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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 April 1, 2011
 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
 þ o
 o o
  Large accelerated filer   o
    
    
    
    Accelerated filer
    
    þNon-accelerated filer     o
    
    
    
    Smaller reporting company
    
    o(Do not check if a smaller reporting company)
 o þ




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FORWARD-LOOKING STATEMENTS
  
    
    the ability of our relationships with leading 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 belief that we are well-situated in China and that fiber deployments are being
rolled out by the countrys major telecommunications carriers;
    
    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;
    
    the continuation of intense price and product competition, and the resulting declining
average selling prices for our products;
    
    the increasing trend toward industry consolidation and the effect it could have on our
operating results;
    
    the sufficiency of our cash balances, along with cash expected from product sales, to
fund our operations, research and development efforts, anticipated capital expenditures,
working capital and other financing requirements, including interest payments on debt
obligations, for the next 12 months;
    
    our expectations with respect to our recognition of income tax benefits in the future;
    
    our restructuring plans, including timing, expected workforce reductions, the expected
cost savings under our restructuring plans and the uses of those savings, the timing and
amount of payments, the impact on our business, the amounts of future charges to complete
our restructuring plans, including any future plans to reduce operating expenses and/or
increase revenue;
    
    the value of our intellectual property, our ability to continue recognizing
patent-related revenue from the sale or licensing of our intellectual property and our
plans to periodically enter into strategic arrangements to leverage our portfolio by
licensing or selling our intellectual property;
    
    our intention to continue to expand our international business activities, including
expansion of design and operations centers abroad, and the challenges associated with such
expansion;
    
    our expectations regarding the effect of the recent crisis in Japan on our operations
in the fiscal third
quarter of 2011 and beyond;
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
    
    our expectations regarding the cyclical nature of the semiconductor industry;
    
    the impact of recent accounting pronouncements and the adoption of new accounting
standards.
  
    
    fluctuations in our operating results and future operating losses;
    
    constraints in the supply of wafers and other product components from our third-party
manufacturers;
    
    worldwide political and economic uncertainties and specific conditions in the markets
we address;
    
    fluctuations in the price of our common stock;
    
    loss of or diminished demand from one or more key customers or distributors;
    
    successful development and introduction of new products;
    
    cash requirements and terms and availability of financing;
    
    our ability to attract and retain qualified personnel;
    
    doing business internationally and our ability to successfully and cost effectively
establish and manage operations in foreign jurisdictions;
    
    the expense of and our ability to defend our intellectual property against infringement
claims by others;
    
    pricing pressures and other competitive factors;
    
    lengthy sales cycles;
    
    order and shipment uncertainty;
    
    our ability to obtain design wins and develop revenue from them;
    
    product defects and bugs;
    
    business acquisitions and investments; and
    
    our ability to utilize our net operating loss carryforwards and certain other tax attributes.
  ® ®
 3




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##### 



MINDSPEED TECHNOLOGIES, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Condensed Balance Sheets  April 1, 2011 and October 1, 2010
    
    
    5Consolidated Condensed Statements of Operations  Three Months and Six Months Ended
April 1, 2011 and April 2, 2010
    
    
    6Consolidated Condensed Statements of Cash Flows  Six Months Ended April 1, 2011 and
April 2, 2010
    
    
    7Notes to Consolidated Condensed Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 6. Exhibits
    
    
    42Signature
    
    
    44EX-10.3EX-31.1EX-31.2EX-32.1EX-32.2
  4




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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)
 April 1,
    

    October 1,2011
    

    2010ASSETSCurrent AssetsCash and cash equivalents
    
    $
    44,908
    
    
    $
    43,685Receivables, net of allowance for doubtful
accounts of $189 at both April 1, 2011 and
October 1, 2010
    
    
    19,248
    
    
    
    25,678Inventories
    
    
    12,596
    
    
    
    10,205Deferred tax
assets, net
    
    
    2,340
    
    
    
    2,264Prepaid expenses and other current assets
    
    
    3,117
    
    
    
    3,035Total current assets
    
    
    82,209
    
    
    
    84,867Property, plant and equipment, net
    
    
    14,284
    
    
    
    12,700Licensed intangibles, net
    
    
    13,567
    
    
    
    9,887Other assets
    
    
    1,391
    
    
    
    1,230Total assets
    
    $
    111,451
    
    
    $
    108,684LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    10,781
    
    
    $
    9,303Accrued compensation and benefits
    
    
    6,150
    
    
    
