##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 1, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 001-31650
 MINDSPEED TECHNOLOGIES, INC.
  Delaware
    
    01-0616769(State of incorporation)
    
    (I.R.S. EmployerIdentification No.)
 4000 MacArthur Boulevard, East TowerNewport Beach, California
    
    92660-3095(Address of principal executive offices)
    
    (Zip code)
 (949) 579-3000
 Yes þ No o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
 Form 10-Q,
 
    
    the ability of our relationships with network infrastructure original equipment
manufacturers to facilitate early adoption of our products, enhance our ability to obtain
design wins and encourage adoption of our technology in the industry;
 
    
    the growth prospects for the network infrastructure equipment and communications
semiconductors markets, including increased demand for network capacity, the upgrade and
expansion of existing networks, and the build-out of networks in developing countries;
 
    
    our belief that our diverse portfolio of semiconductor solutions has positioned us to
capitalize on some of the most significant trends in telecommunications spending;
 
    
    our plans to make substantial investments in research and development and participate
in the formulation of industry standards;
 
    
    our belief that we can maximize our return on our research and development spending by
focusing our investment in what we believe are key growth markets;
 
    
    our ability to achieve design wins and convert design wins into revenue;
 
    
    the continuation of intense price and product competition, and the resulting declining
average selling prices for our products;
 
    
    the impact of changes in customer purchasing activities, inventory levels and inventory
management practices;
 
    
    the challenges of shifting any operations or labor offshore, including the likelihood
of competition in offshore markets for qualified personnel;
 
    
    our ability to achieve revenue growth, regain and sustain profitability and positive
cash flows from operations;
 
    
    our plans to reduce operating expenses, the amount and timing of any such expense
reductions, and its effects on cash flow;
 
    
    our anticipation that we will not pay a dividend in the foreseeable future;
 
    
    the dependence of our operating results on our ability to develop and introduce new
products and enhancements to existing products on a timely basis;
 
    
    the continuation of a trend toward industry consolidation and the effect it could have
on our operating results;
  2




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
    
    the sufficiency of our existing sources of liquidity and expected sources of cash to
repay the remaining $15.0 million in senior convertible debt and fund our operations,
research and development efforts, anticipated capital expenditures, working capital and
other financing requirements for the next 12 months;
 
    
    the circumstances under which we may need to seek additional financing, our ability to
obtain any such financing and any consideration of acquisition opportunities;
 
    
    our expectation that our provision for income taxes for fiscal 2010 will principally
consist of income taxes related to our foreign operations;
 
    
    our expectations with respect to our recognition of income tax benefits in the future;
 
    
    our restructuring plans, including timing, expected workforce reductions, the closure
of the Dubai facility, the expected cost savings under our restructuring plans and the uses
of those savings, the timing and amount of payments to complete the actions, the source of
funds for such payments, the impact on our liquidity and the resulting decreases in our
research and development and selling, general and administrative expenses, and the amounts
of future charges to complete our restructuring plans;
 
    
    our plans with respect to future actions to reduce operating expenses and/or increase
revenues;
 
    
    our beliefs regarding the effect of the disposition of pending or asserted legal
matters and the possibility of future legal matters;
 
    
    our acquisition strategy, the means of financing such a strategy, and the impact of any
past or future acquisitions, including the impact on revenue, margin and profitability;
 
    
    our plans relating to our use of stock-based compensation, the effectiveness of our
incentive compensation programs and the expected amounts of stock-based compensation
expense in future periods;
 
    
    our belief that the financial stability of suppliers is an important consideration in
our customers purchasing decisions;
 
    
    the effects of a downturn in the semiconductor industry and the general economy at
large, including the impact of slower economic activity, an increase in bankruptcy filings,
concerns about inflation and deflation, increased energy costs, decreased consumer
confidence, reduced corporate profits and capital spending, adverse business conditions and
liquidity concerns in the wired and wireless communications markets, recent international
conflicts and terrorist and military activity and the impact of natural disasters and
public health emergencies on our revenue and results of operation;
 
    
    the impact of reductions, delays and cancellation of orders from key customers given
our dependence on a relatively small number of end customers and distributors for a
significant portion of our revenue and our lack of long term purchase commitments;
 
    
    the impact of volatility in the stock market on the market price of our common stock;
 
    
    the impact on our business if we fail to comply with the minimum listing requirements
for continued quotation on the Nasdaq Global Market;
 
    
    the effect of changes in the amount of research coverage of our common stock, changes
in earnings estimates or buy/sell recommendations by analysts and changes in investor
perception of us and the industry in which we operate;
 
    
    the effect of shifts in our product mix and the effect of maturing products;
 
    
    the continued availability and costs of products from our suppliers;
  3




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
    
    the value of our intellectual property, and our ability to continue recognizing
patent-related revenues from the sale or licensing of our intellectual property and our
plans to pursue our current intellectual property strategy;
 
    
    market demand for our new and existing products and our ability to increase our
revenues;
 
    
    our intentions with respect to inventories that were previously written down and the
effects on future demand and market conditions on inventory write-downs;
 
    
    our beliefs regarding the end-markets for sales of products to original equipment
manufacturers and third-party manufacturing service providers in the Asia-Pacific region;
 
    
    our intention to continue to expand our international business activities, including
expansion of design and operations centers abroad;
 
    
    our expectations regarding fluctuations in our growth patterns; and
 
    
    the impact of recent accounting pronouncements and the adoption of new accounting
standards.
  
