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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 January 2, 2009
 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
    
    01-0616769(State of incorporation)
    
    (I.R.S. Employer
Identification No.)
 4000 MacArthur Boulevard, East Tower 
Newport Beach, California
    
    92660-3095(Address of principal executive offices)
    
    (Zip code)
 (949) 579-3000
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
  
    
    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 plans to make substantial investments in research and development and participate in
the formulation of industry standards;
    
    our ability to achieve design wins and convert wins into revenue;
    
    the continuation of intense price and product competition, and the resulting declining
average selling prices for our products;
    
    the impact of changes in customer purchasing activities, inventory levels and inventory
management practices;
    
    the 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, regain and sustain profitability and positive cash
flows from operations;
    
    our plans to reduce operating expenses, the amount and timing of any such expense
reductions, and its effects on cash flow;
    
    our anticipation that we will not pay a dividend in the foreseeable future;
    
    the dependence of our operating results on our ability to develop and introduce new
products and enhancements to existing products on a timely basis;
    
    the continuation of a trend toward industry consolidation and the effect it could have on
our operating results;
    
    our belief that we are benefiting from the increased deployment of internet
protocol-based networks both in new network buildouts worldwide and the replacement of
circuit-switched networks;
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
    
    the sufficiency of our existing sources of liquidity and expected sources of cash to repay
the remaining 10.5 million in senior convertible debt and fund our operations, research and
development efforts, anticipated capital expenditures, working capital and other financing
requirements for the next 12 months;
    
    the circumstances under which we may need to seek additional financing, our ability to
obtain any such financing and any consideration of acquisition opportunities;
    
    our expectation that our provision for income taxes for fiscal 2009 will principally
consist of income taxes related to our foreign operations;
    
    our expectations with respect to our recognition of income tax benefits in the future;
    
    our restructuring plans, including timing, expected workforce reductions, the freezing of
merit salary increases, the closure of the Dubai facility, the expected cost savings under
our restructuring plans and the uses of those savings, the timing and amount of payments to
complete the actions, the source of funds for such payments, the impact on our liquidity and
the resulting decreases in our research and development and selling, general and
administrative expenses, and the amounts of future charges to complete our restructuring
plans;
    
    our beliefs regarding the effect of the disposition of pending or asserted legal matters;
    
    our acquisition strategy, the means of financing such a strategy, and the impact of any
past or future acquisitions, including the impact on revenue, margin and profitability;
    
    our plans relating to our use of stock-based compensation, the effectiveness of our
incentive compensation programs and the expected amounts of stock-based compensation expense
in future periods;
    
    our belief that the financial stability of suppliers is an important consideration in our
customers purchasing decisions;
    
    the effects of a downturn in the semiconductor industry and the general economy at large,
including the impact of slower economic activity, an increase in
bankruptcy filings, concerns about inflation and deflation,
increased energy costs, decreased consumer confidence, reduced corporate profits and capital
spending, adverse business conditions and liquidity concerns in the wired and wireless
communications markets, recent international conflicts and terrorist and military activity
and the impact of natural disasters and public health emergencies on our revenue and results
of operation;
    
    the impact of reductions, delays and cancellation of orders from key customers given our
dependence on a relatively small number of end customers and distributors for a significant
portion of our revenue and our lack of long term purchase commitments;
    
    the impact of volatility in the stock market on the market price of our common stock;
    
    the impact on our business if we fail to comply with the minimum listing requirements for
continued quotation on the Nasdaq Global Market LLC;
    
    the effect of changes in the amount of research coverage of our common stock, changes in
earnings estimates or buy/sell recommendations by analysts and changes in investor
perception of us and the industry in which we operate;
    
    the effect of shifts in our product mix and the effect of maturing products;
    
    the continued availability and costs of products from our suppliers;
    
    the value of our intellectual property, and our ability to continue recognizing
patent-related revenues from the sale or licensing of our intellectual property;
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
    
    market demand for our new and existing products and our ability to increase our revenues;
    
    our intentions with respect to inventories that were previously written down;
    
    our intention to continue to expand our international business activities, including
expansion of design and operations centers abroad;
    
    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; and
    
    the impact of recent accounting pronouncements and the adoption of new accounting
standards.
  