    9,336Accrued income tax
    
    
    1,283
    
    
    
    1,503Deferred income on sales to distributors
    
    
    5,774
    
    
    
    5,199Deferred revenue
    
    
    558
    
    
    
    658Restructuring
    
    
    212
    
    
    
    710Other current liabilities
    
    
    5,270
    
    
    
    4,396Total current liabilities
    
    
    30,028
    
    
    
    31,105Convertible
senior notes  long term
    
    
    14,012
    
    
    
    13,810Other liabilities
    
    
    1,623
    
    
    
    2,133Total liabilities
    
    
    45,663
    
    
    
    47,048Commitments 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; 32,607 (April 1, 2011)
and 32,220 (October 1, 2010) issued and
outstanding shares
    
    
    326
    
    
    
    322Additional paid-in capital
    
    
    321,641
    
    
    
    318,468Accumulated deficit
    
    
    (256,061
    )
    
    
    (257,001
    )Accumulated other comprehensive loss
    
    
    (118
    )
    
    
    (153
    )Total stockholders equity
    
    
    65,788
    
    
    
    61,636Total liabilities and stockholders equity
    
    $
    111,451
    
    
    $
    108,684
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Operations
 (unaudited, in thousands, except per share amounts)
 Three Months Ended
    
    Six Months EndedApril 1,
    
    April 2,
    
    April 1,
    
    April 2,2011
    
    2010
    
    2011
    
    2010Net revenue:Products
    
    $
    38,553
    
    
    $
    40,253
    
    
    $
    76,596
    
    
    $
    77,279Intellectual property
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    Total net revenue
    
    
    38,553
    
    
    
    40,253
    
    
    
    79,096
    
    
    
    77,279Cost of goods sold
    
    
    14,283
    
    
    
    14,333
    
    
    
    28,564
    
    
    
    27,796Gross margin
    
    
    24,270
    
    
    
    25,920
    
    
    
    50,532
    
    
    
    49,483Operating expenses:Research and development
    
    
    14,525
    
    
    
    12,221
    
    
    
    28,448
    
    
    
    24,809Selling, general and administrative
    
    
    10,079
    
    
    
    10,391
    
    
    
    20,290
    
    
    
    20,025Special charges
    
    
    
    
    
    
    (71
    )
    
    
    (18
    )
    
    
    789Total operating expenses
    
    
    24,604
    
    
    
    22,541
    
    
    
    48,720
    
    
    
    45,623Operating income/(loss)
    
    
    (334
    )
    
    
    3,379
    
    
    
    1,812
    
    
    
    3,860Interest expense
    
    
    (399
    )
    
    
    (394
    )
    
    
    (797
    )
    
    
    (1,024
    )Other income/(expense), net
    
    
    (41
    )
    
    
    196
    
    
    
    (41
    )
    
    
    201Income/(loss) before income taxes
    
    
    (774
    )
    
    
    3,181
    
    
    
    974
    
    
    
    3,037Provision/(benefit) for income taxes
    
    
    (15
    )
    
    
    42
    
    
    
    34
    
    
    
    58Net income/(loss)
    
    $
    (759
    )
    
    $
    3,139
    
    
    $
    940
    
    
    $
    2,979Net income/(loss) per share:Basic
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.10Diluted
    
    $
    (0.02
    )
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.10Shares used in computation of net
income/(loss) per share:Basic
    
    
    32,133
    
    
    
    29,362
    
    
    
    32,021
    
    
    
    28,931Diluted
    
    
    32,133
    
    
    
    30,687
    
    
    
    33,032
    
    
    
    29,922
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Cash Flows
 (unaudited, in thousands)
 Six Months EndedApril 1,
    
    
    April 2,2011
    
    
    2010Cash Flows From Operating ActivitiesNet income
    

    $
    940
    
    
    $
    2,979Adjustments required to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    

    
    2,572
    
    
    
    2,422Amortization of licensed intangibles
    

    
    1,135
    
    
    
    443Asset impairments
    

    
    4
    
    
    
    Restructuring charges
    

    
    (18
    )
    
    
    789Stock-based compensation
    

    
    2,212
    
    
    
    2,217Inventory provisions
    

    
    181
    
    
    
    1,025Amortization of debt discount on convertible debt
    

    
    223
    
    
    
    347Other non-cash items, net
    

    
    
    
    