    
    cash requirements and terms and availability of financing;
 
    
    future operating losses;
 
    
    worldwide political and economic uncertainties and specific conditions in the markets
we address;
 
    
    fluctuations in the price of our common stock and our operating results;
 
    
    loss of or diminished demand from one or more key customers or distributors;
 
    
    our ability to attract and retain qualified personnel;
 
    
    constraints in the supply of wafers and other product components from our third-party
manufacturers;
 
    
    pricing pressures and other competitive factors;
 
    
    successful development and introduction of new products;
 
    
    doing business internationally and our ability to successfully and cost effectively
establish and manage operations in foreign jurisdictions;
 
    
    industry consolidation;
 
    
    order and shipment uncertainty;
 
    
    our ability to obtain design wins and develop revenues from them;
 
    
    lengthy sales cycles;
 
    
    the expense of and our ability to defend our intellectual property against infringement
claims by others;
 
    
    product defects and bugs;
  4




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
    
    business acquisitions and investments; and
 
    
    our ability to utilize our net operating loss carryforwards and certain other tax
attributes.
  ® ®
  5




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##### 



MINDSPEED TECHNOLOGIES, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Condensed Balance Sheets  January 1, 2010 and October 2, 2009
    
    
    7Consolidated Condensed Statements of Operations  Three Months Ended January 1, 2010 and
January 2, 2009
    
    
    8Consolidated Condensed Statements of Cash Flows  Three Months Ended January 1, 2010 and
January 2, 2009
    
    
    9Notes to Consolidated Condensed Financial Statements
    
    
    10Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 6. Exhibits
    
    
    49Signature
    
    
    50Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   6




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Balance Sheets
 (unaudited, in thousands, except per share amounts)
 January 1,
    
    
    October 2,2010
    
    
    2009As Adjusted -Note 5ASSETSCurrent AssetsCash and cash equivalents
    
    $
    11,481
    
    
    $
    20,891Receivables, net of allowance for doubtful
accounts of $144 at both January 1, 2010
and October 2, 2009
    
    
    12,743
    
    
    
    7,662Inventories
    
    
    9,395
    
    
    
    10,902Deferred tax assets  current
    
    
    1,528
    
    
    
    1,574Prepaid expenses and other current assets
    
    
    2,801
    
    
    
    2,529Total current assets
    
    
    37,948
    
    
    
    43,558Property, plant and equipment, net
    
    
    11,639
    
    
    
    11,018License agreements, net
    
    
    6,824
    
    
    
    6,505Other assets
    
    
    1,291
    
    
    
    1,382Total assets
    
    $
    57,702
    
    
    $
    62,463LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    7,673
    
    
    $
    6,338Accrued compensation and benefits
    
    
    5,862
    
    
    
    5,788Accrued income tax
    
    
    413
    
    
    
    525Deferred income on sales to distributors
    
    
    5,063
    
    
    
    2,604Deferred revenue
    
    
    796
    
    
    
    1,106Restructuring
    
    
    925
    
    
    
    448Convertible senior notes  short term
    
    
    
    
    
    
    10,349Other current liabilities
    
    
    2,457
    
    
    
    2,177Total current liabilities
    
    
    23,189
    
    
    
    29,335Convertible senior notes  long term
    
    
    13,513
    
    
    
    13,415Other liabilities
    
    
    1,408
    
    
    
    823Total liabilities
    
    
    38,110
    
    
    
    43,573Commitments and contingencies (Note 6)
    
    
    
    
    
    
    Stockholders EquityPreferred stock, $0.01 par value: 25,000
shares authorized; no shares issued
or outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value,
100,000 shares authorized; 29,056 (January
1, 2010) and 28,756 (October 2,
2009) issued and outstanding shares
    
    
    291
    
    
    
    288Additional paid-in capital
    
    
    297,283
    
    
    
    296,333Accumulated deficit
    
    
    (263,023
    )
    
    
    (262,863
    )Accumulated other comprehensive loss
    
    
    (14,959
    )
    
    
    (14,868
    )Total stockholders equity
    
    
    19,592
    
    
    
    18,890Total liabilities and stockholders equity
    
    $
    57,702
    
    
    $
    62,463
   7




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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Operations
 (unaudited, in thousands, except per share amounts)
 Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009As Adjusted -Note 5Net revenues:Products
    
    $
    37,026
    
    
    $
    27,731Intellectual Property
    
    
    
    
    
    
    3,000Total net revenues
    
    
    37,026
    
    
    
    30,731Cost of goods sold
    
    
    13,463
    
    
    
    9,749Gross margin
    
    
    23,563
    
    
    
    20,982Operating expenses:Research and development
    
    
    12,588
    
    
    
    13,344Selling, general and administrative
    
    
    9,634
    
    
    
    11,123Special charges
    
    
    860
    
    
    
    2,305Total operating expenses
    
    
    23,082
    
    
    
    26,772Operating income (loss)
    
    
    481
    
    
    
    (5,790
    )Interest expense
    
    
    (630
    )
    
    
    (913
    )Other income, net
    
    
    5
    
    
    
    1,042Loss before income taxes
    
    
    (144
    )
    
    
    (5,661
    )Provision for income taxes
    
    
    16
    
    
    
    90Net loss
    
    $
    (160
    )
    
    $
    (5,751
    )Net loss per share, basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.25
    )Weighted-average number of shares used in per share computation
    
    
    28,500
    
    
    
    23,407
   8




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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Cash Flows
 (unaudited, in thousands)
 Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009As Adjusted -Note 5Cash Flows From Operating ActivitiesNet loss
    