    
    cash requirements and terms and availability of financing;
    
    future operating losses;
    
    worldwide political and economic uncertainties and specific conditions in the markets we
address;
    
    fluctuations in the price of our common stock and our operating results;
    
    loss of or diminished demand from one or more key customers or distributors;
    
    our ability to attract and retain qualified personnel;
    
    constraints in the supply of wafers and other product components from our third-party
manufacturers;
    
    doing business internationally;
    
    pricing pressures and other competitive factors;
    
    successful development and introduction of new products;
    
    our ability to successfully and cost effectively establish and manage operations in
foreign jurisdictions;
    
    industry consolidation;
    
    order and shipment uncertainty;
    
    our ability to obtain design wins and develop revenues from them;
    
    lengthy sales cycles;
    
    the expense of and our ability to defend our intellectual property against infringement
claims by others;
    
    product defects and bugs;
    
    possible future impairments because our stock market capitalization is lower than our
stockholders equity; and
    
    business acquisitions and investments.
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® ®
 5




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##### 



MINDSPEED TECHNOLOGIES, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Condensed Balance Sheets  January 2, 2009 and October 3, 2008
    
    
    7Consolidated Condensed Statements of Operations  Three Months Ended January 2,
2009 and December 28, 2007
    
    
    8Consolidated Condensed Statements of Cash Flows  Three Months Ended January 2,
2009 and December 28, 2007
    
    
    9Notes to Consolidated Condensed Financial Statements
    
    
    10Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 5. Other Information
    
    
    42Item 6. Exhibits
    
    
    43Signature
    
    
    45EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Balance Sheets
 (unaudited, in thousands, except per share amounts)
 January 2,
    
    
    October 3,2009
    
    
    2008(In thousands, except share amounts)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    20,030
    
    
    $
    43,033Receivables, net of allowance for doubtful
accounts of $331 and $342 at January 2,
2009 and October 3, 2008, respectively
    
    
    8,573
    
    
    
    14,398Inventories
    
    
    18,402
    
    
    
    16,187Other current assets
    
    
    3,056
    
    
    
    3,138Total current assets
    
    
    50,061
    
    
    
    76,756Property, plant and equipment, net
    
    
    12,788
    
    
    
    12,600Intangible assets, net
    
    
    2,325
    
    
    
    2,480Goodwill
    
    
    2,429
    
    
    
    2,429License agreements, net
    
    
    5,987
    
    
    
    3,347Other assets
    
    
    2,916
    
    
    
    2,992Total assets
    
    $
    76,506
    
    
    $
    100,604LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    9,802
    
    
    $
    11,265Deferred income on sales to distributors
    
    
    4,126
    
    
    
    4,869Accrued compensation and benefits
    
    
    5,723
    
    
    
    6,778Accrued income tax
    
    
    176
    
    
    
    412Restructuring
    
    
    1,056
    
    
    
    8Convertible senior notes  short term
    
    
    10,407
    
    
    
    Other current liabilities
    
    
    4,268
    
    
    
    3,147Total current liabilities
    
    
    35,558
    
    
    
    26,479Convertible senior notes  long term
    
    
    15,000
    
    
    
    45,648Other liabilities
    
    
    929
    
    
    
    519Total liabilities
    
    
    51,487
    
    
    
    72,646Commitments and contingencies
    
    
    
    
    
    
    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; 23,867 (January 2,
2009) and 23,852 (October 3, 2008) issued
shares
    
    
    239
    
    
    
    239Additional paid-in capital
    
    
    270,437
    
    
    
    269,487Accumulated deficit
    
    
    (230,591
    )
    
    
    (227,043
    )Accumulated other comprehensive loss
    
    
    (15,066
    )
    
    
    (14,725
    )Total stockholders equity
    
    
    25,019
    
    
    
    27,958Total liabilities and stockholders equity
    
    $
    76,506
    
    
    $
    100,604
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
 Three months endedJanuary 2,
    
    
    December 28,2009
    
    
    2007Net revenues:Products
    
    $
    27,731
    
    
    $
    32,651Intellectual Property
    
    
    3,000
    
    
    
    2,650Total net revenues
    
    
    30,731
    
    
    
    35,301Cost of goods sold
    
    
    9,749
    
    
    
    10,342Gross margin
    
    
    20,982
    
    
    
    24,959Operating expenses:Research and development
    
    
    13,344
    
    
    
    13,718Selling, general and administrative
    
    
    11,123
    
    
    
    11,506Special charges
    
    
    2,305
    
    
    
    81Total operating expenses
    
    
    26,772
    
    
    
    25,305Operating loss
    
    
    (5,790
    )
    
    
    (346
    )Interest expense
    
    
    (469
    )
    
    
    (562
    )Other income, net
    
    
    2,801
    
    
    
