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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 March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-50499
 MINDSPEED TECHNOLOGIES, INC.
  Delaware(State of incorporation)
    
    01-0616769(I.R.S. Employer
Identification No.)
 4000 MacArthur Boulevard, East Tower 
Newport Beach, California(Address of principal executive offices)
    
    92660-3095(Zip code)
 Registrants telephone number, including area code:
(949) 579-3000
 þ o
  o þ o
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ORWARD-LOOKING STATEMENTS
  
    
    our competitive advantages;
    
    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 legacy networks, and the build-out of networks in developing countries;
    
    our investment in research and development and participation in the formulation of
industry standards;
    
    the growth rate for products in the enterprise, network access and metro service areas
and our position to increase market share;
    
    the focus of our research and development efforts on certain products, including voice
over Internet protocol and high performance analog applications, and our expectation of the
growth prospects for those products;
    
    our ability to achieve design wins and convert wins into revenue;
    
    the availability of raw materials, parts and supplies;
    
    competition and the principal competitive factors for semiconductor suppliers, including
time to market, product quality, reliability and performance, customer support, price and
total system cost, new product innovation and compliance with industry standards;
    
    the continuation of intense price and product competition, and the resulting declining
average selling prices for our products;
    
    the value of our intellectual property;
    
    the impact of changes in customer purchasing activities, inventory levels and inventory
management practices;
    
    the importance of attracting and retaining highly skilled, dedicated personnel;
    
    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 and profitability, or to achieve positive cash
flows from operations, and the expected period through which we will continue to incur
significant losses and negative cash flows;
    
    our plans to reduce operating expenses, and the amount and timing of any such expense reductions;
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
    
    the importance of providing comprehensive product service and support;
    
    the dependence of our operating results on our ability to introduce products on a timely basis;
    
    the sufficiency of our existing sources of liquidity and expected sources of cash to fund
our operations, research and development efforts, anticipated capital expenditures, working
capital and other financing requirements for the next twelve months;
    
    our expectation of paying our obligations relating to our restructuring plans and other
obligations over their respective terms, our intention to fund those payments from available
cash balances and funds from product sales, and the impact of such payments on our
liquidity;
    
    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 2007 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 expected workforce reductions and facilities closures,
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 intentions with respect to inventories that were previously written down;
    
    our beliefs regarding the effect of the disposition of pending or asserted legal matters;
    
    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 amount and timing of future payments under contractual obligations; and
    
    the impact of recent accounting pronouncements and the adoption of new accounting standards.
  
    
    market demand for our new and existing products and our ability to increase our revenues;
    
    our ability to maintain operating expenses within anticipated levels;
    
    our ability to reduce our cash consumption;
    
    availability and terms of capital needed for our business;
    
    constraints in the supply of wafers and other product components from our third-party manufacturers;
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
    
    our ability to successfully and cost effectively establish and manage operations in foreign jurisdictions;
    
    the ability to attract and retain qualified personnel;
    
    successful development and introduction of new products;
    
    our ability to obtain design wins and develop revenues from them;
    
    pricing pressures and other competitive factors;
    
    order and shipment uncertainty;
    
    changes in our customers inventory levels and inventory management practices;
    
    fluctuations in manufacturing yields;
    
    product defects; and
    
    intellectual property infringement claims by others and the ability to protect our intellectual property.
  ® ®
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MINDSPEED TECHNOLOGIES, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Condensed Balance Sheets  March 31, 2007 and September 30, 2006
    
    
    6Consolidated Condensed Statements of Operations  Three Months and Six Months Ended
March 31, 2007 and 2006
    
    
    7Consolidated Condensed Statements of Cash Flows  Six Months Ended March 31, 2007
and 2006
    
    
    8Notes to Consolidated Condensed Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 4. Submission of Matters to a Vote of Security Holders
    
    
    42Item 6. Exhibits
    
    
    43Signature
    
    
    45EXHIBIT 10.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  5




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Balance Sheets
 (unaudited, in thousands, except per share amounts)
 March 31,
    
    
    September 30,2007
    
    
    2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    23,697
    
    
    $
    29,976Marketable securities
    
    
    10,748
    
    
    