    $
    (160
    )
    
    $
    (5,751
    )Adjustments to reconcile net loss to net cash provided by /
(used in) operating activities, net of effects of
acquisitions:Depreciation and amortization
    
    
    1,431
    
    
    
    1,650Special charges
    
    
    860
    
    
    
    2,305Stock-based compensation
    
    
    940
    
    
    
    967Inventory provisions
    
    
    963
    
    
    
    486Gain on debt extinguishment
    
    
    
    
    
    
    (1,121
    )Amortization of debt discount on convertible senior notes
    
    
    249
    
    
    
    446Other non-cash items, net
    
    
    197
    
    
    
    176Changes in assets and liabilities:Receivables
    
    
    (5,097
    )
    
    
    5,837Inventories
    
    
    544
    
    
    
    (2,701
    )Accounts payable
    
    
    714
    
    
    
    (3,900
    )Deferred revenue
    
    
    2,459
    
    
    
    (743
    )Restructuring
    
    
    (395
    )
    
    
    (956
    )Accrued expenses and other current liabilities
    
    
    (365
    )
    
    
    (175
    )Other
    
    
    (359
    )
    
    
    213Net cash provided by / (used in) operating activities
    
    
    1,981
    
    
    
    (3,267
    )Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (808
    )
    
    
    (2,175
    )Net cash used in investing activities
    
    
    (808
    )
    
    
    (2,175
    )Cash Flows From Financing ActivitiesExtinguishment of convertible debt
    
    
    (10,500
    )
    
    
    (17,320
    )Payments made on capital lease obligations
    
    
    (151
    )
    
    
    Borrowings under line of credit
    
    
    7,000
    
    
    
    Payments made on borrowings under line of credit
    
    
    (7,000
    )
    
    
    Debt issuance costs
    
    
    
    
    
    
    (244
    )Exercise of stock options and warrants
    
    
    44
    
    
    
    Net cash used in financing activities
    
    
    (10,607
    )
    
    
    (17,564
    )Effect of foreign currency exchange rates on cash
    
    
    24
    
    
    
    3Net decrease in cash and cash equivalents
    
    
    (9,410
    )
    
    
    (23,003
    )Cash and cash equivalents at beginning of period
    
    
    20,891
    
    
    
    43,033Cash and cash equivalents at end of period
    
    $
    11,481
    
    
    $
    20,030
   9




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MINDSPEED TECHNOLOGIES, INC.
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  1. Basis of Presentation and Significant Accounting Policies
    Basis of Presentation
  10




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Fiscal Periods
 Recent Accounting Standards
 .
  Income Taxes
 Concentrations 
  11




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Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009Customer A
    
    
    16
    %
    
    
    18
    %Customer B
    
    
    11
    %
    
    
    13
    %Customer C
    
    
    11
    %
    
    
    9
    %
  January 1,
    
    
    October 2,2010
    
    
    2009Customer A
    
    
    8
    %
    
    
    19
    %Customer B
    
    
    2
    %
    
    
    10
    %Customer D
    
    
    22
    %
    
    
    4
    %Customer E
    
    
    18
    %
    
    
    0
    %Customer F
    
    
    10
    %
    
    
    6
    %Customer G
    
    
    4
    %
    
    
    10
    %
 Supplemental Cash Flow Information
 2. Supplemental Financial Statement Data
 Inventories
  January 1,
    
    
    October 2,2010
    
    
    2009Work-in-process
    
    $
    3,513
    
    
    $
    4,124Finished goods
    
    
    5,882
    
    
    
    6,778Total inventories
    
    $
    9,395
    
    
    $
    10,902
  Deferred Income on Shipments to Distributors
  January 1,
    
    
    October 2,2010
    
    
    2009Deferred revenue on shipments to distributors
    
    $
    5,592
    
    
    $
    2,984Deferred cost of inventory on shipments to distributors
    
    
    (588
    )
    
    
    (422
    )Reserves
    
    
    59
    
    
    
    42Deferred income on sales to distributors
    
    $
    5,063
    
    
    $
    2,604
  12




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##### Table of Contents



Comprehensive Loss
  Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009As Adjusted -Note 5Net loss
    
    $
    (160
    )
    
    $
    (5,751
    )Foreign currency translation adjustments, net of tax
    
    
    (92
    )
    
    
    (341
    )Comprehensive loss
    
    $
    (252
    )
    
    $
    (6,092
    )
  Revenues by Product Line
  Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009Multiservice access DSP products
    
    $
    13,955
    
    
    $
    10,789High-performance analog products
    
    
    11,580
    
    
    
    10,519WAN communications products
    
    
    11,491
    
    
    
    6,423Intellectual property
    
    
    
    
    
    
    3,000Total net revenues
    
    $
    37,026
    
    
    $
    30,731
 Revenues by Geographic Area
  Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009Americas
    
    $
    8,618
    
    
    $
    12,319Asia-Pacific
    
    
    26,056
    
    
    
    14,294Europe, Middle East and Africa
    
    
    2,352
    
    
    
    4,118Total net revenues
    
    $
    37,026
    
    
    $
    30,731
  3. Fair Value Measurements
   
    
    Level 1uses unadjusted quoted prices that are available in active markets for
identical assets or liabilities. The Companys Level 1 assets include investments in money
market funds.
 