    161Loss before income taxes
    
    
    (3,458
    )
    
    
    (747
    )Provision for income taxes
    
    
    90
    
    
    
    82Net loss
    
    $
    (3,548
    )
    
    $
    (829
    )Net loss per share, basic and diluted
    
    $
    (0.15
    )
    
    $
    (0.04
    )Weighted-average number of shares used in per share computation
    
    
    23,407
    
    
    
    22,755
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Cash Flows
(unaudited, in thousands)
 January 2,
    
    
    December 28,2009
    
    
    2007Cash Flows From Operating ActivitiesNet loss
    
    $
    (3,548
    )
    
    $
    (829
    )Adjustments to reconcile net loss to net cash (used in) / provided
by operating activities, net of effects of acquisitions:Depreciation and amortization
    
    
    1,650
    
    
    
    1,610Stock-based compensation
    
    
    967
    
    
    
    1,654Inventory provisions
    
    
    486
    
    
    
    (347
    )Gain on debt extinguishment
    
    
    (2,880
    )
    
    
    Other non-cash items, net
    
    
    178
    
    
    
    128Changes in assets and liabilities, net of effects of acquisitions:Receivables
    
    
    5,837
    
    
    
    1,087Inventories
    
    
    (2,701
    )
    
    
    2,576Accounts payable
    
    
    (3,900
    )
    
    
    (627
    )Deferred revenue
    
    
    (743
    )
    
    
    (271
    )Accrued expenses and other current liabilities
    
    
    873
    
    
    
    52Other
    
    
    514
    
    
    
    (245
    )Net cash (used in) / provided by operating activities
    
    
    (3,267
    )
    
    
    4,788Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (2,175
    )
    
    
    (2,013
    )Acquisition of assets, net of cash acquired
    
    
    
    
    
    
    (1,155
    )Net cash used in investing activities
    
    
    (2,175
    )
    
    
    (3,168
    )Cash Flows From Financing ActivitiesExtinguishment of convertible debt
    
    
    (17,320
    )
    
    
    Debt issuance costs
    
    
    (244
    )
    
    
    Exercise of stock options and warrants
    
    
    
    
    
    
    101Net cash (used in) / provided by financing activities
    
    
    (17,564
    )
    
    
    101Effect of foreign currency exchange rates on cash
    
    
    3
    
    
    
    (3
    )Net (decrease) / increase in cash and cash equivalents
    
    
    (23,003
    )
    
    
    1,718Cash and cash equivalents at beginning of period
    
    
    43,033
    
    
    
    25,796Cash and cash equivalents at end of period
    
    $
    20,030
    
    
    $
    27,514
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MINDSPEED TECHNOLOGIES, INC.
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 1. Basis of Presentation and Significant Accounting Policies
   Basis of Presentation
 Reverse Stock Split
 Liquidity
  10




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Fiscal Periods
 Reclassifications
 Recent Accounting Standards
   Income Taxes
 Supplemental Cash Flow Information
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2. Supplemental Financial Statement Data
 Inventories
  January 2,
    
    
    October 3,2009
    
    
    2008Work-in-process
    
    $
    7,547
    
    
    $
    8,620Finished goods
    
    
    10,855
    
    
    
    7,567Total
inventories
    
    $
    18,402
    
    
    $
    16,187
  Deferred Income on Shipments to Distributors
  January 2,
    
    
    October 3,2009
    
    
    2008Deferred revenue on shipments to distributors
    
    $
    4,593
    
    
    $
    5,387Deferred cost of inventory on shipments to distributors
    
    
    (519
    )
    
    
    (576
    )Reserves
    
    
    52
    
    
    
    58Deferred income on sales to distributors
    
    $
    4,126
    
    
    $
    4,869
 Comprehensive Loss
  Three months endedJanuary 2,
    
    
    December 28,2009
    
    
    2007Net loss
    
    $
    (3,548
    )
    
    $
    (829
    )Foreign currency translation adjustments, net of tax
    
    
    (341
    )
    
    
    109Comprehensive loss
    
    $
    (3,889
    )
    
    $
    (720
    )
  Revenues by Product Line
  Three months endedJanuary 2,
    
    
    December 28,2009
    
    
    2007Multiservice access DSP products
    
    $
    10,789
    
    
    $
    8,092High-performance analog products
    
    
    10,519
    
    
    
    10,574WAN communications products
    
    
    6,423
    
    
    
    13,985Intellectual property
    
    
    3,000
    
    
    