    11,260Receivables, net of allowance for doubtful
accounts of $393 and $447 at March 31, 2007
and September 30, 2006, respectively
    
    
    10,756
    
    
    
    14,786Inventories
    
    
    18,567
    
    
    
    19,008Other current assets
    
    
    3,132
    
    
    
    3,690Total current assets
    
    
    66,900
    
    
    
    78,720Property, plant and equipment, net
    
    
    12,128
    
    
    
    12,961Other assets
    
    
    5,215
    
    
    
    4,861Total assets
    
    $
    84,243
    
    
    $
    96,542LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    8,681
    
    
    $
    10,639Deferred revenue
    
    
    4,080
    
    
    
    5,047Accrued compensation and benefits
    
    
    5,838
    
    
    
    5,038Accrued income tax
    
    
    2,869
    
    
    
    2,761Restructuring
    
    
    2,966
    
    
    
    1,667Other current liabilities
    
    
    2,252
    
    
    
    2,688Total current liabilities
    
    
    26,686
    
    
    
    27,840Convertible senior notes
    
    
    44,825
    
    
    
    44,618Other liabilities
    
    
    1,196
    
    
    
    608Total liabilities
    
    
    72,707
    
    
    
    73,066Commitments and contingencies
    
    
    
    
    
    
    Stockholders EquityPreferred stock, $0.01 par value: 25,000 shares authorized; no
shares issued or
outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value: 500,000 shares authorized; 114,494
and 110,702
shares issued at March 31, 2007 and
September 30, 2006, respectively
    
    
    1,145
    
    
    
    1,107Additional paid-in capital
    
    
    257,140
    
    
    
    250,602Accumulated deficit
    
    
    (231,502
    )
    
    
    (212,566
    )Accumulated other comprehensive loss
    
    
    (15,247
    )
    
    
    (15,667
    )Total stockholders equity
    
    
    11,536
    
    
    
    23,476Total liabilities and stockholders equity
    
    $
    84,243
    
    
    $
    96,542
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Operations
 (unaudited, in thousands, except per share amounts)
 Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    30,758
    
    
    $
    34,610
    
    
    $
    60,915
    
    
    $
    67,813Cost of goods sold
    
    
    10,817
    
    
    
    10,221
    
    
    
    21,494
    
    
    
    20,703Gross margin
    
    
    19,941
    
    
    
    24,389
    
    
    
    39,421
    
    
    
    47,110Operating expenses:Research and development
    
    
    14,710
    
    
    
    17,035
    
    
    
    30,310
    
    
    
    33,547Selling, general and administrative
    
    
    11,279
    
    
    
    12,462
    
    
    
    22,072
    
    
    
    23,498Special charges
    
    
    1,237
    
    
    
    1,156
    
    
    
    4,832
    
    
    
    1,181Total operating expenses
    
    
    27,226
    
    
    
    30,653
    
    
    
    57,214
    
    
    
    58,226Operating loss
    
    
    (7,285
    )
    
    
    (6,264
    )
    
    
    (17,793
    )
    
    
    (11,116
    )Interest expense
    
    
    (559
    )
    
    
    (552
    )
    
    
    (1,118
    )
    
    
    (1,104
    )Other income, net
    
    
    320
    
    
    
    354
    
    
    
    267
    
    
    
    728Loss before income taxes
    
    
    (7,524
    )
    
    
    (6,462
    )
    
    
    (18,644
    )
    
    
    (11,492
    )Provision for income taxes
    
    
    95
    
    
    
    652
    
    
    
    292
    
    
    
    1,126Net loss
    
    $
    (7,619
    )
    
    $
    (7,114
    )
    
    $
    (18,936
    )
    
    $
    (12,618
    )Net loss per share, basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.07
    )
    
    $
    (0.17
    )
    
    $
    (0.12
    )Weighted-average number of shares used in
per share computation
    
    
    110,429
    
    
    
    105,000
    
    
    
    109,405
    
    
    
    104,349
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Cash Flows
 (unaudited, in thousands)
 Six months endedMarch 31,2007
    
