<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ----------------

                                    FORM 10-Q


           [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                       OR

           [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934


                        COMMISSION FILE NUMBER: 000-24923



                             CONEXANT SYSTEMS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



             DELAWARE                                    25-1799439
     (State of incorporation)               (I.R.S. Employer Identification No.)


                               4311 JAMBOREE ROAD
                      NEWPORT BEACH, CALIFORNIA       92660-3095
             (Address of principal executive offices) (Zip code)


                                 (949) 483-4600
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]   No [ ]


Registrant's number of shares of common stock outstanding as of April 28, 2000
was 217,327,032.

================================================================================


<PAGE>   2

                             CONEXANT SYSTEMS, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                 ----
<S>      <C>                                                                                     <C>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited):

         Consolidated Condensed Balance Sheets -- March 31, 2000 and September 30, 1999           3

         Consolidated Condensed Statements of Operations -- Three Months and Six Months
            Ended March 31, 2000 and 1999                                                         4

         Consolidated Condensed Statements of Cash Flows -- Six Months Ended March 31,
            2000 and 1999                                                                         5

         Notes to Consolidated Condensed Financial Statements                                     6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
            Operations                                                                           13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                              19


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                                       20

Item 2.  Changes in Securities                                                                   21

Item 4.  Submission of Matters to a Vote of Security Holders                                     22

Item 6.  Exhibits and Reports on Form 8-K                                                        23

         Signatures                                                                              24
</TABLE>



                                        2
<PAGE>   3

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                             CONEXANT SYSTEMS, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
               (unaudited, in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                  March 31,  September 30,
                                                                     2000         1999
                                                                 ----------  -------------
<S>                                                              <C>          <C>
                                          ASSETS
Current assets:
  Cash and cash equivalents                                      $  930,892   $  398,516
  Receivables, net of allowances of $6,765 and $9,658
     at March 31, 2000 and September 30, 1999, respectively         295,864      238,940
  Inventories, net                                                  261,703      224,477
  Deferred income taxes                                             132,299       81,860
  Other current assets                                               83,334       35,381
                                                                 ----------   ----------
          Total current assets                                    1,704,092      979,174

Marketable securities                                               159,064           --
Property, plant and equipment, net                                  787,299      723,013
Goodwill and intangibles, net                                     1,034,217       47,824
Other assets                                                        159,574       91,939
                                                                 ----------   ----------
          Total assets                                           $3,844,246   $1,841,950
                                                                 ==========   ==========

                           LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                               $  189,577   $  265,151
  Deferred revenue                                                   34,564       21,027
  Accrued compensation and benefits                                  77,936       48,530
  Other current liabilities                                          37,422       40,013
                                                                 ----------   ----------
          Total current liabilities                                 339,499      374,721

Convertible subordinated notes                                    1,000,000      350,000
Other long-term liabilities                                          77,819       82,076
Deferred income taxes                                                72,786           --
                                                                 ----------   ----------
          Total liabilities                                       1,490,104      806,797
                                                                 ----------   ----------

Commitments and contingencies                                            --           --

Shareholders' equity:
  Preferred and junior preferred stock (no par value, 25,000
     shares authorized, no shares issued or outstanding)                 --           --
  Common stock ($1.00 par value, 1,000,000 shares
     authorized; 216,913 and 196,387 outstanding at
     March 31, 2000 and September 30, 1999, respectively)           216,932      196,387
  Additional paid-in capital                                      2,072,173      769,563
  Retained earnings (deficit)                                       (10,459)      70,052
  Accumulated other comprehensive income                             79,807          149
  Treasury stock, at cost                                            (1,122)          --
  Unearned compensation                                              (3,189)        (998)
                                                                 ----------   ----------
          Total shareholders' equity                              2,354,142    1,035,153
                                                                 ----------   ----------
          Total liabilities and shareholders' equity             $3,844,246   $1,841,950
                                                                 ==========   ==========
</TABLE>


           See notes to consolidated condensed financial statements.



