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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 December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-50499
 MINDSPEED TECHNOLOGIES, INC.
  Delaware(State of incorporation)
    
    01-0616769(I.R.S. Employer
Identification No.)4000 MacArthur Boulevard, East Tower 
Newport Beach, California(Address of principal executive offices)
    
    92660-3095(Zip code)
 Registrants telephone number, including area code:
(949) 579-3000
 þ o
  o þ o
 o þ




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FORWARD-LOOKING STATEMENTS
  
    
    our competitive advantages;
    
    the benefits of a fabless operation;
    
    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 importance of software drivers and application software;
    
    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, the build-out of networks in developing countries, and the
increased outsourcing of component requirements;
    
    our investment in research and development and participation in the formulation of
industry standards;
    
    the growth rate for products in the enterprise, network access and metro service areas
and our position to increase market share;
    
    the focus of our research and development efforts on certain products, including voice
over Internet protocol and high performance analog applications, and our expectation of the
growth prospects for those products;
    
    our ability to achieve design wins and convert wins into revenue;
    
    the availability of raw materials, parts and supplies;
    
    competition and the principal competitive factors for semiconductor suppliers,
including time to market, product quality, reliability and performance, customer support,
price and total system cost, new product innovation and compliance with industry standards;
    
    the continuation of intense price and product competition, and the resulting declining
average selling prices for our products;
    
    our investments in research and development;
    
    the value of our intellectual property;
    
    the impact of changes in customer purchasing activities, inventory levels and inventory
management practices;
    
    the importance of attracting and retaining highly skilled, dedicated personnel;
    
    our ability to achieve revenue growth and profitability, or to achieve positive cash
flows from operations, and the expected period through which we will continue to incur
significant losses and negative cash flows;
 2




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
    
    our plans to reduce operating expenses, and the amount and timing of any such expense reductions;
    
    the importance of providing comprehensive product service and support;
    
    the dependence of our operating results on our ability to introduce products on a timely basis;
    
    the sufficiency of our existing sources of liquidity and expected sources of cash to
fund our operations, research and development efforts, anticipated capital expenditures,
working capital and other financing requirements for the next twelve months;
    
    our expectation of paying our obligations relating to our restructuring plans and other
obligations over their respective terms, our intention to fund those payments from
available cash balances and funds from product sales, and the impact of such payments on
our liquidity;
    
    the circumstances under which we may need to seek additional financing, our ability to
obtain any such financing and any consideration of acquisition opportunities;
    
    our expectation that our provision for income taxes for fiscal 2007 will principally
consist of income taxes related to our foreign operations;
    
    our expectations with respect to our recognition of income tax benefits in the future;
    
    our restructuring plans, including expected workforce reductions and facilities
closures, the expected cost savings under our restructuring plans and the uses of those
savings, the timing and amount of payments to complete the actions, the source of funds for
such payments, the impact on our liquidity and the resulting decreases in our research and
development and selling, general and administrative expenses, and the amounts of future
charges to complete our restructuring plans;
    
    our intentions with respect to inventories that were previously written down;
    
    our beliefs regarding the effect of the disposition of pending or asserted legal matters;
    
    our plans relating to our use of stock-based compensation, the effectiveness of our
incentive compensation programs and the expected amounts of stock-based compensation
expense in future periods;
    
    our belief that the financial stability of suppliers is an important consideration in
our customers purchasing decisions;
    
    the amount and timing of future payments under contractual obligations; and
    
    the impact of recent accounting pronouncements and the adoption of new accounting standards.
  
    
    market demand for our new and existing products and our ability to increase our revenues;
    
    our ability to maintain operating expenses within anticipated levels;
    
    our ability to reduce our cash consumption;
    
    availability and terms of capital needed for our business;
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
    
    constraints in the supply of wafers and other product components from our third-party manufacturers;
    
    our ability to successfully and cost effectively establish and manage operations in
jurisdictions with low cost structures;
    
    the ability to attract and retain qualified personnel;
    
    successful development and introduction of new products;
    
    our ability to obtain design wins and develop revenues from them;
    
    pricing pressures and other competitive factors;
    
    order and shipment uncertainty;
    
    changes in our customers inventory levels and inventory management practices;
    
    fluctuations in manufacturing yields;
    
    product defects; and
    
    intellectual property infringement claims by others and the ability to protect our intellectual property.
    4