    2,650Total net
revenues
    
    $
    30,731
    
    
    $
    35,301
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Revenues by Geographic Area
  Three months endedJanuary 2,
    
    
    December 28,2009
    
    
    2007Americas
    
    $
    12,319
    
    
    $
    13,626Asia-Pacific
    
    
    14,294
    
    
    
    17,671Europe, Middle East and Africa
    
    
    4,118
    
    
    
    4,004Total net
revenues
    
    $
    30,731
    
    
    $
    35,301
   Three months endedJanuary 2,
    
    December 28,2009
    
    2007Customer A
    
    
    18
    %
    
    
    16
    %Customer B
    
    
    13
    %
    
    
    17
    %
 3. Fair Value Measurements
   
    
    Level 1uses unadjusted quoted prices that are available in active markets for identical
assets or liabilities. The Companys Level 1 assets include
investments in money market funds.
    
    Level 2uses inputs other than quoted prices included in Level 1 that are either
directly or indirectly observable through correlation with market data. These include
quoted prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active; and inputs to
valuation models or other pricing methodologies that do not require significant judgment
because the inputs used in the model, such as interest rates and volatility, can be
corroborated by readily observable market data. The Companys Level 2 liabilities include
convertible senior notes.
    
    Level 3uses one or more significant inputs that are unobservable and supported by
little or no market activity, and reflect the use of significant management judgment.
Level 3 assets and liabilities include those whose fair value
measurements are determined using pricing models, discounted cash flow methodologies or
similar valuation techniques and significant management judgment or estimation. The Company
does not have any assets or liabilities that are valued using inputs identified under a
Level 3 hierarchy.
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Quoted Prices inActive Marketsfor Identical
    
    Significant OtherInstruments
    
    Observable Inputs
    
    Total Fair Value as(Level 1)
    
    (Level 2)
    
    of January 2, 2009Assets:Cash equivalents
    
    $
    20,030
    
    
    
    
    
    
    $
    20,030Total assets
    
    $
    20,030
    
    
    
    
    
    
    $
    20,030Liabilities:Senior convertible debt
    
    
    
    
    
    $
    24,544
    
    
    $
    24,544Total liabilities
    
    
    
    
    
    $
    24,544
    
    
    $
    24,544
 4. Stock-Based Compensation
     Three months endedJanuary 2,
    
    December 28,2009
    
    2007Weighted-average fair value of options granted
    
    $
    0.61
    
    
    $
    3.70Weighted-average assumptions:Expected option life
    
    2.9 years
    
    
    3.5 yearsRisk-free interest rate
    
    
    1.4
    %
    
    
    3.2
    %Expected volatility
    
    
    76
    %
    
    
    68
    %Dividend yield
    
    
    
    
    
    
    
  14




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Three months endedJanuary 2,
    
    
    December 28,2009
    
    
    2007Cost of goods sold
    
    $
    35
    
    
    $
    80Research and development
    
    
    340
    
    
    
    801Selling, general and administrative
    
    
    592
    
    
    
    773Total stock-based compensation expense
    
    $
    967
    
    
    $
    1,654
 Stock Compensation Plans
    Stock Option Awards
  15




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Weighted-AverageNumber
    
    Weighted-Average
    
    Remainingof Shares
    
    Exercise Price
    
    Contractual TermOutstanding at October 3, 2008
    
    
    3,528
    
    
    $
    10.50
    
    
    3.7 yearsGranted
    
    
    24
    
    
    $
    1.27Exercised
    
    
    
    
    
    $
    Forfeited or expired
    
    
    (250
    )
    
    $
    11.64Outstanding at January 2, 2009
    
    
    3,302
    
    
    $
    10.34
    
    
    3.6 yearsExercisable at end of period
    
    
    2,513
    
    
    $
    11.57
    
    
    2.5 years
  Restricted Stock Awards
    Weighted-Number
    
    Averageof
    
    Grant DateShares
    
    Fair ValueNonvested shares at October 3, 2008
    
    
    682
    
    
    $
    6.69Granted
    
    
    41
    
    
    $
    1.55Vested
    
    
    (304
    )
    
    $
    6.14Forfeited
    
    
    (34
    )
    
    $
    7.37Nonvested shares at January 2, 2009
    
    
    385
    
    
    $
    6.02
  5. Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
  16




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3.75% Convertible Senior Notes due 2009
   6.50% Convertible Senior Notes due 2013
  6. Commitments and Contingencies
   7. Special Charges
  Restructuring Charges
 Mindspeed First Quarter Fiscal 2009 Restructuring Plan 
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    1,937
    