                                       3
<PAGE>   4

                             CONEXANT SYSTEMS, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
               (unaudited, in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                         Three Months Ended              Six Months Ended
                                                             March  31,                     March  31,
                                                   ---------------------------    ---------------------------
                                                       2000            1999           2000            1999
                                                   -----------     -----------    -----------     -----------
<S>                                                <C>             <C>            <C>             <C>
Net revenues                                       $   501,728     $   316,932    $ 1,011,691     $   611,610
Cost of goods sold                                     269,459         186,677        546,905         403,431
                                                   -----------     -----------    -----------     -----------
Gross margin                                           232,269         130,255        464,786         208,179

Operating expenses:
  Research and development                             100,095          68,802        188,572         139,911
  Selling, general and administrative                   66,024          48,527        134,192         112,543
  Amortization of intangibles                           25,337           2,063         27,742           4,127
  Purchased in-process
     research and development                          145,900              --        145,900              --
  Special charges - Rockwell-retained assets                --              --             --          20,000
  Special charges - other                                   --              --             --          17,906
                                                   -----------     -----------    -----------     -----------
          Total operating expenses                     337,356         119,392        496,406         294,487
                                                   -----------     -----------    -----------     -----------
Operating income (loss)                               (105,087)         10,863        (31,620)        (86,308)

Other income, net                                          932              17          1,510            (126)
                                                   -----------     -----------    -----------     -----------
Income (loss) before provision
  (benefit) for income taxes                          (104,155)         10,880        (30,110)        (86,434)

Provision (benefit) for income taxes                    28,187           3,263         50,401         (36,928)
                                                   -----------     -----------    -----------     -----------

Net income (loss)                                  $  (132,342)    $     7,617    $   (80,511)    $   (49,506)
                                                   ===========     ===========    ===========     ===========
Net income (loss) per share:
  Basic                                            $     (0.64)    $      0.04    $     (0.40)
                                                   ===========     ===========    ===========
  Diluted                                          $     (0.64)    $      0.04    $     (0.40)
                                                   ===========     ===========    ===========

Number of shares used in per share computation:
  Basic                                                205,207         189,958        200,962
                                                   ===========     ===========     ===========
  Diluted                                              205,207         195,464        200,962
                                                   ===========     ===========     ===========
</TABLE>

           See notes to consolidated condensed financial statements.



                                       4
<PAGE>   5

                             CONEXANT SYSTEMS, INC.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                            (unaudited, in thousands)

<TABLE>
<CAPTION>
                                                             Six Months Ended March 31,
                                                             --------------------------
                                                                2000            1999
                                                             ---------       ----------
<S>                                                          <C>             <C>
Cash Flows From Operating Activities:
   Net loss                                                  $ (80,511)      $ (49,506)

   Adjustments to reconcile net loss to
    net cash provided by operating activities:
      Depreciation                                              92,413         100,060
      Amortization of intangibles                               27,742           4,127
      Purchased in-process research and development            145,900              --
      Deferred income taxes                                       (253)         13,076
      Other non-cash charges                                     3,291           2,346
      Special charges -- Rockwell-retained assets                   --          20,000
      Special charges -- other                                      --          17,906
      Changes in assets and liabilities, net of
       acquisitions:
         Receivables                                           (53,442)         20,425
         Inventories                                           (35,855)         54,265
         Accounts payable                                      (65,038)        (21,674)
         Accrued expenses and other current liabilities         68,270         (16,845)
         Other                                                   1,773         (10,266)
                                                             ---------       ---------
    Net cash provided by operating activities                  104,290         133,914
                                                             ---------       ---------

Cash Flows From Investing Activities:
   Capital expenditures                                       (160,874)        (33,367)
   Acquisitions of businesses, net of cash acquired             (6,771)             --
   Investments in and advances to businesses                  (112,196)             --
                                                             ---------       ---------
    Net cash used in investing activities                     (279,841)        (33,367)
                                                             ---------       ---------

Cash Flows From Financing Activities:
   Issuance of 4% convertible subordinated notes               631,300              --
   Short-term borrowings                                            --         100,000
   Payments of short-term debt                                      --         (14,075)
   Net transfers to Rockwell                                        --         (44,670)
   Proceeds from exercise of stock options                      76,627           3,297
                                                             ---------       ---------
    Net cash provided by financing activities                  707,927          44,552
                                                             ---------       ---------
    Net increase in cash and cash equivalents                  532,376         145,099
Cash and cash equivalents at beginning of period               398,516          14,000
                                                             ---------       ---------
Cash and cash equivalents at end of period                   $ 930,892       $ 159,099
                                                             =========       =========
</TABLE>

           See notes to consolidated condensed financial statements.