    
    Level 2uses inputs other than quoted prices included in Level 1 that are either
directly or indirectly observable through correlation with market data. These include
quoted prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or liabilities in markets
that are not active; and inputs to valuation models or other pricing methodologies that do
not require significant judgment because the inputs used in the model, such as interest rates
and volatility, can be corroborated by readily observable market data. The Companys Level 2
liabilities include convertible senior notes.
  13




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
    
    Level 3uses one or more significant inputs that are unobservable and supported by
little or no market activity, and reflect the use of significant management judgment. Level
3 assets and liabilities include those whose fair value measurements are determined using
pricing models, discounted cash flow methodologies or similar valuation techniques and
significant management judgment or estimation. The Company does not have any assets or
liabilities that are valued using inputs identified under a Level 3 hierarchy.
  Quoted Prices inActive Markets
    
    
    Significant Otherfor Identical
    
    
    Observable
    
    
    Total Fair ValueInstruments
    
    
    Inputs
    
    
    asJanuary 1, 2010
    
    (Level 1)
    
    
    (Level 2)
    
    
    of January 1, 2010Assets:Cash equivalents
    
    $
    11,481
    
    
    
    
    
    
    $
    11,481Liabilities:Senior convertible debt
    
    
    
    
    
    $
    18,716
    
    
    $
    18,716
 Quoted Prices inActive Markets
    
    
    Significant Otherfor Identical
    
    
    Observable
    
    
    Total Fair ValueInstruments
    
    
    Inputs
    
    
    asOctober 2, 2009
    
    (Level 1)
    
    
    (Level 2)
    
    
    of October 2, 2009Assets:Cash equivalents
    
    $
    20,891
    
    
    
    
    
    
    $
    20,891Liabilities:Senior convertible debt
    
    
    
    
    
    $
    25,096
    
    
    $
    25,096
  January 1, 2010
    
    
    October 2, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Cash equivalents
    
    $
    11,481
    
    
    $
    11,481
    
    
    $
    20,891
    
    
    $
    20,891Liabilities:Senior convertible debt
    
    $
    13,513
    
    
    $
    18,716
    
    
    $
    25,486
    
    
    $
    25,096
 4. Stock-Based Compensation
     14




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Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009Weighted-average fair value of options granted
    
    $
    2.48
    
    
    $
    0.61Weighted-average assumptions:Expected option life
    
    2.6 years
    
    
    2.9 yearsRisk-free interest rate
    
    
    1.2
    %
    
    
    1.4
    %Expected volatility
    
    
    96
    %
    
    
    76
    %Dividend yield
    
    
    
    
    
    
    
   Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    2009Cost of goods sold
    
    $
    32
    
    
    $
    35Research and development
    
    
    307
    
    
    
    340Selling, general and administrative
    
    
    601
    
    
    
    592Total stock-based compensation expense
    
    $
    940
    
    
    $
    967
 Stock Compensation Plans
     15




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Stock Option Awards
   Weighted-AverageNumber
    
    
    Weighted-Average
    
    
    Remainingof Shares
    
    
    Exercise Price
    
    
    Contractual TermOutstanding at October 2, 2009
    
    
    3,128
    
    
    $
    6.48
    
    
    4.9 yearsGranted
    
    
    408
    
    
    
    4.36Exercised
    
    
    (17
    )
    
    
    2.65Forfeited or expired
    
    
    (58
    )
    
    
    10.34Outstanding at January 1, 2010
    
    
    3,461
    
    
    
    6.19
    
    
    5.1 yearsExercisable at end of period
    
    
    1,471
    
    
    $
    10.56
    
    
    2.7 years
  Restricted Stock Awards
    16




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Weighted-Number
    
    
    Averageof
    
    
    Grant DateShares
    
    
    Fair ValueNonvested shares at October 2, 2009
    
    
    371
    
    
    $
    4.50Granted
    
    
    286
    
    
    
    4.38Vested
    
    
    (93
    )
    
    
    4.90Forfeited
    
    
    (1
    )
    
    
    4.64Nonvested shares at January 1, 2010
    
    
    563
    
    
    $
    4.05
  5. Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
  3.75% Convertible Senior Notes due 2009
    6.50% Convertible Senior Notes due 2013
   17




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Impact of Adoption of New Accounting Standard
    18




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Consolidated Balance Sheet
    
    As PreviouslyOctober 2, 2009 (in thousands)
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedOther assets  long term
    
    $
    1,479
    
    
    $
    (97
    )
    
    $
    1,382Total assets
    
    
    62,560
    
    
    
    (97
    )
    
    
    62,463Convertible senior notes  short term
    
    
    10,486
    
    
    
    (137
    )
    
    
    10,349Total current liabilities
    
    
    29,472
    
    
    
    (137
    )
    
    
    29,335Convertible senior notes  long term
    
    
    15,000
    
    
    
    (1,585
    )
    
    
    13,415Total liabilities
    
    
    45,295
    
    
    
    (1,722
    )
    
    
    43,573Additional paid-in capital
    
    
    280,919
    
    
    
    15,414
    
    
    
    296,333Accumulated deficit
    
    
    (249,074
    )
    
    
    (13,789
    )
    
    
    (262,863
    )Total stockholders equity
    
    
    17,265
    
    
    
    1,625
    
    
    
    18,890Total liabilities and stockholders equity
    
    $
    62,560
    
    
    $
    (97
    )
    
    $
    62,463
 Consolidated Condensed Statement of Operations
    
    As PreviouslyThree months ended January 2, 2009 (in thousands)
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedInterest expense
    
    $
    469
    
    
    $
    444
    
    
    $
    913Other income, net
    
    
    2,801
    
    
    