    
    2006Cash Flows From Operating ActivitiesNet loss
    
    $
    (18,936
    )
    
    $
    (12,618
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    2,589
    
    
    
    3,774Stock-based compensation
    
    
    3,585
    
    
    
    2,989Inventory provisions
    
    
    (228
    )
    
    
    (542
    )Other non-cash items, net
    
    
    254
    
    
    
    397Changes in assets and liabilities:Receivables
    
    
    4,103
    
    
    
    3,560Inventories
    
    
    669
    
    
    
    (7,483
    )Accounts payable
    
    
    (1,958
    )
    
    
    (1,474
    )Deferred revenue
    
    
    (967
    )
    
    
    606Accrued expenses and other current liabilities
    
    
    2,338
    
    
    
    (108
    )Other
    
    
    1,141
    
    
    
    (31
    )Net cash used in operating activities
    
    
    (7,410
    )
    
    
    (10,930
    )Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (1,822
    )
    
    
    (1,535
    )Purchases of available-for-sale marketable securities
    
    
    (12,832
    )
    
    
    (32,747
    )Sales of available-for-sale marketable securities
    
    
    12,500
    
    
    
    39,875Maturities of held-to-maturity marketable securities
    
    
    863
    
    
    
    863Net cash (used in) provided by investing activities
    
    
    (1,291
    )
    
    
    6,456Cash Flows From Financing ActivitiesExercise of stock options and warrants
    
    
    2,422
    
    
    
    3,612Net cash provided by financing activities
    
    
    2,422
    
    
    
    3,612Net decrease in cash and cash equivalents
    
    
    (6,279
    )
    
    
    (862
    )Cash and cash equivalents at beginning of period
    
    
    29,976
    
    
    
    15,335Cash and cash equivalents at end of period
    
    $
    23,697
    
    
    $
    14,473
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MINDSPEED TECHNOLOGIES, INC.
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  1. Basis of Presentation and Significant Accounting Policies
   Basis of Presentation
 Fiscal Periods
 Recent Accounting Standards
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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
    Income Taxes
 Supplemental Cash Flow Information
 2. Supplemental Financial Statement Data
 Marketable Securities
   Inventories
  March 31,
    
    
    September 30,2007
    
    
    2006Work-in-process
    
    $
    9,768
    
    
    $
    9,120Finished goods
    
    
    8,799
    
    
    
    9,888$
    18,567
    
    
    $
    19,008
  10




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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
  Comprehensive Loss
  Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (7,619
    )
    
    $
    (7,114
    )
    
    $
    (18,936
    )
    
    $
    (12,618
    )Foreign currency
translation
adjustments
    
    
    86
    
    
    
    12
    
    
    
    420
    
    
    
    (99
    )Comprehensive loss
    
    $
    (7,533
    )
    
    $
    (7,102
    )
    
    $
    (18,516
    )
    
    $
    (12,717
    )
  Revenues
by Product Line
  Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Multiservice access DSP products
    
    $
    9,318
    
    
    $
    8,168
    
    
    $
    18,304
    
    
    $
    19,837High-performance analog products
    
    
    8,158
    
    
    
    11,274
    
    
    
    17,952
    
    
    
    20,010WAN communications products
    
    
    13,282
    
    
    
    15,168
    
    
    
    24,659
    
    
    
    27,966$
    30,758
    
    
    $
    34,610
    
    
    $
    60,915
    
    
    $
    67,813
 Revenues
by Geographic Area
  Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Americas
    
    $
    11,359
    
    
    $
    13,490
    
    
    $
    21,378
    
    
    $
    24,890Asia-Pacific
    
    
    15,417
    
    
    
    17,909
    
    
    
    32,600
    
    
    
    36,456Europe, Middle East and Africa
    
    
    3,982
    
    
    
    3,211
    
    
    
    6,937
    
    
    
    6,467$
    30,758
    
    
    $
    34,610
    
    
    $
    60,915
    
    
    $
    67,813
   Six months endedMarch 31,2007
    
    2006Customer A
    
    
    18
    %
    
    
    17
    %Customer B
    
    
    14
    %
    
    
    10
    %Customer C
    
    
    7
    %
    
    
    11
    %Customer D
    
    
    5
    %
    
    
    10
    %
 11




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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
  3. Stock-Based Compensation
     Six months ended
    