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##### 



MINDSPEED TECHNOLOGIES, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited):Consolidated
Condensed Balance Sheets  December 31, 2006 and
September 30, 2006
    
    
    6Consolidated
Condensed Statements of Operations  Three Months
Ended December 31, 2006 and 2005
    
    
    7Consolidated
Condensed Statements of Cash Flows  Three Months Ended
December 31, 2006 and 2005
    
    
    8Notes to Consolidated Condensed Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 6.
    
    Exhibits
    
    
    43Signature
    
    
    44EXHIBIT 10.1EXHIBIT 12.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  5




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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)
 December 31,
    
    
    September 30,2006
    
    
    2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    25,130
    
    
    $
    29,976Marketable securities
    
    
    12,650
    
    
    
    11,260Receivables, net of allowance for doubtful accounts
of $418 and $447 at December 31, 2006
and September 30, 2006, respectively
    
    
    13,083
    
    
    
    14,786Inventories
    
    
    19,864
    
    
    
    19,008Other current assets
    
    
    2,920
    
    
    
    3,690Total current assets
    
    
    73,647
    
    
    
    78,720Property, plant and equipment, net
    
    
    12,767
    
    
    
    12,961Other assets
    
    
    4,886
    
    
    
    4,861Total assets
    
    $
    91,300
    
    
    $
    96,542LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable
    
    $
    11,664
    
    
    $
    10,639Deferred revenue
    
    
    4,229
    
    
    
    5,047Accrued compensation and benefits
    
    
    6,256
    
    
    
    5,038Accrued income tax
    
    
    3,014
    
    
    
    2,761Restructuring
    
    
    3,951
    
    
    
    1,667Other current liabilities
    
    
    2,114
    
    
    
    2,688Total current liabilities
    
    
    31,228
    
    
    
    27,840Convertible senior notes
    
    
    44,721
    
    
    
    44,618Other liabilities
    
    
    870
    
    
    
    608Total liabilities
    
    
    76,819
    
    
    
    73,066Commitments and contingencies
    
    
    
    
    
    
    Stockholders EquityPreferred stock, $0.01 par value: 25,000 shares authorized; no shares issued or
outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value: 500,000 shares authorized;
112,679 and 110,702 shares issued at December 31, 2006
and September 30, 2006, respectively
    
    
    1,127
    
    
    
    1,107Additional paid-in capital
    
    
    252,570
    
    
    
    250,602Accumulated deficit
    
    
    (223,883
    )
    
    
    (212,566
    )Accumulated other comprehensive loss
    
    
    (15,333
    )
    
    
    (15,667
    )Total stockholders equity
    
    
    14,481
    
    
    
    23,476Total liabilities and stockholders equity
    
    $
    91,300
    
    
    $
    96,542
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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Operations
(unaudited, in thousands, except per share amounts)
 Three months endedDecember 31,2006
    
    
    2005Net revenues
    
    $
    30,157
    
    
    $
    33,203Cost of goods sold
    
    
    10,677
    
    
    
    10,482Gross margin
    
    
    19,480
    
    
    
    22,721Operating expenses:Research and development
    
    
    15,600
    
    
    
    16,512Selling, general and administrative
    
    
    10,793
    
    
    
    11,036Special charges
    
    
    3,595
    
    
    
    25Total operating expenses
    
    
    29,988
    
    
    
    27,573Operating loss
    
    
    (10,508
    )
    
    
    (4,852
    )Interest expense
    
    
    (559
    )
    
    
    (552
    )Other (expense) income, net
    
    
    (53
    )
    
    
    374Loss before income taxes
    
    
    (11,120
    )
    
    
    (5,030
    )Provision for income taxes
    
    
    197
    
    
    
    474Net loss
    
    $
    (11,317
    )
    
    $
    (5,504
    )Net loss per share, basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.05
    )Weighted-average number of shares
used in per share computation
    
    
    108,380
    
    
    
    103,698
  7




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MINDSPEED TECHNOLOGIES, INC.
 