    (1,759
    )
    
    
    1,042Loss before income taxes
    
    
    (3,458
    )
    
    
    (2,203
    )
    
    
    (5,661
    )Net loss
    
    $
    (3,548
    )
    
    $
    (2,203
    )
    
    $
    (5,751
    )Net loss per share, basic and diluted
    
    $
    (0.15
    )
    
    $
    (0.10
    )
    
    $
    (0.25
    )Weighted average number of shares used in per
share calculation
    
    
    23,407
    
    
    
    23,407
    
    
    
    23,407
 Consolidated Condensed Statement of Cash Flows
    
    As PreviouslyThree months ended January 2, 2009 (in thousands)
    
    Reported
    
    
    Adjustment
    
    
    As AdjustedCash flows from operating activities:Net loss
    
    $
    (3,548
    )
    
    $
    (2,203
    )
    
    $
    (5,751
    )Adjustments to reconcile net loss to net cash
used in operating activities:Gain on debt extinguishment
    
    
    (2,880
    )
    
    
    1,759
    
    
    
    (1,121
    )Amortization of debt discount
    
    
    
    
    
    
    446
    
    
    
    446Other non-cash items, net*
    
    
    178
    
    
    
    (2
    )
    
    
    176Net cash used in operating activities
    
    $
    (3,267
    )
    
    
    
    
    
    $
    (3,267
    )
 *
    
    Includes the amortization of debt issuance costs  19




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##### Table of Contents



The following table sets
forth balance sheet information related to the notes (in thousands): January 1, 2010
    
    
    October 2, 20093.75% convertible senior notesPrincipal value of the liability component
    
    $
    
    
    
    $
    10,500Unamortized value of the liability component
    
    
    
    
    
    
    151Net carrying value of the liability component
    
    $
    
    
    
    $
    10,3496.50% convertible senior notesPrincipal value of the liability component
    
    $
    15,000
    
    
    $
    15,000Unamortized value of the liability component
    
    
    1,487
    
    
    
    1,585Net carrying value of the liability component
    
    $
    13,513
    
    
    $
    13,415
  Three months endedJanuary 1,
    
    
    January 2,2010
    
    
    20093.75% convertible senior notesInterest expense   coupon
    
    $
    48
    
    
    $
    137Interest expense   debt discount amortization
    
    
    151
    
    
    
    351Total
    
    $
    199
    
    
    $
    494Effective
interest rate on the liability component for the period
    
    
    14.68
    %
    
    
    13.62
    %6.50% convertible senior notesInterest expense   coupon
    
    $
    244
    
    
    $
    244Interest expense   debt discount amortization
    
    
    98
    
    
    
    95Total
    
    $
    342
    
    
    $
    339Effective
interest rate on the liability component for the period
    
    
    9.12
    %
    
    
    9.04
    %
 6. Commitments and Contingencies
   7. Special Charges
  Restructuring Charges
 Mindspeed First Quarter Fiscal 2010 Restructuring Plan 
  20




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##### Table of Contents



Workforce
    
    
    Facility andReductions
    
    
    Other
    
    
    TotalCharged to costs and expenses
    
    $
    287
    
    
    $
    573
    
    
    $
    860Cash payments
    
    
    (70
    )
    
    
    (195
    )
    
    
    (265
    )Restructuring balance, January 1, 2010
    
    $
    217
    
    
    $
    378
    
    
    $
    595
  Mindspeed Second Quarter Fiscal 2009 Restructuring Plan 
  Workforce
    
    
    Facility andReductions
    
    
    Other
    
    
    TotalRestructuring balance, October 2, 2009
    
    $
    78
    
    
    $
    
    
    
    $
    78Cash payments
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Restructuring balance, January 1, 2010
    
    $
    59
    
    
    $
    
    
    
    $
    59
  Mindspeed First Quarter Fiscal 2009 Restructuring Plan 
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalRestructuring balance, October 2, 2009
    
    $
    287
    
    
    $
    86
    
    
    $
    373Cash payments
    
    
    (60
    )
    
    
    (48
    )
    
    
    (108
    )Restructuring balance, January 1, 2010
    
    $
    227
    
    
    $
    38
    
    
    $
    265
  21




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##### Table of Contents



Mindspeed Restructuring Plans 
 8. Related Party Transactions
   22




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   
    
    packet processing in high-speed multiservice access applications, including advanced
VoIP and triple-play (voice, data and video) service delivery;
 
    
    high-speed analog transmission and switching for next-generation optical networking,
enterprise storage and broadcast video transmission applications, with difficult switching,
timing and synchronization requirements; and
 
    
    WAN communications over the public switched telephone network, which furnishes much of
the Internets underlying long-distance infrastructure.
  Trends and Factors Affecting Our Business
   23




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24




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Critical Accounting Policies and Estimates
  Inventories
   Stock-Based Compensation
 Revenue Recognition
  25




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26




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Deferred Income Taxes and Uncertain Tax Positions
 Impairment of Long-Lived Assets
 Recent Accounting Pronouncements
   .
   27




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Results of Operations
 Net Revenues
  Three months endedJanuary 1,
    
    
    
    
    
    
    January 2,($ in millions)
    
    2010
    
    
    Change
    
    
    2009Multiservice access DSP products
    
    $
    13.9
    
    
    
    29
    %
    
    $
    10.8High-performance analog products
    
    
    11.6
    
    
    
    10
    %
    
    
    10.5WAN communications products
    
    
    11.5
    
    
    