    Six months endedMarch 31, 2007
    
    March 31, 2006Weighted-average fair value of options granted
    
    $
    1.17
    
    
    $
    1.74Weighted-average assumptions:Expected option life
    
    3.3 years
    
    3.4 yearsRisk-free interest rate
    
    
    4.7
    %
    
    
    4.6
    %Expected volatility
    
    
    75
    %
    
    
    77
    %Dividend yield
    
    
    
    
    
    
    
   Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Cost of goods sold
    
    $
    97
    
    
    $
    98
    
    
    $
    189
    
    
    $
    175Research and development
    
    
    515
    
    
    
    652
    
    
    
    1,094
    
    
    
    1,298Selling, general and administrative
    
    
    1,460
    
    
    
    922
    
    
    
    2,233
    
    
    
    1,516Special charges
    
    
    37
    
    
    
    
    
    
    
    69
    
    
    
    Total stock-based compensation expense
    
    $
    2,109
    
    
    $
    1,672
    
    
    $
    3,585
    
    
    $
    2,989
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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
  Stock Compensation Plans
    Stock Option Awards
  Weighted-AverageNumber
    
    Weighted-Average
    
    Remainingof Shares
    
    Exercise Price
    
    Contractual TermOutstanding at September 30, 2006
    
    
    22,196
    
    
    $
    2.32Granted
    
    
    2,234
    
    
    $
    2.18Exercised
    
    
    (1,524
    )
    
    $
    1.59Forfeited or expired
    
    
    (1,360
    )
    
    $
    2.72Outstanding at March 31, 2007
    
    
    21,546
    
    
    $
    2.33
    
    
    4.3 yearsExercisable at end of period
    
    
    17,133
    
    
    $
    2.29
    
    
    3.6 years
  13




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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
  Restricted Stock Awards
   Weighted-Number
    
    Averageof
    
    Grant DateShares
    
    Fair ValueNonvested shares at September 30, 2006
    
    
    3,671
    
    
    $
    2.54Granted
    
    
    2,307
    
    
    $
    1.88Vested
    
    
    (2,249
    )
    
    $
    2.31Forfeited
    
    
    (381
    )
    
    $
    2.62Nonvested shares at March 31, 2007
    
    
    3,348
    
    
    $
    2.20
  Employee Stock Purchase Plans
  4. Commitments and Contingencies
  14




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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
   5. Special Charges
  Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Restructuring charges
    
    $
    1,237
    
    
    $
    1,156
    
    
    $
    4,832
    
    
    $
    1,181
 Restructuring Charges
 Mindspeed 2007 Restructuring Plan
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    2,418
    
    
    $
    2,575
    
    
    $
    4,993Cash payments
    
    
    (1,392
    )
    
    
    (646
    )
    
    
    (2,038
    )Non-cash charges
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Restructuring balance, March 31, 2007
    
    $
    951
    
    
    $
    1,929
    
    
    $
    2,880
 Mindspeed 2006 Restructuring Plan
 15




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MINDSPEED TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS (continued)
   WorkforceReductionsCharged to costs and expenses
    
    $
    2,406Cash payments
    
    
    (1,215
    )Non-cash charges
    
    
    (294
    )Restructuring balance, September 30, 2006
    
    
    897Charged to costs and expenses
    
    
    (160
    )Cash payments
    
    
    (528
    )Non-cash charges
    
    
    10Restructuring balance, March 31, 2007
    
    $
    219
 Other Restructuring Plans
  6. Related Party Transactions
  
 16




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Overview
  Trends and Factors Affecting Our Business
     17




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Spin-off from Conexant Systems, Inc.
   Critical Accounting Policies and Estimates
  18




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Inventories
 Stock-Based Compensation
 Revenue Recognition
 Allowance for Doubtful Accounts
 Deferred Income Taxes
 Impairment of Long-Lived Assets
 19




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Recent Accounting Pronouncements
     Results of Operations
 Net Revenues
  Three months ended March 31,
    