 Consolidated Condensed Statements of Cash Flows
(unaudited, in thousands)
 Three months endedDecember 31,2006
    
    
    2005Cash Flows From Operating ActivitiesNet loss
    
    $
    (11,317
    )
    
    $
    (5,504
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    1,267
    
    
    
    1,947Stock-based compensation
    
    
    1,476
    
    
    
    1,317Inventory provisions
    
    
    (323
    )
    
    
    (696
    )Other non-cash items, net
    
    
    92
    
    
    
    126Changes in assets and liabilities:Receivables
    
    
    1,743
    
    
    
    2,499Inventories
    
    
    (533
    )
    
    
    (4,181
    )Accounts payable
    
    
    1,025
    
    
    
    (1,140
    )Deferred revenue
    
    
    (818
    )
    
    
    1,654Accrued expenses and other current liabilities
    
    
    3,332
    
    
    
    (1,425
    )Other
    
    
    1,304
    
    
    
    (99
    )Net cash used in operating activities
    
    
    (2,752
    )
    
    
    (5,502
    )Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (1,066
    )
    
    
    (460
    )Sales of assets
    
    
    
    
    
    
    10Purchases of available-for-sale marketable securities
    
    
    (6,050
    )
    
    
    (19,300
    )Sales of available-for-sale marketable securities
    
    
    3,800
    
    
    
    24,300Maturities of held-to-maturity marketable securities
    
    
    863
    
    
    
    863Net cash (used in) provided by investing activities
    
    
    (2,453
    )
    
    
    5,413Cash Flows From Financing ActivitiesExercise of stock options and warrants
    
    
    359
    
    
    
    560Net cash provided by financing activities
    
    
    359
    
    
    
    560Net (decrease) increase in cash and cash equivalents
    
    
    (4,846
    )
    
    
    471Cash and cash equivalents at beginning of period
    
    
    29,976
    
    
    
    15,335Cash and cash equivalents at end of period
    
    $
    25,130
    
    
    $
    15,806
  8




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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
   9




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
  Income Taxes
 Supplemental Cash Flow Information
 2. Supplemental Financial Statement Data
 Marketable Securities
   Inventories
  December 31,
    
    
    September 30,2006
    
    
    2006Work-in-process
    
    $
    9,696
    
    
    $
    9,120Finished goods
    
    
    10,168
    
    
    
    9,888$
    19,864
    
    
    $
    19,008
  Comprehensive Loss
  Three months endedDecember 31,2006
    
    
    2005Net loss
    
    $
    (11,317
    )
    
    $
    (5,504
    )Foreign currency translation
adjustments
    
    
    334
    
    
    
    (111
    )Comprehensive loss
    
    $
    (10,983
    )
    
    $
    (5,615
    )
  10




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 Revenues by Product Line
  Three months endedDecember 31,2006
    
    
    2005Multiservice access DSP products
    
    $
    8,986
    
    
    $
    11,669High-performance analog products
    
    
    9,794
    
    
    
    8,736WAN communications products
    
    
    11,377
    
    
    
    12,798$
    30,157
    
    
    $
    33,203
 Revenues by Geographic Area
  Three months endedDecember 31,2006
    
    
    2005Americas
    
    $
    10,019
    
    
    $
    11,400Asia-Pacific
    
    
    17,183
    
    
    
    18,547Europe, Middle East and Africa
    
    
    2,955
    
    
    
