) were conservative and content with a thriving analog modem business which unknown to their near sightedness, looked like it was going up into the clouds, but actually was about to fall off a cliff.
Conexant had a choice to raise convertible debt or issue shares when they hit $12B in mkt cap. PMCS, AMCC etc issued shares and diluted and stock went down a bit as it was bubble time anyway. Conexant CFO decided to issue Convertible Debt and management cashed out of the stovk. Most debt did not convert and after a decade they stil have 100s of millions left to pay. Other comments in this article are spot on. How a great technology company can be mis-managed to bankruptcy, they need to learn from erstwhile Conexant senior leadership.
Actually, this was a canny strategic move by the CEO. Kudos. This company has been hobbled with excessive legacy debt for years, and a pre-pkg BK means they can finally move forward... with the help of a golden angel here or there. Not predicting miracles, but don't be shocked if they move to go public again in the intermediate term.
Wonderful analysis in a very short amount of time!
Sound like the Maker acquisition was one of the biggest blunders, coming when many people were trying to jump ahead of "the long boom" Wired and others predicted with bets in optical communications that went south in the dotcom bust.
All Conexant CEOs and presidents/co-presidents were responsible for the plight of the company. As a Rockwell spinoff, it had excellent product portfolio IP and product portfolio and a very solid engineering team with excellent DSP/analog technology. Dwight Decker, Dan Artusi, Scott Mercer, Sailesh Chittipeddi and Christian Scherp let the company down by making financial and strategic blunders. None of these CEOs very visionaries or had any technical depth or understood the markets well. Sad.
I have fond memories of working with some great Conexant engineers on a JV back in the late 90s/early 00s. It was a shame to see the company continue to shrink to such a level, much as my former employer did -- not only through market changes, but also due to simple divestiture. Those divestments may have brought in lots of cash and unleashed shareholder value, but when taken to extreme, the remaining so-called core business is often not sustainable.
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