    
    Six months ended March 31,($ in millions)
    
    2007
    
    
    Change
    
    
    2006
    
    
    2007
    
    
    Change
    
    
    2006Multiservice access DSP products
    
    $
    9.3
    
    
    
    14
    %
    
    $
    8.1
    
    
    $
    18.3
    
    
    
    (8
    )%
    
    $
    19.8High-performance analog products
    
    
    8.2
    
    
    
    (28
    )%
    
    
    11.3
    
    
    
    18.0
    
    
    
    (10
    )%
    
    
    20.0WAN communications products
    
    
    13.3
    
    
    
    (12
    )%
    
    
    15.2
    
    
    
    24.6
    
    
    
    (12
    )%
    
    
    28.0Net revenues
    
    $
    30.8
    
    
    
    (11
    )%
    
    $
    34.6
    
    
    $
    60.9
    
    
    
    (10
    )%
    
    $
    67.8
   20




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Gross Margin
 Three months ended March 31,
    
    Six months ended March 31,($ in millions)
    
    2007
    
    Change
    
    2006
    
    2007
    
    Change
    
    2006Gross margin
    
    $
    19.9
    
    
    
    (18
    )%
    
    $
    24.4
    
    
    $
    39.4
    
    
    
    (16
    )%
    
    $
    47.1Percent of net revenues
    
    
    65
    %
    
    
    
    
    
    
    70
    %
    
    
    65
    %
    
    
    
    
    
    
    69
    %
      21




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##### Table of Contents



Research and Development
 Three months ended March 31,
    
    Six months ended March 31,($ in millions)
    
    2007
    
    Change
    
    2006
    
    2007
    
    Change
    
    2006Research and development
    
    $
    14.7
    
    
    
    (14
    )%
    
    $
    17.0
    
    
    $
    30.3
    
    
    
    (10
    )%
    
    $
    33.5Percent of net revenues
    
    
    48
    %
    
    
    
    
    
    
    49
    %
    
    
    50
    %
    
    
    
    
    
    
    49
    %
   22




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##### Table of Contents



Selling, General and Administrative
 Three months ended March 31,
    
    Six months ended March 31,($ in millions)
    
    2007
    
    Change
    
    2006
    
    2007
    
    Change
    
    2006Selling, general and
administrative
    
    $
    11.3
    
    
    
    (9
    )%
    
    $
    12.5
    
    
    $
    22.1
    
    
    
    (6
    )%
    
    $
    23.5Percent of net revenues
    
    
    37
    %
    
    
    
    
    
    
    36
    %
    
    
    36
    %
    
    
    
    
    
    
    35
    %
   Special Charges
  Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Restructuring charges
    
    $
    1,237
    
    
    $
    1,156
    
    
    $
    4,832
    
    
    $
    1,181
 Restructuring Charges
 Mindspeed 2007 Restructuring Plan
 23




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##### Table of Contents



Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    2,418
    
    
    $
    2,575
    
    
    $
    4,993Cash payments
    
    
    (1,392
    )
    
    
    (646
    )
    
    
    (2,038
    )Non-cash charges
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Restructuring balance, March 31, 2007
    
    $
    951
    
    
    $
    1,929
    
    
    $
    2,880
 Mindspeed 2006 Restructuring Plan
 WorkforceReductionsCharged to costs and expenses
    
    $
    2,406Cash payments
    
    
    (1,215
    )Non-cash charges
    
    
    (294
    )Restructuring balance, September 30, 2006
    
    
    897Charged to costs and expenses
    
    
    (160
    )Cash payments
    
    
    (528
    )Non-cash charges
    
    
    10Restructuring balance, March 31, 2007
    
    $
    219
 Other Restructuring Plans
  24




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##### Table of Contents



Interest Expense
 Three months ended March 31,
    
    Six months ended March 31,($ in millions)
    
    2007
    
    2006
    
    2007
    
    2006Interest expense
    
    $
    0.6
    
    
    $
    0.6
    
    
    $
    1.1
    
    
    $
    1.1
  Other Income (Expense), Net
 Three months ended March 31,
    
    Six months ended March 31,($ in millions)
    