    3,256$
    30,157
    
    
    $
    33,203
   Three months endedDecember 31,2006
    
    2005Customer A
    
    
    20
    %
    
    
    17
    %Customer B
    
    
    12
    %
    
    
    9
    %Customer C
    
    
    10
    %
    
    
    15
    %Customer D
    
    
    7
    %
    
    
    10
    %Customer E
    
    
    6
    %
    
    
    11
    %
 3. Stock-Based Compensation
    11




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
  Three months ended
    
    Three months endedDecember 31, 2006
    
    December 31, 2005Weighted-average fair value of options granted
    
    $
    0.99
    
    
    $
    1.19Weighted-average assumptions:Expected option life
    
    3.5 years
    
    3.2 yearsRisk-free interest rate
    
    
    4.6
    %
    
    
    4.3
    %Expected volatility
    
    
    75
    %
    
    
    78
    %Dividend yield
    
    
    
    
    
    
    
   Three months endedDecember 31,2006
    
    
    2005Cost of goods sold
    
    $
    92
    
    
    $
    77Research and development
    
    
    579
    
    
    
    646Selling, general and administrative
    
    
    773
    
    
    
    594Special charges
    
    
    32
    
    
    
    Total stock-based compensation expense
    
    $
    1,476
    
    
    $
    1,317
 Stock Compensation Plans
   12




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
   Stock Option Awards
  Weighted-AverageNumber
    
    Weighted-Average
    
    Remainingof Shares
    
    Exercise Price
    
    Contractual TermOutstanding at September 30, 2006
    
    
    22,196
    
    
    $
    2.32Granted
    
    
    39
    
    
    $
    1.79Exercised
    
    
    (247
    )
    
    $
    1.48Forfeited or expired
    
    
    (768
    )
    
    $
    2.50Outstanding at December 31, 2006
    
    
    21,220
    
    
    $
    2.32
    
    
    4.1 yearsExercisable at end of period
    
    
    18,521
    
    
    $
    2.23
    
    
    3.8 years
  Restricted Stock Awards
  13




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
  Weighted-Number
    
    Averageof
    
    Grant DateShares
    
    Fair ValueNonvested shares at September 30, 2006
    
    
    3,671
    
    
    $
    2.54Granted
    
    
    1,812
    
    
    $
    1.79Vested
    
    
    (1,751
    )
    
    $
    2.19Forfeited
    
    
    (134
    )
    
    $
    2.46Nonvested shares at December 31, 2006
    
    
    3,598
    
    
    $
    2.31
  Employee Stock Purchase Plan
  4. Commitments and Contingencies
   14




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 5. Special Charges
  Restructuring Charges
 Mindspeed 2007 Restructuring Plan
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    1,737
    
    
    $
    1,890
    
    
    $
    3,627Cash payments
    
    
    (377
    )
    
    
    (184
    )
    
    
    (561
    )Non-cash charges
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Restructuring balance, December 31, 2006
    
    $
    1,318
    
    
    $
    1,706
    
    
    $
    3,024
 Mindspeed 2006 Restructuring Plan
 WorkforceReductionsCharged to costs and expenses
    
    $
    2,406Cash payments
    
    
    (1,215
    )Non-cash charges
    
    
    (294
    )Restructuring balance, September 30, 2006
    
    
    897Charged to costs and expenses
    
    
    (10
    )Cash payments
    
    
    (367
    )Non-cash charges
    
    
    10Restructuring balance, December 31, 2006
    
    $
    530
 15




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MINDSPEED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
 Other Restructuring Plans
  6. Related Party Transactions
  16




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




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




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




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Recent Accounting Pronouncements
    Results of Operations
 Net Revenues
  Three months ended December 31,($ in millions)
    
    2006
    
    
    Change
    
    
    2005Multiservice access DSP products
    
    $
    9.0
    
    
    
    (23
    )%
    
    $
    11.7High-performance analog products
    
    
    9.8
    
    
    
    12
    %
    
    
    8.7WAN communications products
    
    
    11.4
    
    
    
    (11
    )%
    
    
    12.8Net revenues
    
    $
    30.2
    
    
    
    (9
    )%
    
    $
    33.2
  Gross Margin
 Three months ended December 31,($ in millions)
    