    
    215Changes in operating assets and liabilities:Receivables
    

    
    6,442
    
    
    
    (7,398
    )Inventories
    

    
    (2,572
    )
    
    
    2,392Accounts payable
    

    
    1,931
    
    
    
    111Deferred income on sales to distributors
    

    
    575
    
    
    
    2,126Restructuring
    

    
    (491
    )
    
    
    (770
    )Accrued compensation and benefits
    

    
    (3,229
    )
    
    
    89Accrued expenses and other current liabilities
    

    
    (213
    )
    
    
    437Other
    

    
    (190
    )
    
    
    (531
    )Net cash provided by operating activities
    

    
    9,502
    
    
    
    6,893Cash Flows From Investing ActivitiesPurchases of property, plant and equipment
    

    
    (3,920
    )
    
    
    (2,308
    )Payments for licensed intangibles
    

    
    (5,009
    )
    
    
    (739
    )Net cash used in investing activities
    

    
    (8,929
    )
    
    
    (3,047
    )Cash Flows From Financing ActivitiesGross proceeds from sale of equity
    

    
    
    
    
    
    18,300Offering costs from sale of equity
    

    
    
    
    
    
    (1,307
    )Extinguishment of convertible debt
    

    
    
    
    
    
    (10,500
    )Payments made on capital lease obligations
    

    
    (274
    )
    
    
    (249
    )Borrowings under line of credit
    

    
    
    
    
    
    7,000Payments made on borrowings under line of credit
    

    
    
    
    
    
    (7,000
    )Repurchase of restricted stock for income tax withholding
    

    
    (291
    )
    
    
    (192
    )Proceeds from equity compensation programs
    

    
    1,256
    
    
    
    474Net cash provided by financing activities
    

    
    691
    
    
    
    6,526Effect of foreign currency exchange rates on cash
    

    
    (41
    )
    
    
    85Net increase in cash and cash equivalents
    

    
    1,223
    
    
    
    10,457Cash and cash equivalents at beginning of period
    

    
    43,685
    
    
    
    20,891Cash and cash equivalents at end of period
    

    $
    44,908
    
    
    $
    31,348
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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
 Revenue Recognition
  8




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2. Supplemental Financial Statement Data
 Inventories
  April 1,
    
    October 1,2011
    
    2010Work-in-process
    
    $
    6,331
    
    
    $
    4,681Finished goods
    
    
    6,265
    
    
    
    5,524Total inventories, net
    
    $
    12,596
    
    
    $
    10,205
 Deferred Income on Sales to Distributors
  April 1,
    
    October 1,2011
    
    2010Deferred revenue on shipments to distributors
    
    $
    6,252
    
    
    $
    5,674Deferred cost of goods sold on shipments to distributors
    
    
    (531
    )
    
    
    (528
    )Reserves
    
    
    53
    
    
    
    53Deferred income on sales to distributors
    
    $
    5,774
    
    
    $
    5,199
 Other Liabilities
  April 1,
    
    October 1,2011
    
    2010CurrentDeferred rent
    
    
    886
    
    
    
    1,075Capital lease obligations
    
    
    458
    
    
    
    478Royalties
    
    
    358
    
    
    
    426Licensed intangibles
    
    
    2,086
    
    
    
    1,302Other
    
    
    1,482
    
    
    
    1,115Total other current liabilities
    
    $
    5,270
    
    
    $
    4,396Long-termCapital lease obligations
    
    $
    320
    
    
    $
    574Licensed intangibles
    
    
    646
    
    
    
    952Other
    
    
    657
    
    
    
    607Total other liabilities
    
    $
    1,623
    
    
    $
    2,133
 Computation of Net Income/(Loss) per Share
  Three Months Ended
    
    Six Months EndedApril 1,
    
    April 2,
    
    April 1,
    
    April 2,2011
    
    2010
    
    2011
    
    2010Earnings per
share    basicNet income/(loss)
    
    $
    (759
    )
    
    $
    3,139
    
    
    $
    940
    
    
    $
    2,979Basic weighted average common shares outstanding
    
    
    32,133
    
    
    
    29,362
    
    
    
    32,021
    
    
    
    28,931Earnings per
share - basic
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    0.03
    
    
    $
    0.10
 10




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Basic weighted average common shares outstanding
    
    
    32,133
    
    
    
    29,362
    
    
    
    32,021
    
    
    