    
    $
    368
    
    
    $
    2,305Cash payments
    
    
    (809
    )
    
    
    (47
    )
    
    
    (856
    )Non-cash charges
    
    
    
    
    
    
    (98
    )
    
    
    (98
    )Restructuring balance, January 2, 2009
    
    $
    1,128
    
    
    $
    223
    
    
    $
    1,351
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Mindspeed Restructuring Plans
  8. Related Party Transactions
  9. Subsequent Event
  18




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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
     19




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Critical Accounting Policies and Estimates
  Inventories
 Stock-Based Compensation
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Revenue Recognition
      21




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Deferred Income Taxes
 Impairment of Long-Lived Assets
  Fair Value Measurements  Adoption of SFAS 157 Fair Value Measurements,
 Recent Accounting Pronouncements
    22




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Results of Operations
 Net Revenues
  Three months endedJanuary 2,
    
    
    
    
    
    
    December 28,($ in millions)
    
    2009
    
    
    Change
    
    
    2007Multiservice access DSP products
    
    $
    10.8
    
    
    
    33
    %
    
    $
    8.1High-performance analog products
    
    
    10.5
    
    
    
    0
    %
    
    
    10.5WAN communications products
    
    
    6.4
    
    
    
    (54)
    %
    
    
    14.0Intellectual property
    
    
    3.0
    
    
    
    11
    %
    
    
    2.7Net revenues
    
    $
    30.7
    
    
    
    (13)
    %
    
    $
    35.3
  Gross Margin
 Three months endedJanuary 2,
    
    
    
    
    
    December 28,($ in millions)
    
    2009
    
    Change
    
    2007Gross margin
    
    $
    21.0
    
    
    
    (16)
    %
    
    $
    25.0Percent of net revenues
    
    
    68
    %
    
    
    

    
    
    
    71
    %
    23




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Research and Development
 Three months endedJanuary 2,
    
    
    
    
    
    December 28,($ in millions)
    
    2009
    
    Change
    
    2007Research and development
    
    $
    13.3
    
    
    
    (3)
    %
    
    $
    13.7Percent of net revenues
    
    
    43
    %
    
    
    
    
    
    
    39
    %
  Selling, General and Administrative
 Three months endedJanuary 2,
    
    
    
    
    
    December 28,($ in millions)
    
    2009
    
    Change
    
    2007Selling, general and administrative
    
    $
    11.1
    
    
    
    (3)
    %
    
    $
    11.5Percent of net revenues
    
    
    36
    %
    
    
    
    
    
    
    33
    %
  Special Charges
  Restructuring Charges
 Mindspeed First Quarter Fiscal 2009 Restructuring Plan 
 24




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##### Table of Contents



Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    1,937
    
    
    $
    368
    
    
    $
    2,305Cash payments
    
    
    (809
    )
    
    
    (47
    )
    
    
    (856
    )Non-cash charges
    
    
    
    
    
    
    (98
    )
    
    
    (98
    )Restructuring balance, January 2, 2009
    
    $
    1,128
    
    
    $
    223
    
    
    $
    1,351
 Mindspeed Restructuring Plans
   Interest Expense
 Three months endedJanuary 2,
    
    December 28,($ in millions)
    
    2009
    
    2007Interest expense
    
    $
    (0.5
    )
    
    $
    (0.6
    )
  Other Income, Net
 Three months endedJanuary 2,
    
    December 28,($ in millions)
    
    2009
    
    2007Other income, net
    
    $
    2.8
    
    
    $
    0.2
  Provision for Income Taxes
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Liquidity and Capital Resources
     Revolving Credit Facility and Convertible Senior Notes
 Revolving Credit Facility
    3.75% Convertible Senior Notes due 2009
  26




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6.50% Convertible Senior Notes due 2013
    27




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Conexant Warrant
    Liquidity
   28




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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Exchange Risk
  29




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
   We have substantial cash requirements to fund our operations, research and development efforts and
capital expenditures. Our capital resources are limited and capital needed for our business may
not be available when we need it.
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We have incurred operating losses in the past and we may incur losses in future periods.
   Our operating results may be adversely impacted by worldwide political and economic uncertainties
and specific conditions in the markets we address, including the cyclical nature of and volatility
in the semiconductor industry. As a result, the market price of our common stock may decline.
   The price of our common stock may fluctuate significantly.
  