    2006
    
    Change
    
    2005Gross margin
    
    $
    19.5
    
    
    
    (14
    )%
    
    $
    22.7Percent of net revenues
    
    
    65
    %
    
    
    
    
    
    
    68
    %
  20




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21




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Research and Development
 Three months ended December 31,($ in millions)
    
    2006
    
    Change
    
    2005Research and development
    
    $
    15.6
    
    
    
    (6
    )%
    
    $
    16.5Percent of net revenues
    
    
    52
    %
    
    
    
    
    
    
    50
    %
  Selling, General and Administrative
 Three months ended December 31,($ in millions)
    
    2006
    
    Change
    
    2005Selling, general and administrative
    
    $
    10.8
    
    
    
    (2
    )%
    
    $
    11.0Percent of net revenues
    
    
    36
    %
    
    
    
    
    
    
    33
    %
  Special Charges
  Restructuring Charges
 Mindspeed 2007 Restructuring Plan
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Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    1,737
    
    
    $
    1,890
    
    
    $
    3,627Cash payments
    
    
    (377
    )
    
    
    (184
    )
    
    
    (561
    )Non-cash charges
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Restructuring balance, December 31, 2006
    
    $
    1,318
    
    
    $
    1,706
    
    
    $
    3,024
 Mindspeed 2006 Restructuring Plan
 WorkforceReductionsCharged to costs and expenses
    
    $
    2,406Cash payments
    
    
    (1,215
    )Non-cash charges
    
    
    (294
    )Restructuring balance, September 30, 2006
    
    
    897Charged to costs and expenses
    
    
    (10
    )Cash payments
    
    
    (367
    )Non-cash charges
    
    
    10Restructuring balance, December 31, 2006
    
    $
    530
 Other Restructuring Plans
  Interest Expense
 Three months ended December 31,($ in millions)
    
    2006
    
    2005Interest expense
    
    $
    (0.6
    )
    
    $
    (0.6
    )
  23




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Other Income (Expense), Net
 Three months ended December 31,($ in millions)
    
    2006
    
    2005Other income (expense), net
    
    $
    (0.1
    )
    
    $
    0.4
  Provision for Income Taxes
  Liquidity and Capital Resources
     Convertible Senior Notes Offering
   24




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Conexant Warrant
   25




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Liquidity
    Contractual Obligations
  Payments due by periodContractual Obligations
    
    Total
    
    
    <1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    >5 years(in millions)Long-term debt
    
    $
    46.0
    
    
    $
    
    
    
    $
    46.0
    
    
    $
    
    
    
    $
    Interest expense
on long-term debt
    
    
    5.1
    
    
    
    1.7
    
    
    
    3.4
    
    
    
    
    
    
    
    Operating leases
    
    
    15.9
    
    
    
    8.9
    
    
    
    5.7
    
    
    
    0.8
    
    
    
    0.5Purchase obligations
    
    
    7.6
    
    
    
    3.5
    
    
    
    4.1
    
    
    
    
    
    
    
    Total
    
    $
    74.6
    
    
    $
    14.1
    
    
    $
    59.2
    
    
    $
    0.8
    
    
    $
    0.5
    26




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Off-Balance Sheet Arrangements
  27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  28




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PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
   We are incurring substantial operating losses, and we anticipate additional future losses.
   We have substantial cash requirements to fund our operations, research and development efforts and
capital expenditures. Our capital resources are limited and capital needed for our business may not
be available when we need it.
  We operate in the highly cyclical semiconductor industry, which is subject to significant
downturns.
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Our operating results are subject to substantial quarterly and annual fluctuations.
  