    28,931Effect of dilutive securities:Convertible senior notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dilutive stock awards
    
    
    
    
    
    
    1,325
    
    
    
    993
    
    
    
    991Dilutive employee stock purchase plan shares
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    Diluted weighted average common shares outstanding
    
    
    32,133
    
    
    
    30,687
    
    
    
    33,032
    
    
    
    29,922Earnings per
share   diluted
    
    $
    (0.02
    )
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.10
  Comprehensive Income/(Loss)
  Three Months Ended

    
    Six Months EndedApril 1,

    
    April 2,

    
    April 1,

    
    April 2,2011

    
    2010

    
    2011

    
    2010Net
income/(loss)
    
    $
    (759
    )

    
    $
    3,139
    

    
    $
    940
    

    
    $
    2,979Foreign
currency translation adjustments, net of tax
    
    
    111
    

    
    
    (231
    )

    
    
    35
    

    
    
    (323
    )Comprehensive
income/(loss)
    
    $
    (648
    )

    
    $
    2,908
    

    
    $
    975
    

    
    $
    2,656
 Net Revenue by Product Line
  Three Months Ended

    
    Six Months EndedApril 1,

    
    April 2,

    
    April 1,

    
    April 2,2011

    
    2010

    
    2011

    
    2010Communications
convergence processing products
    
    $
    15,569
    

    
    $
    16,168
    

    
    $
    32,194
    

    
    $
    30,123High-performance
analog products
    
    
    14,949
    

    
    
    13,531
    

    
    
    29,053
    

    
    
    25,111WAN
communications products
    
    
    8,035
    

    
    
    10,554
    

    
    
    15,349
    

    
    
    22,045Intellectual
property
    
    
    
    

    
    
    
    

    
    
    2,500
    

    
    
    Total net
revenue
    
    $
    38,553
    

    
    $
    40,253
    

    
    $
    79,096
    

    
    $
    77,279
 Net Revenue by Geographic Area
  Three Months Ended

    Six Months EndedApril 1,

    April 2,

    April 1,

    
    April 2,2011

    2010

    2011

    2010Americas
    
    $
    7,796
    

    
    $
    7,888
    

    
    $
    19,827
    

    
    $
    16,506Asia-Pacific
    
    
    27,414
    

    
    
    28,857
    

    
    
    52,586
    

    
    
    54,913Europe, Middle East and Africa
    
    
    3,343
    

    
    
    3,508
    

    
    
    6,683
    

    
    
    5,860Total net revenue
    
    $
    38,553
    

    
    $
    40,253
    

    
    $
    79,096
    

    
    $
    77,279
  Supplemental Cash Flow Information
  11




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Customer Concentrations
  Three Months Ended
    
    Six Months EndedApril 1,
    
    April 2,
    
    April 1,
    
    April 2,2011
    
    2010
    
    2011
    
    2010Customer A
    
    
    25
    %
    
    
    15
    %
    
    
    22
    %
    
    
    13
    %Customer B
    
    
    18
    %
    
    
    19
    %
    
    
    17
    %
    
    
    18
    %Customer C
    
    
    10
    %
    
    
    7
    %
    
    
    9
    %
    
    
    9
    %Customer D
    
    
    8
    %
    
    
    14
    %
    
    
    7
    %
    
    
    11
    %
  April 1,
    
    October 1,2011
    
    2010Customer A
    
    
    25
    %
    
    
    5
    %Customer B
    
    
    18
    %
    
    
    25
    %Customer E
    
    
    9
    %
    
    
    12
    %
 3. Fair Value Measurements
  Quoted Prices inActive Marketsfor Identical
    
    Total Fair ValueInstruments
    
    asApril
1, 2011
    
    (Level 1)
    
    of April 1, 2011Assets:Cash
    
    $
    20,383
    
    
    $
    20,383Money market fund
    
    
    15,517
    
    
    
    15,517Government money market fund
    
    
    9,008
    
    
    
    9,008Total cash and cash equivalents
    
    $
    44,908
    
    
    $
    44,908
 Quoted Prices inActive Marketsfor Identical
    
    Total Fair ValueInstruments
    
    asOctober
1, 2010
    
    (Level 1)
    
    of October 1, 2010Assets:Cash
    
    $
    22,174
    
    
    $
    22,174Money market fund
    
    
    16,007
    
    
    
    16,007Government money market fund
    
    
    5,504
    
    
    