    2007
    
    2006
    
    2007
    
    2006Other income (expense), net
    
    $
    0.3
    
    
    $
    0.4
    
    
    $
    0.3
    
    
    $
    0.7
  Provision for Income Taxes
  Liquidity and Capital Resources
     25




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Convertible Senior Notes Offering
    Conexant Warrant
  26




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Liquidity
   Contractual Obligations
  Payments due by periodContractual Obligations
    
    Total
    
    
    <1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    >5 years(in millions)Long-term debt
    
    $
    46.0
    
    
    $
    
    
    
    $
    46.0
    
    
    $
    
    
    
    $
    Interest expense on long-term debt
    
    
    5.1
    
    
    
    1.7
    
    
    
    3.4
    
    
    
    
    
    
    
    Operating leases
    
    
    14.0
    
    
    
    8.9
    
    
    
    3.9
    
    
    
    0.7
    
    
    
    0.5Purchase obligations
    
    
    8.4
    
    
    
    2.3
    
    
    
    3.0
    
    
    
    3.1
    
    
    
    Total
    
    $
    73.5
    
    
    $
    12.9
    
    
    $
    56.3
    
    
    $
    3.8
    
    
    $
    0.5
   27




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Off-Balance Sheet Arrangements
  28




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  29




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PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
   We are incurring substantial operating losses, and we anticipate additional future losses.
   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.
  We operate in the highly cyclical semiconductor industry, which is subject to significant
downturns.
  30




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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 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;
    
    shifts in our product mix and the effect of maturing products;
    
    availability and cost of products from our suppliers;
    
    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;
    
    the timing and extent of product development costs;
    
    new product and technology introductions by us or our competitors;
    
    fluctuations in manufacturing yields;
    
    significant warranty claims, including those not covered by our suppliers;
    
    intellectual property disputes; and
    
    the effects of competitive pricing pressures, including decreases in average selling
prices of our products.
  The increasing significance of our foreign operations exposes us to risks that are beyond our
control and could affect our ability to operate successfully.
  31




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
    
    political uncertainties;
    
    wage inflation;
    
    exposure to foreign currency fluctuations;
    
    tariffs and other trade barriers; and
    
    foreign regulatory restrictions and unexpected changes in regulatory environments.
  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;
    
    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.
   32




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We are subject to intense competition.
   
    
    stronger financial position and liquidity;
    
    longer presence in key markets;
    
    greater name recognition;
    
    more secure supply chain;
    
    access to larger customer bases; and
    
    significantly greater sales and marketing, manufacturing, distribution, technical and other resources.
  33




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##### Table of Contents



Our success depends on our ability to develop competitive new products in a timely manner.
  
    
    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.
   If we are not able to keep abreast of the rapid technological changes in our markets, our products
could become obsolete.
  
    
    rapid technological developments;
    
    rapid changes in customer requirements;
    
    frequent new product introductions and enhancements;
declining prices over the life cycle of products; and
    
    evolving industry standards.
 34




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Uncertainties involving the ordering and shipment of our products could adversely affect our
business.
   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.
  35




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##### Table of Contents




    
    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.
  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.
  36




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##### Table of Contents



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.
    We are subject to the risks of doing business internationally.
  
    
    currency exchange rate fluctuations;
    
    local economic and political conditions;
 37




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##### Table of Contents




    
    disruptions of capital and trading markets;
    
    accounts receivable collection and longer payment cycles;
    
    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 United States and other countries affecting trade, foreign
investment and loans, and import or export licensing requirements;
    
    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.
   We may make business acquisitions or investments, which involve significant risk.
  
    
    issuances of equity securities dilutive to our existing stockholders;
    
    the incurrence of substantial debt and assumption of unknown liabilities;
    
    large one-time write-offs;
    
    amortization expenses related to intangible assets;
    
    the diversion of managements attention from other business concerns; and
    
    the potential loss of key employees from the acquired business.
 38




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##### Table of Contents



The price of our common stock may fluctuate significantly.
  
    
    our operating and financial performance and prospects, including our ability to achieve
or sustain profitability, if achieved, within the forecasted time period;
    
    the depth and liquidity of the market for our common stock;
    