    
    changes in end-user demand for the products manufactured and sold by our customers;
    
    the timing of receipt, reduction or cancellation of significant orders by customers;
    
    fluctuations in the levels of component inventories held by our customers and changes
in our customers inventory management practices;
    
    shifts in our product mix and the effect of maturing products;
    
    availability and cost of products from our suppliers;
    
    the gain or loss of significant customers;
    
    market acceptance of our products and our customers products;
    
    our ability to develop, introduce, market and support new products and technologies on a timely basis;
    
    the timing and extent of product development costs;
    
    new product and technology introductions by us or our competitors;
    
    fluctuations in manufacturing yields;
    
    significant warranty claims, including those not covered by our suppliers;
    
    intellectual property disputes; and
    
    the effects of competitive pricing pressures, including decreases in average selling prices of our products.
  The increasing significance of our foreign operations exposes us to risks that are beyond our
control and could affect our ability to operate successfully.
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
    
    political uncertainties;
    
    wage inflation;
    
    exposure to foreign currency fluctuations;
    
    tariffs and other trade barriers; and
    
    foreign regulatory restrictions and unexpected changes in regulatory environments.
  We are entirely dependent upon third parties for the manufacture of our products and are vulnerable
to their capacity constraints during times of increasing demand for semiconductor products.
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
    
    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.
      We are subject to intense competition.
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
    
    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.
   Our success depends on our ability to develop competitive new products in a timely manner.
  
    
    our ability to anticipate customer and market requirements and changes in technology
and industry standards;
    
    our ability to accurately define new products;
    
    our ability to complete development of new products, and bring our products to market, on a timely basis;
    
    our ability to differentiate our products from offerings of our competitors; and
    
    overall market acceptance of our products.
   33




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If we are not able to keep abreast of the rapid technological changes in our markets, our products
could become obsolete.
  
    
    rapid technological developments;
    
    rapid changes in customer requirements;
    
    frequent new product introductions and enhancements;
    
    declining prices over the life cycle of products; and
    
    evolving industry standards.
  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.
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Because of the lengthy sales cycles of many of our products, we may incur significant expenses
before we generate any revenues related to those products.
  We may be subject to claims, or we may be required to defend and indemnify customers against
claims, of infringement of third-party intellectual property rights or demands that we, or our
customers, license third-party technology, which could result in significant expense.
  
    
    pay substantial damages for past, present and future use of the infringing technology;
    
    cease the manufacture, use or sale of infringing products;
    
    discontinue the use of infringing technology;
    
    expend significant resources to develop non-infringing technology;
    
    pay substantial damages to our customers or end users to discontinue use or replace
infringing technology with non-infringing technology;
    
    license technology from the third party claiming infringement, which license may not be
available on commercially reasonable terms, or at all; or
    
    relinquish intellectual property rights associated with one or more of our patent
claims, if such claims are held invalid or otherwise unenforceable.
  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;
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
    
    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.
   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.
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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;
    
    the laws and policies of the United States and other countries affecting trade, foreign
investment and loans, and import or export licensing requirements;
    
    tax laws;
    
    limitations on our ability under local laws to protect our intellectual property;
    
    cultural differences in the conduct of business; and
    
    natural disasters, acts of terrorism and war.
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We may make business acquisitions or investments, which involve significant risk.
  
    
    issuances of equity securities dilutive to our existing stockholders;
    
    the incurrence of substantial debt and assumption of unknown liabilities;
    
    large one-time write-offs;
    
    amortization expenses related to intangible assets;
    
    the diversion of managements attention from other business concerns; and
    
    the potential loss of key employees from the acquired business.
   The price of our common stock may fluctuate significantly.
  
    
    our operating and financial performance and prospects, including our ability to achieve
or sustain profitability, if achieved, within the forecasted time period;
    
    the depth and liquidity of the market for our common stock;
    
    investor perception of us and the industry in which we operate;
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    general financial and other market conditions; and
    
    domestic and international economic conditions.
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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.
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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.
    Provisions in our organizational documents and rights plan and Delaware law will make it more
difficult for someone to acquire control of us.
  