    5,504Total cash and cash equivalents
    
    $
    43,685
    
    
    $
    43,685
 4. Stock-Based Compensation
  12




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Three Months Ended
    
    
    Six Months EndedApril 1,
    
    
    April 2,
    
    
    April 1,
    
    
    April 2,2011
    
    
    2010
    
    
    2011
    
    
    2010Cost of goods sold
    
    $

    45
    
    
    $
    38
    
    
    $
    88
    
    
    $
    70Research and development
    
    
    308
    
    
    
    198
    
    
    
    616
    
    
    
    505Selling, general and administrative
    
    
    697
    
    
    
    1,041
    
    
    
    1,508
    
    
    
    1,642Total stock-based compensation
    
    $
    1,050
    
    
    $
    1,277
    
    
    $
    2,212
    
    
    $
    2,217
  Six Months EndedApril 1,

    
    April 2,2011

    
    2010Weighted-average assumptions:Expected option life
    
    2.9 years
    
    
    2.7 yearsRisk-free interest rate
    
    
    0.7
    %
    
    
    1.3
    %Expected volatility
    
    
    99
    %
    
    
    95
    %Dividend yield
    
    
    
    
    
    
    Weighted-average grant date fair value per share
    
    
    $ 4.02

    
    
    $ 2.92
 Stock Option Awards
  Weighted-AverageNumber
    
    Weighted-Average
    
    Remainingof Shares
    
    Exercise Price
    
    Contractual TermOutstanding at October 1, 2010
    
    
    2,900
    
    
    $
    6.41
    
    
    4.8 yearsGranted
    
    
    449
    
    
    
    6.65Exercised
    
    
    (165
    )
    
    
    3.16Forfeited or expired
    
    
    (320
    )
    
    
    9.11Outstanding at April 1, 2011
    
    
    2,864
    
    
    
    6.33
    
    
    5.2 yearsExercisable at end of period
    
    
    1,365
    
    
    $
    8.25
    
    
    3.9 years
  Stock Awards
  13




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##### Table of Contents



Weighted-Number
    
    Averageof
    
    Grant DateShares
    
    Fair ValueNonvested shares at October 1, 2010
    
    
    680
    
    
    $
    6.64Granted
    
    
    135
    
    
    
    6.58Vested
    
    
    (170
    )
    
    
    5.02Forfeited
    
    
    (4
    )
    
    
    3.09Nonvested shares at April 1, 2011
    
    
    641
    
    
    $
    6.84
  5. Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
  3.75% Convertible Senior Notes due 2009
   Six Months EndedApril 1,

    
    April 2,2011

    
    20103.75% convertible senior notesInterest
expense   coupon
    

    $
    
    
    
    $
    48Interest
expense   debt discount amortization
    

    
    
    
    
    
    151Total
    

    $
    
    
    
    $
    199Effective interest rate on the liability component for the period
    

    
    
    
    
    
    14.68
    %
 6.50% Convertible Senior Notes due 2013
   14




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##### Table of Contents



April 1, 2011

    
    October 1, 20106.50% convertible senior notesPrincipal value of the liability component
    
    $
    15,000
    
    
    $
    15,000Unamortized value of the liability component
    
    
    988
    
    
    
    1,190Net carrying value of the liability component
    
    $
    14,012
    
    
    $
    13,810
  Three Months Ended

    
    Six Months EndedApril 1,

    
    April 2,
    
    
    April 1,
    
    
    April 2,2011

    
    2010
    
    
    2011
    
    
    20106.50% convertible senior notesInterest
expense   coupon
    
    $
    244
    
    
    $
    244
    
    
    $
    488
    
    
    $
    488Interest
expense   debt discount amortization
    
    
    101
    
    
    
    99
    
    
    
    202
    
    
    
    197Total
    
    $
    345
    
    
    $
    343
    
    
    $
    690
    
    
    $
    685Effective interest rate on the liability component for the period
    
    
    9.20
    %
    
    
    9.15%
    
    
    
    9.20%
    
    
    
    9.13
    %
 6. Commitments and Contingencies
   15




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7. Special Charges
  Restructuring Charges
  Fourth
Quarter of Fiscal 2010 Restructuring Plan 
  Workforce

    
    Facility andReductions

    
    Other

    
    TotalRestructuring balance, October 1, 2010
    
    $
    701
    
    
    $
    
    
    
    $
    701Cash payments
    
    
    (489
    )
    