    
    our operating and financial performance and prospects, including our ability to regain
and sustain the profitability we achieved in the fourth quarter of fiscal 2008;
    
    the depth and liquidity of the market for our common stock which can impact, among other
things, the volatility of our stock price and the availability of market participants to
borrow shares;
    
    investor perception of us and the industry in which we operate;
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    general financial and other market conditions; and
    
    domestic and international economic conditions.
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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;
    
    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;
    
    availability and cost of products from our suppliers;
    
    the timing and extent of product development costs;
    
    new product and technology introductions by us or our competitors;
    
    fluctuations in manufacturing yields; and
    
    significant warranty claims, including those not covered by our suppliers.
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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 revenues and profits.
  We may not be able to attract and retain qualified personnel necessary for the design,
development, sale and support of our products. Our success could be negatively affected if key
personnel leave.
    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.
  33




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We are subject to the risks of doing business internationally.
  
    
    currency exchange rate fluctuations;
    
    local economic and political conditions;
    
    disruptions of capital and trading markets;
    
    accounts receivable collection and longer payment cycles;
    
    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;
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
    
    the laws and policies of the United States and other countries affecting trade, foreign
investment and loans and import or export licensing requirements;
    
    environmental laws and regulations governing, among other things, air emissions,
wastewater discharges, 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.
   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.
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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.
   The increasing significance of our foreign operations exposes us to risks that are beyond our
control and could affect our ability to operate successfully.
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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.
  Industry consolidation may harm our operating results.
  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.
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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.
  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.
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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.
   Because
our stock market capitalization is lower than our stockholders
equity, the risk of impairment is raised.
  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;
    
    the diversion of managements attention from other business concerns; and
    
    the potential loss of key employees, customers and suppliers of the acquired business.
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Our results of operations could vary as a result of the methods, estimates and judgments we use in
applying our accounting policies.
  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.
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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 exclusive responsibility of the board of directors to fill vacancies on the board of
directors;
    
    the ability of our board of directors to issue shares of our preferred stock in one or
more series without further authorization of our stockholders;
    
    a prohibition on stockholder action by written consent;
    
    a requirement that stockholders provide advance notice of any stockholder nominations of
directors or any proposal of new business to be considered at any meeting of stockholders;
    
    a requirement that a supermajority vote be obtained to remove a director for cause or to
amend or repeal certain provisions of our restated certificate of incorporation or amended
and restated bylaws;
    
    elimination of the right of stockholders to call a special meeting of stockholders; and
    
    a fair price provision.
   
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
 Maximum Number (orTotal Number of
    
    
    Approximate DollarShares (or Units)
    
    
    Value) of Shares (orTotal Number of
    
    
    Average Price
    
    
    Purchased as Part of
    
    
    Units) that May Yet BeShares (or Units)
    
    
    Paid per Share
    
    
    Publicly Announced
    
    
    Purchased Under thePurchased
    
    
    (or Unit)
    
    
    Plans or Programs
    
    
    Plans or ProgramsOctober 4, 2008 to
October 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    November 1, 2008 to
November 28, 2008
    
    
    23,661
    (a)
    
    $
    0.74
    
    
    
    
    
    
    
    November 29, 2008
to January 2, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    23,661
    
    
    $
    0.74
    
    
    
    
    
    
    
    
 
 (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 5. OTHER INFORMATION
   42




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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.3.3
    
    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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2008,
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
    
    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.4.5
    
    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.4.6
    
    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.4.7
    
    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.4.8
    
    Form of 3.75% Convertible Senior Notes due 2009, attached as Exhibit A to the Indenture (Exhibit
4.7 hereto), is incorporated herein by reference.4.9
    
    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.4.10
    
    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
    
    Letter Agreement, dated as of December 11, 2008, by and between the Registrant and the Chief
Executive Officer of the Registrant, filed as Exhibit 10.37 to the Registrants Annual Report on
Form 10-K for the year ended October 3, 2008, is incorporated by reference.*10.2
    
    Confidential Severance and General Release, effective as of October 10, 2008, by and between
Thomas Stites and the Registrant, filed as Exhibit 10.32 to the Registrants Annual Report on Form
10-K for the year ended October 3, 2008 is incorporated by reference.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.
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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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SIGNATURE
  MINDSPEED TECHNOLOGIES, INC.
(Registrant)Date: February 10, 2009
    By
    /s/ BRET W. JOHNSENBret W. JohnsenSenior Vice President, Chief Financial Officer
and Treasurer
(principal financial and accounting officer) 45




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EXHIBIT INDEX
 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.
 46