    80
    %
    
    
    6.4Intellectual property
    
    
    
    
    
    
    (100
    )%
    
    
    3.0Net revenues
    
    $
    37.0
    
    
    
    21
    %
    
    $
    30.7
  Gross Margin
 Three months endedJanuary 1,
    
    
    
    
    
    
    January 2,($ in millions)
    
    2010
    
    
    Change
    
    
    2009Gross margin
    
    $
    23.6
    
    
    
    12
    %
    
    $
    21.0Percent of net revenues
    
    
    64
    %
    
    
    
    
    
    
    68
    %
     28




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Research and Development
 Three months endedJanuary 1,
    
    
    
    
    
    
    January 2,($ in millions)
    
    2010
    
    
    Change
    
    
    2009Research and development
    
    $
    12.6
    
    
    
    (5
    )%
    
    $
    13.3Percent of net revenues
    
    
    34
    %
    
    
    
    
    
    
    43
    %
  Selling, General and Administrative
 Three months endedJanuary 1,
    
    
    
    
    
    
    January 2,($ in millions)
    
    2010
    
    
    Change
    
    
    2009Selling, general and administrative
    
    $
    9.6
    
    
    
    (14
    )%
    
    $
    11.1Percent of net revenues
    
    
    26
    %
    
    
    
    
    
    
    36
    %
  Special Charges
  Restructuring Charges
 Mindspeed First Quarter of Fiscal 2010 Restructuring Plan 
  29




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Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    287
    
    
    $
    573
    
    
    $
    860Cash payments
    
    
    (70
    )
    
    
    (195
    )
    
    
    (265
    )Restructuring balance, January 1, 2010
    
    $
    217
    
    
    $
    378
    
    
    $
    595
  Mindspeed Second Quarter of Fiscal 2009 Restructuring Plan 
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalRestructuring balance, October 2, 2009
    
    $
    78
    
    
    $
    
    
    
    $
    78Cash payments
    
    
    (19
    )
    
    
    
    
    
    
    (19
    )Restructuring balance, January 1, 2010
    
    $
    59
    
    
    $
    
    
    
    $
    59
  Mindspeed First Quarter Fiscal 2009 Restructuring Plan 
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalRestructuring balance, October 2, 2009
    
    $
    287
    
    
    $
    86
    
    
    $
    373Cash payments
    
    
    (60
    )
    
    
    (48
    )
    
    
    (108
    )Restructuring balance, January 1, 2010
    
    $
    227
    
    
    $
    38
    
    
    $
    265
  Mindspeed Restructuring Plans 
  30




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Interest Expense
 Three months endedJanuary 1,
    
    
    January 2,($ in millions)
    
    2010
    
    
    2009Interest expense
    
    $
    (0.6
    )
    
    $
    (0.9
    )
  Other Income, Net
 Three months endedJanuary 1,
    
    
    January 2,($ in millions)
    
    2010
    
    
    2009Other income, net
    
    $
    
    
    
    $
    1.0
  Provision for Income Taxes
  Liquidity and Capital Resources
    31




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Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
   32




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3.75% Convertible Senior Notes due 2009
   6.50% Convertible Senior Notes due 2013
     33




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Conexant Warrant
     34




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Off-Balance Sheet Arrangements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Exchange Risk
    35




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##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORS
   We have substantial cash requirements to fund our operations, research and development efforts and
capital expenditures. Our capital resources are limited and capital needed for our business may not
be available when we need it.
   36




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##### Table of Contents



We have incurred operating losses in the past and we may incur losses in future periods.
   Our operating results may be adversely impacted by worldwide political and economic uncertainties
and specific conditions in the markets we address, including the cyclical nature of and volatility
in the semiconductor industry. As a result, the market price of our common stock may decline.
    37




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The price of our common stock may fluctuate significantly.
  
    
    our operating and financial performance and prospects, including our ability to regain and sustain the
profitability we achieved in the fourth quarter of fiscal 2008;
 
    
    the depth and liquidity of the market for our common stock which can impact, among other things,
the volatility of our stock price and the availability of market participants to borrow shares;
 
    
    investor perception of us and the industry in which we operate;
 
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    the issuance and sale of additional shares of common stock;
 
    
    general financial and other market conditions; and
 
    
    domestic and international economic conditions.
  Our operating results are subject to substantial quarterly and annual fluctuations.
  
    
    changes in end-user demand for the products manufactured and sold by our customers;
 
    
    the effects of competitive pricing pressures, including decreases in average selling prices of our
products;
 
    
    the gain or loss of significant customers;
 
    
    market acceptance of our products and our customers products;
 
    
    our ability to develop, introduce, market and support new products and technologies on a timely basis;
 
    
    intellectual property disputes;
 
    
    the timing of receipt, reduction or cancellation of significant orders by customers;
 
    
    fluctuations in the levels of component inventories held by our customers and changes in our
customers inventory management practices;
  38




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##### Table of Contents




    
    shifts in our product mix and the effect of maturing products;
 
    
    availability and cost of products from our suppliers;
 
    
    the timing and extent of product development costs;
 
    
    new product and technology introductions by us or our competitors;
 
    
    fluctuations in manufacturing yields; and
 
    
    significant warranty claims, including those not covered by our suppliers.
  The loss of one or more key customers or distributors, or the diminished demand for our products
from a key customer could significantly reduce our revenues and profits.
  We may not be able to attract and retain qualified personnel necessary for the design, development,
sale and support of our products. Our success could be negatively affected if key personnel leave.
     39