    
    
    
    
    
    (489
    )Restructuring balance, April 1, 2011
    
    $
    212
    
    
    $
    
    
    
    $
    212
  Fiscal 2009 Restructuring Plans 
  8. Income Taxes
   16




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9. Related Party Transactions
  17




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   
    
    Communications Convergence Processing triple-play edge and metro trunking gateways
for Voice-over-Internet protocol (VoIP) platforms; broadband customer premises equipment
(CPE) gateways and other equipment that carriers use to deliver voice, data and video
services to residential subscribers; Internet protocol (IP) private branch exchange (PBX)
equipment and security appliances used in the enterprise and 3G/4G mobile base stations in
the carrier infrastructure;
 
    
    High-Performance Analog  next-generation fiber access network equipment (including
passive optical networking, or PON, systems); storage and server systems supporting
high-speed PCI Express and Serial Attached SCSI (SAS) protocols; and production
switches, routers and other systems that are driving the migration to 3G high-definition
(HD) transmission; and
 
    
    WAN Communications circuit-switched networking equipment that implements
asynchronous transfer mode (ATM) and T1/E1 and T3/E3 communications protocols.
  Trends and Factors Affecting Our Business
  18




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19




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Critical Accounting Policies and Estimates
  Revenue Recognition
    20




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Recent Accounting Pronouncements
  21




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Results of Operations
 Net Revenue
  Three Months Ended
    
    
    Six Months EndedApril 1,

    
    
    
    
    
    April 2,

    
    April 1,
    
    
    
    
    
    
    April 2,($ in millions)
    
    2011

    
    Change

    
    2010

    
    2011
    
    Change

    
    2010Communications convergence processing products
    
    
    $      15.6
    
    


(4)%
    
    $
    16.2
    
    
    $
    32.2
    
    

    7%

    
    
    $      30.1High-performance analog products
    
    
    14.9
    
    

    10%

    
    
    13.5
    
    
    
    29.1
    
    

    16%

    
    
    25.1WAN communications products
    
    
    8.1
    
    

    (24)%

    
    
    10.6
    
    
    
    15.3
    
    

    (31)%

    
    
    22.1Intellectual property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    Net revenue
    
    
    $      38.6
    
    

    (4)%

    
    $
    40.3
    
    
    $
    79.1
    
    
    2%
    
    
    $      77.3
   22




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Gross Margin
 Three Months Ended
    
    Six Months EndedApril 1,
    
    
    
    
    
    April 2,
    
    April 1,
    
    
    
    
    
    April 2,($ in millions)
    
    2011
    
    Change
    
    2010
    
    2011
    
    Change
    
    2010Gross margin
    
    $
    24.3
    
    
    
    (6)%
    
    
    $
    25.9
    
    
    $
    50.5
    
    
    
    2%
    
    
    $
    49.5Percent of net revenue
    
    
    63%
    
    
    
    
    
    
    
    64%
    
    
    
    64%
    
    
    
    
    
    
    
    64%
    Research and Development
 Three Months Ended
    
    Six Months EndedApril 1,
    
    
    
    
    
    April 2,
    
    April 1,
    
    
    
    
    
    April 2,($ in millions)
    
    2011
    
    Change
    
    2010
    
    2011
    
    Change
    
    2010Research and development
    
    $
    14.5
    
    
    
    19%
    
    
    $
    12.2
    
    
    $
    28.4
    
    
    
    15%
    
    
    $
    24.8Percent of net revenue
    
    
    38%
    
    
    
    
    
    
    
    30%
    
    
    
    36%
    
    
    
    
    
    
    
    32%
    Selling, General and Administrative
 Three Months Ended
    
    Six Months EndedApril 1,
    
    
    
    
    
    April 2,
    
    April 1,
    
    
    
    
    
    April 2,($ in millions)
    
    2011
    
    Change
    
    2010
    
    2011
    
    Change
    
    2010Selling, general and administrative
    
    $
    10.1
    
    
    
    (3)%
    
    
    $
    10.4
    
    
    $
    20.3
    
    
    
    2%
    
    
    $
    20.0Percent of net revenue
    
    
    26
    %
    
    
    
    
    
    
    26
    %
    
    
    26
    %
    
    
    
    
    
    
    26
    %
  23




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Special Charges
   Restructuring Charges
  Mindspeed
Fourth Quarter of Fiscal 2010 Restructuring Plan 
  Workforce
    