    
    the division of our board of directors into three classes to be elected on a staggered
basis, one class each year;
    
    the ability of our board of directors to issue shares of our preferred stock in one or
more series without further authorization of our stockholders;
    
    a prohibition on stockholder action by written consent;
    
    a requirement that stockholders provide advance notice of any stockholder nominations
of directors or any proposal of new business to be considered at any meeting of
stockholders;
    
    a requirement that a supermajority vote be obtained to remove a director for cause or
to amend or repeal certain provisions of our restated certificate of incorporation or
amended bylaws;
    
    elimination of the right of stockholders to call a special meeting of stockholders; and
    
    a fair price provision.
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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 ProgramsSeptember 30, 2006 to October 27, 2006
    
    
    4,905
    (a)
    
    $
    1.86
    
    
    
    
    
    
    
    October 28, 2006 to November 24, 2006
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    November 25, 2006 to December 29, 2006
    
    
    16,725
    (a)
    
    $
    2.05
    
    
    
    
    
    
    
    21,630
    
    
    $
    2.01
    
    
    
    
    
    
    
    
 
 (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. 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
    
    Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.2 to the Registrants Annual
Report on Form 10-K for the year ended September 30, 2005, is incorporated herein by reference.4.1
    
    Specimen certificate for the Registrants Common Stock, par value $.01 per share, filed as Exhibit
4.1 to the Registrants Registration Statement on Form 10 (File No. 1-31650), is incorporated
herein by reference.4.2
    
    Rights Agreement dated as of June 26, 2003, by and between the Registrant and Mellon Investor
Services LLC, as Rights Agent, filed as Exhibit 4.1 to the Registrants Current Report on Form 8-K
dated July 1, 2003, is incorporated herein by reference.4.3
    
    First Amendment to Rights Agreement, dated as of December 6, 2004, by and between the Registrant
and Mellon Investor Services LLC, filed as Exhibit 4.4 to the Registrants Current Report on Form
8-K dated December 2, 2004, is incorporated herein by reference.4.4
    
    Common Stock Purchase Warrant dated June 27, 2003, filed as Exhibit 4.5 to the Registrants
Registration Statement on Form S-3 (Registration Statement No. 333-109523), is incorporated herein
by reference.4.5
    
    Registration Rights Agreement dated as of June 27, 2003, by and between the Registrant and
Conexant Systems, Inc., filed as Exhibit 4.6 to the Registrants Registration Statement on Form
S-3 (Registration Statement No. 333-109523), is incorporated herein by reference.4.6
    
    Credit Agreement Warrant dated June 27, 2003, issued by the Registrant to Conexant Systems, Inc.,
filed as Exhibit 4.5 to the Registrants Registration Statement on Form S-3 (Registration
Statement No. 333-109525), is incorporated herein by reference.4.7
    
    Registration Rights Agreement dated as of June 27, 2003 by and between the Registrant and Conexant
Systems, Inc., filed as Exhibit 4.6 to the Registrants Registration Statement on Form S-3
(Registration Statement No. 333-109525), is incorporated herein by reference.4.8
    
    Indenture, dated as of December 8, 2004, between the Registrant and Wells Fargo Bank, N.A., filed
as Exhibit 4.1 to the Registrants Current Report on Form 8-K dated December 2, 2004, is
incorporated herein by reference.4.9
    
    Form of 3.75% Convertible Senior Notes due 2009, attached as Exhibit A to the Indenture (Exhibit
4.8 hereto), is incorporated herein by reference.4.10
    
    Registration Rights Agreement, dated as of December 8, 2004, by and between the Registrant and
Lehman Brothers Inc., filed as Exhibit 4.3 to the Registrants Current Report on Form 8-K dated
December 2, 2004, is incorporated herein by reference.10.1
    
    Agreement, dated January 31, 2007, by and between Bradley W. Yates and the Registrant12.1
    
    Statement re: Computation of Ratios.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: February 6, 2007
    By
    /s/ Simon BiddiscombeSimon Biddiscombe
Senior Vice President, Chief Financial Officer,
   Secretary and Treasurer

(principal financial officer) 44




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EXHIBIT INDEX
 10.1
    
    Agreement, dated January 31, 2007, by and between Bradley W. Yates and the Registrant12.1
    
    Statement re: Computation of Ratios.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.