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##### Table of Contents



We are entirely dependent upon third parties for the manufacture of our products and are vulnerable
to their capacity constraints during times of increasing demand for semiconductor products.
   
    
    the lack of assured supply, potential shortages and higher prices;
    
    the effects of disputes or litigation involving our third-party foundries;
    
    increased lead times;
    
    limited control over delivery schedules, manufacturing yields, production costs and product
quality; and
    
    the unavailability of, or delays in obtaining, products or access to key process technologies.
       40




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##### Table of Contents



We are subject to the risks of doing business internationally.
  
    
    currency exchange rate fluctuations;
    
    local economic and political conditions;
    
    disruptions of capital and trading markets;
    
    accounts receivable collection and longer payment cycles;
    
    wage inflation;
    
    difficulties in staffing and managing foreign operations;
    
    potential hostilities and changes in diplomatic and trade relationships;
    
    restrictive governmental actions (such as restrictions on the transfer or repatriation of funds
and trade protection measures, including export duties and quotas and customs duties and tariffs);
    
    changes in legal or regulatory requirements;
    
    difficulty in obtaining distribution and support;
    
    the laws and policies of the U.S. and other countries affecting trade, foreign investment and
loans and import or export licensing requirements;
    
    existing or future environmental laws and regulations governing, among other things, air emissions,
wastewater
discharges, the contents of our products, the use, handling and disposal of hazardous substances
and wastes, soil and groundwater contamination and employee health and safety;
    
    tax laws;
    
    limitations on our ability under local laws to protect our intellectual property;
    
    cultural differences in the conduct of business; and
    
    natural disasters, acts of terrorism and war.
   41




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We are subject to intense competition.
   
    
    stronger financial position and liquidity;
    
    longer, or stronger, presence in key markets;
    
    greater name recognition;
    
    more secure supply chain;
    
    lower cost alternatives to our products;
    
    access to larger customer bases; and
    
    significantly greater sales and marketing, manufacturing, distribution, technical and other resources.
   Our success depends on our ability to develop competitive new products in a timely manner and keep
abreast of the rapid technological changes in our market.
   42




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##### Table of Contents




    
    our ability to anticipate customer and market requirements and changes in technology and industry
standards;
    
    our ability to accurately define new products;
    
    our ability to complete development of new products, and bring our products to market, on a
timely basis;
    
    our ability to differentiate our products from offerings of our competitors; and
    
    overall market acceptance of our products.
   Industry consolidation may harm our operating results.
  Uncertainties involving the ordering and shipment of our products could adversely affect our
business.
    43




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##### Table of Contents



If network infrastructure OEMs do not design our products into their equipment, we will be unable
to sell those products. Moreover, a design win from a customer does not guarantee future sales to
that customer.
  Because of the lengthy sales cycles of many of our products, we may incur significant expenses
before we generate any revenues related to those products.
  We may be subject to claims, or we may be required to defend and indemnify customers against
claims, of infringement of third-party intellectual property rights or demands that we, or our
customers, license third-party technology, which could result in significant expense.
   
    
    pay substantial damages for past, present and future use of the infringing technology;
    
    cease the manufacture, use or sale of infringing products;
    
    discontinue the use of infringing technology;
    
    expend significant resources to develop non-infringing technology;
    
    pay substantial damages to our customers or end users to discontinue use or replace infringing
technology with non-infringing technology;
    
    license technology from the third party claiming infringement, which license may not be available
on commercially reasonable terms, or at all; or
    
    relinquish intellectual property rights associated with one or more of our patent claims, if such claims
are held invalid or otherwise unenforceable.
  44




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##### Table of Contents



If we are not successful in protecting our intellectual property rights, it may harm our ability to
compete.
  
    
    the steps we take to prevent misappropriation or infringement of our intellectual property
may not be successful;
    
    any existing or future patents may be challenged, invalidated or circumvented; or
    
    the measures described above may not provide meaningful protection.
  The complexity of our products may lead to errors, defects and bugs, which could subject us to
significant costs or damages and adversely affect market acceptance of our products.
    45




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##### Table of Contents



We may make business acquisitions or investments, which involve significant risk.
  
    
    issuances of equity securities dilutive to our existing stockholders;
    
    substantial cash payments;
    
    the incurrence of substantial debt and assumption of unknown liabilities;
    
    large one-time write-offs;
    
    amortization expenses related to intangible assets;
    
    ability to use our net operating loss carryforwards;
    
    the diversion of managements attention from other business concerns; and
    
    the potential loss of key employees, customers and suppliers of the acquired business.
   Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be
limited.
  Our results of operations could vary as a result of the methods, estimates and judgments we use in
applying our accounting policies.
   46




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Substantial sales of the shares of our common stock issuable upon conversion of our convertible
senior notes or exercise of the warrant issued to Conexant could adversely affect our stock price
or our ability to raise additional financing in the public capital markets.
  Antidilution and other provisions in the warrant issued to Conexant may also adversely affect our
stock price or our ability to raise additional financing.
   Some of our directors and executive officers may have potential conflicts of interest because of
their positions with Conexant or their ownership of Conexant common stock.
     47




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Provisions in our organizational documents and stockholders rights agreements and Delaware law will
make it more difficult for someone to acquire control of us.
  
    
    the division of our board of directors into three classes to be elected on a staggered basis, one class
each year;
    
    the exclusive responsibility of the board of directors to fill vacancies on the board of directors;
    
    the ability of our board of directors to issue shares of our preferred stock in one or more
series without further authorization of our stockholders;
    
    a prohibition on stockholder action by written consent;
    
    a requirement that stockholders provide advance notice of any stockholder nominations of directors
or any proposal of new business to be considered at any meeting of stockholders;
    
    a requirement that a supermajority vote be obtained to remove a director for cause or to amend
or repeal certain provisions of our restated certificate of incorporation or amended and restated bylaws;
    
    elimination of the right of stockholders to call a special meeting of stockholders; and
    
    a fair price provision.
   