    
    Facility andReductions
    
    
    Other
    
    
    TotalRestructuring balance, October 1, 2010
    
    $
    701
    
    
    $
    
    
    
    $
    701Cash payments
    
    
    (489
    )
    
    
    
    
    
    
    (489
    )Restructuring balance, April 1, 2011
    
    $
    212
    
    
    $
    
    
    
    $
    212
  Mindspeed Fiscal 2009 Restructuring Plans 
  Interest Expense
 Three Months Ended
    
    Six Months EndedApril 1,
    
    April 2,
    
    April 1,
    
    April 2,($ in millions)
    
    2011
    
    2010
    
    2011
    
    2010Interest expense
    
    $
    (0.4
    )
    
    $
    (0.4
    )
    
    $
    (0.8
    )
    
    $
    (1.0
    )
  24




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Other Income, Net
 Three Months Ended
    
    Six Months EndedApril 1,
    
    April 2,
    
    April 1,
    
    April 2,($ in millions)
    
    2011
    
    2010
    
    2011
    
    2010Other income, net
    
    $
    
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    0.2
   Income Taxes
  Liquidity and Capital Resources
    25




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26




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Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
    3.75% Convertible Senior Notes due 2009
  6.50% Convertible Senior Notes due 2013
   27




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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   28




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Foreign Exchange Risk
   
 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
   29




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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 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;
    
    availability and cost of products from our suppliers;
    
    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;
    
    shifts in our product mix and the effect of maturing products;
    
    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.
  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.
  30




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
    
    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.
      31




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Our operating results may be adversely impacted by worldwide economic uncertainties and specific
conditions in the markets we address, including the cyclical nature of and volatility in the
semiconductor industry.
   The price of our common stock may fluctuate significantly.
  
    
    our operating and financial performance and prospects, including our
ability to achieve sustained
profitability;
    
    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.
  32




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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 net revenue, gross margin and results of
operations.
  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.
   
    
    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.
   33




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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 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.
  34




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
    
    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.
  35




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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.
 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.
 36




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Because of the lengthy sales cycles of many of our products, we may incur significant expenses
before we generate any revenue related to those products.
  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.
  37




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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.
   38




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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.
  39




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Substantial sales of the shares of our common stock issuable upon conversion of our convertible
senior notes or exercise of our outstanding warrant and antidilution and other provisions in our
outstanding warrant could adversely affect our stock price or our ability to raise additional
financing in the public capital markets.
     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.
 40




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
 Total Number of

    
    Average PriceShares (or Units)

    
    Paid per SharePurchased (a)

    
    (or Unit)January 1, 2011 to January 28, 2011
    
    
    
    
    
    $
    January 29, 2011 to February 25, 2011
    
    
    3,424
    
    
    
    7.30February 26, 2011 to April 1, 2011
    
    
    5,987
    
    
    
    7.519,411
    
    
    $
    7.43
 
 (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 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 3.1
to the Registrants Current Report on Form 8-K dated January 27,
2011, is incorporated herein by reference (SEC File No. 000-31650).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 S-8 dated April 6, 2011, is incorporated herein by
reference (SEC File No. 333-173328).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
    
    Standstill and Voting Agreement, effective as of January 5, 2011, by
and between the Registrant, Artis Capital Management, L.P., and
certain other direct and beneficial holders of the Companys Common
Stock, filed as Exhibit 10.1 to the Registrants Current Report on
Form 8-K dated January 10, 2011, is incorporated herein by reference
(SEC File No. 001-31650).
 42




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*10.2
    
    Mindspeed Technologies, Inc. 2003 Long-Term Incentives Plan, as amended and restated, filed Exhibit 10.1 to the
Registrants Current Report on Form 8-K dated April 8, 2011, is incorporated herein by reference (SEC File No.
001-31650).10.3
    
    Second Amendment to Lease, as of January 25, 2011, by and between 4000 MacArthur, L.P. and the Registrant.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. 43




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SIGNATURE
  MINDSPEED TECHNOLOGIES, INC.
(Registrant)Date: May 6, 2011
    By
    /s/ BRET W. JOHNSENBret W. JohnsenSenior Vice President and Chief Financial Officer
(principal financial and accounting officer) 44




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EXHIBIT INDEX
 10.3
    
    Second Amendment to Lease, as of January 25, 2011, by and
between 4000 MacArthur, L.P. and the Registrant.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.
 45