    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;
    
    general financial and other market conditions; and
    
    domestic and international economic conditions.
  Our results of operations could vary as a result of the methods, estimates and judgments we use in
applying our accounting policies.
  39




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##### Table of Contents



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.
    40




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Provisions in our organizational documents and rights plan 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 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
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 ProgramsDecember 30,
2006 to January 26,
2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    January 27, 2007 to
February 23, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    February 24, 2007
to March 30, 2007
    
    
    213
    (a)
    
    $
    2.29
    
    
    
    
    
    
    
    213
    
    
    $
    2.29
    
    
    
    
    
    
    
    
 
 (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. 41




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Number of sharesVoted For
    
    WithheldElection of three Class III directors for a three-year
term expiring in 2010:Donald R. Beall
    
    
    74,576,338
    
    
    
    22,779,136Donald L. Gips
    
    
    75,148,781
    
    
    
    22,206,693Jerre L. Stead
    
    
    74,262,886
    
    
    
    23,092,588
 Number of sharesVoted
    
    
    
    
    
    
    
    
    
    BrokerFor
    
    Voted Against
    
    Abstentions
    
    Non-VotesProposal to ratify the appointment of
Deloitte & Touche LLP as our independent
registered public accounting firm
    
    
    96,114,392
    
    
    
    821,100
    
    
    
    419,982
    
    
    
    Proposal to amend our 2003 long-term
incentives
plan increasing the number of authorized
shares from 18 million to 19.3 million
    
    
    28,676,023
    
    
    
    23,409,579
    
    
    
    618,133
    
    
    
    44,651,739Proposal to amend our directors stock plan
eliminating the evergreen provision in the
Plan, setting the number of authorized shares
to 1,440,000 and adding annual grants of
restricted shares
    
    
    36,268,233
    
    
    
    15,805,626
    
    
    
    629,856
    
    
    
    44,651,759
  42




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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
    
    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.4.1
    
    Specimen certificate for the Registrants Common Stock, par value $.01 per share, filed as
Exhibit 4.1 to the Registrants Registration Statement on Form 10 (File No. 1-31650), is
incorporated herein by reference.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.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.4.4
    
    Common Stock Purchase Warrant dated June 27, 2003, 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.4.5
    
    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.4.6
    
    Credit Agreement 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. 333-109525), 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. 333-109525), is incorporated herein by reference.4.8
    
    Indenture, dated as of December 8, 2004, 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 December 2, 2004,
is incorporated herein by reference.4.9
    
    Form of 3.75% Convertible Senior Notes due 2009, attached as Exhibit A to the Indenture
(Exhibit 4.8 hereto), is incorporated herein by reference.4.10
    
    Registration Rights Agreement, dated as of December 8, 2004, by and between the Registrant
and Lehman Brothers Inc., filed as Exhibit 4.3 to the Registrants Current Report on Form 8-K
dated December 2, 2004, is incorporated herein by reference.* 10.1
    
    Summary of Director Compensation Arrangements.* 10.2
    
    Agreement, dated January 31, 2007, by and between Bradley W. Yates and the Registrant, filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 2006, is incorporated herein by reference.* 10.3
    
    Mindspeed Technologies, Inc. 2003 Long-Term Incentives Plan, as amended and restated, filed as Exhibit 10.1 to the
Registrants Current Report on Form 8-K dated March 5, 2007, is incorporated herein by reference.* 10.4
    
    Mindspeed Technologies, Inc. Directors Stock Plan, as amended and restated, filed as Exhibit 10.2 to the Registrants
Current Report on Form 8-K dated March 5, 2007, is incorporated herein by reference.31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 43




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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. 44




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##### Table of Contents



SIGNATURE
  MINDSPEED TECHNOLOGIES, INC.
(Registrant)Date: May 8, 2007
    By /s/ Simon BiddiscombeSimon BiddiscombeSenior Vice President, Chief Financial Officer,
Secretary and Treasurer
(principal financial officer) 45




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EXHIBIT INDEX
 10.1
    
    Summary of the Director Compensation Arrangements.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.