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
 Maximum Number (orTotal Number of
    
    
    Approximate DollarShares (or Units)
    
    
    Value) of Shares (orTotal Number of
    
    
    Average Price
    
    
    Purchased as Part of
    
    
    Units) that May Yet BeShares (or Units)
    
    
    Paid per Share
    
    
    Publicly Announced
    
    
    Purchased Under thePurchased
    
    
    (or Unit)
    
    
    Plans or Programs
    
    
    Plans or ProgramsOctober 3,
2009 to October 30,
2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    October 31, 2009 to
November 27, 2009
    
    
    7,749
    (a)
    
    
    3.56
    
    
    
    
    
    
    
    November 28, 2009
to January 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,749
    
    
    $
    3.56
    
    
    
    
    
    
    
    
 
 (a)
    
    Represents shares of our common stock withheld from, or delivered by, employees in order to
satisfy applicable tax withholding obligations in connection with the vesting of restricted
stock. These repurchases were not made pursuant to any publicly announced plan or program.  48




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 3.1
    
    
    Restated Certificate of Incorporation of the Registrant, filed as Exhibit 4.1 to the Registrants
Registration Statement on Form S-3 (Registration Statement No. 333-106146), is incorporated herein
by reference.3.2
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, filed as
Exhibit 3.1 to the Registrants Current Report on Form 8-K dated July 1, 2008, is incorporated
herein by reference (SEC File No. 001-31650).3.3
    
    
    Certificate of Designation of Series B Junior Participating Preferred Stock, filed as Exhibit 3.1
to the Registrants Current Report on Form 8-K filed on August 10, 2009, is incorporated herein by
reference (SEC File No. 001-31650).3.4
    
    
    Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.2 to the Registrants Annual
Report on Form 10-K for the year ended September 30, 2005, is incorporated herein by reference
(SEC File No. 000-50499).4.1
    
    
    Specimen Certificate for the Registrants Common Stock, par value $.01 per share, filed as Exhibit
4.1 to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2008,
is incorporated herein by reference (SEC File No. 001-31650).4.2
    
    
    Rights Agreement dated as of June 26, 2003, by and between the Registrant and Mellon Investor
Services LLC, as Rights Agent, filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K
dated July 1, 2003, is incorporated herein by reference (SEC File No. 001-31650).4.3
    
    
    First Amendment to Rights Agreement, dated as of December 6, 2004, by and between the Registrant
and Mellon Investor Services LLC, filed as Exhibit 4.4 to the Registrants Current Report on Form
8-K dated December 2, 2004, is incorporated herein by reference (SEC File No. 001-31650).4.4
    
    
    Second Amendment to Rights Agreement, dated as of June 16, 2008, by and between the Registrant and
Mellon Investor Services LLC, filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K
dated June 11, 2008, is incorporated herein by reference (SEC File No. 000-50499).4.5
    
    
    Section 382 Rights Agreement, dated as of August 9, 2009, between the Registrant and Mellon
Investor Services LLC, filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K dated
August 10, 2009, is incorporated herein by reference (SEC File No. 001-31650).4.6
    
    
    Common Stock Purchase Warrant dated June 27, 2003, issued by the Registrant to Conexant Systems,
Inc., filed as Exhibit 4.5 to the Registrants Registration Statement on Form S-3 (Registration
Statement No. 333-109523), is incorporated herein by reference.4.7
    
    
    Registration Rights Agreement dated as of June 27, 2003 by and between the Registrant and Conexant
Systems, Inc., filed as Exhibit 4.6 to the Registrants Registration Statement on Form S-3
(Registration Statement No. 333-109523), is incorporated herein by reference.4.8
    
    
    Indenture, dated as of August 1, 2008, between the Registrant and Wells Fargo Bank, N.A., filed as
Exhibit 4.1 to the Registrants Current Report on Form 8-K dated August 4, 2008, is incorporated
herein by reference (SEC File No. 001-31650).4.9
    
    
    Form of 6.50% Convertible Senior Notes due 2013, attached as Exhibit A to the Indenture (Exhibit
4.9 hereto), is incorporated herein by reference.*10.1
    
    
    Mindspeed Technologies, Inc. Directors Stock Plan, as amended and restated.*10.2
    
    
    Summary of Mindspeed Technologies, Inc. Fiscal Year 2010 Cash Bonus Plan, as set forth in the
Registrants Current Report on Form 8-K dated December 16, 2009, is incorporated herein by
reference (SEC File No. 001-31650).31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Management contract or compensatory plan or arrangement.  49




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##### Table of Contents



SIGNATURE
  MINDSPEED TECHNOLOGIES, INC.
(Registrant)Date: February 9, 2010
    By
    
    /s/ BRET W. JOHNSENBret W. JohnsenSenior Vice President, Chief Financial Officer
and Treasurer
(principal financial and accounting officer)  50




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    
    Mindspeed Technologies, Inc. Directors Stock Plan, as amended and restated.31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  51