                                       5
<PAGE>   6

                             CONEXANT SYSTEMS, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

On December 31, 1998, Conexant Systems, Inc. (formerly named Rockwell
Semiconductor Systems, Inc.) (the "Company" or "Conexant"), became an
independent, separately traded, publicly-held company when Rockwell
International Corporation ("Rockwell") spun off its semiconductor systems
business ("Semiconductor Systems") by means of a distribution (the
"Distribution") of all the outstanding shares of common stock of the Company to
the shareholders of Rockwell in a tax-free spin-off. In the Distribution, each
Rockwell shareholder of record on December 11, 1998 received one share of
Conexant common stock, along with an associated preferred share purchase right,
for every two shares of Rockwell common stock (prior to the effect of Conexant's
October 1999 stock split).

The unaudited consolidated condensed financial statements through the date of
the Distribution present the historical financial position, results of
operations, and cash flows of Semiconductor Systems, as it was spun off, and
exclude the assets, liabilities, and results of operations of non-semiconductor
businesses retained by Rockwell. The financial statements prior to the
Distribution are not necessarily indicative of what the financial position,
results of operations, or cash flows would have been had Conexant been an
independent public company during such periods. Financial data included in the
accompanying unaudited consolidated condensed financial statements for periods
subsequent to the Distribution have been prepared on a basis that reflects the
historical assets, liabilities, and operations of the business contributed to
Conexant by Rockwell.

Prior to the Distribution, Rockwell provided certain management services that
were allocated based on sales in proportion to total Rockwell sales. Rockwell
continues to provide certain services to the Company (primarily research and
development activities) under the terms of a transition agreement. Costs for
these services and programs are billed to Conexant based on actual usage and are
included in Conexant's unaudited consolidated condensed statements of
operations. Management believes that the methods of billing these costs are
reasonable and that the costs charged to Conexant are approximately those which
would have been incurred on a stand-alone basis.

In the opinion of management, the accompanying consolidated condensed financial
statements contain all adjustments, consisting of adjustments of a normal
recurring nature, as well as the fiscal 2000 charge for purchased in-process
research and development and the fiscal 1999 special charges (see Note 2),
necessary to present fairly the financial position, results of operations, and
cash flows of Conexant. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for a full year.
These statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1999.

FISCAL PERIODS

For presentation purposes, references made to the periods ended March 31, 1999
relate to the actual fiscal 1999 periods ended April 2, 1999, as previously
reported.

STOCK SPLIT

Common share and per common share amounts for all periods presented have been
restated to reflect the two-for-one stock split (in the form of a dividend)
effected on October 29, 1999 for shareholders of record as of September 24,
1999.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the current
period presentation.

RECENT ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other



                                       6
<PAGE>   7

contracts, and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in fair value of
derivatives will either offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings, or be recognized in
other comprehensive income until the hedged item is recognized in earnings. The
change in a derivative's fair value related to the ineffective portion of a
hedge, if any, will generally be immediately recognized in earnings.
Implementation of SFAS 133 is required as of the beginning of fiscal year 2001
and is not expected to have a material effect on the Company's financial
position or results of operations.

2. SPECIAL CHARGES

ROCKWELL-RETAINED ASSETS: Prior to the Distribution, the Company distributed its
wafer fabrication facilities in Colorado Springs, Colorado (and the related tax
benefit) to Rockwell. The transition agreement with Rockwell provided for the
lease of the Colorado Springs facilities by Conexant through April 30, 1999,
pursuant to a triple-net lease under which Conexant paid all costs of the
facilities. In the first fiscal quarter of 1999, Conexant recorded a special
charge for an additional asset impairment of $20 million for the Colorado
Springs wafer fabrication facilities as a result of Rockwell's decision to
further write-down the facilities, which were retained by Rockwell as part of
the spin-off. This non-cash charge was required to be reported in the Company's
last fiscal quarter as a subsidiary of Rockwell.

OTHER: In the fourth quarter of fiscal 1998, Conexant restructured its business
and recorded special charges of $147 million. In the first quarter of fiscal
1999, Conexant recorded additional special charges of $18 million. The
additional charges include $17 million relating to the Voluntary Early
Retirement Program ("VERP") and $1 million relating to decommissioning
equipment, activities at foreign subsidiaries, and contract cancellations at the
Colorado Springs wafer fabrication facilities. The restructuring actions are
substantially complete.

3. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) for the three months and six months ended March 31,
2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                    Three months ended               Six months ended
                                                         March 31,                       March 31,
                                                 -------------------------       -------------------------
                                                    2000            1999            2000            1999
                                                 ---------       ---------       ---------       ---------
<S>                                              <C>             <C>             <C>             <C>
Net income (loss)                                $(132,342)      $   7,617       $ (80,511)      $ (49,506)

Other comprehensive income:
  Foreign currency translation adjustments          (1,920)          4,494             287             649
  Unrealized gains on marketable securities         84,545            (569)        128,401           1,157
  Income taxes                                     (32,286)         (1,161)        (49,030)         (1,161)
                                                 ---------       ---------       ---------       ---------
    Other comprehensive income                      50,339           2,764          79,658             645
                                                 ---------       ---------       ---------       ---------
Comprehensive income (loss)                      $ (82,003)      $  10,381       $    (853)      $ (48,861)
                                                 =========       =========       =========       =========
</TABLE>

Accumulated other comprehensive income consists of the following:

<TABLE>
<CAPTION>
                                                          As of
                                               ---------------------------
                                               March 31,     September 30,
                                                 2000            1999
                                               ---------     -------------
<S>                                            <C>           <C>
Unrealized gains on marketable securities      $ 128,401       $      --
Foreign currency translation adjustments             436             149
Income taxes                                     (49,030)             --
                                               ---------       ---------
Accumulated other comprehensive income         $  79,807       $     149
                                               =========       =========
</TABLE>



                                       7
<PAGE>   8

4. NET INCOME (LOSS) PER SHARE

Prior to the December 31, 1998 spin-off of Conexant from Rockwell, Conexant was
not an independent company. Consequently, for periods prior to the spin-off, net
income (loss) per share is not presented and pro forma net loss per share
(computed as if the spin-off had occurred on October 1, 1998) is shown below.
The number of pro forma weighted average shares outstanding used in the
computation of pro forma net loss per share for the six months ended March 31,
1999 was based upon the weighted average number of Rockwell shares and share
equivalents outstanding during the period, adjusted for the distribution ratio
of one share of the Company's common stock for every two shares of Rockwell
common stock and for the effect of Conexant's October 1999 two-for-one stock
split. These pro forma results are not indicative of future results. Pro forma
basic and diluted loss per share for the six months ended March 31, 1999 is as
follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                       Six months ended
                                                        March 31, 1999
                                                       ----------------
<S>                                                    <C>
Net loss                                                   $(49,506)
Pro forma basic and diluted net loss per share             $  (0.26)
Pro forma basic and diluted weighted
   average common shares outstanding                        189,914
</TABLE>

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                   Three months ended         Six months ended
                                                        March 31,                 March 31,
                                                 ----------------------    -----------------------
                                                                                         Pro forma
                                                    2000         1999         2000          1999
                                                 ---------     --------    ---------     ---------
<S>                                              <C>           <C>         <C>           <C>
Income:
Net income (loss) available to
   common shareholders - basic and diluted       $(132,342)    $  7,617    $ (80,511)    $ (49,506)
                                                 =========     ========    =========     =========

Shares:
Weighted-average shares outstanding - basic        205,207      189,958      200,962       189,914

Effect of dilutive securities:
  Stock options                                         --        3,472           --            --
  Restricted stock                                      --        2,034           --            --
                                                 ---------     --------    ---------     ---------
Weighted-average shares outstanding - diluted      205,207      195,464      200,962       189,914
                                                 =========     ========    =========     =========

Net income (loss) per share:
  Basic                                          $   (0.64)    $   0.04    $   (0.40)    $   (0.26)
                                                 =========     ========    =========     =========
  Diluted                                        $   (0.64)    $   0.04    $   (0.40)    $   (0.26)
                                                 =========     ========    =========     =========
</TABLE>

The average shares listed below were not included in the computation of diluted
earnings per share, as their effect would have been antidilutive for the periods
presented (in thousands):

<TABLE>
<CAPTION>
                                                               Three months ended   Six months
                                                                     March 31,        ended
                                                               ------------------    March 31,
                                                                 2000       1999       2000
                                                                ------      ----    ----------
<S>                                                             <C>         <C>     <C>
  Effect of stock options (under the treasury stock method)     18,719       --      17,994
  Restricted stock and other                                       565       --         440
  4-1/4% convertible subordinated notes due 2006                15,153       --      15,153
  4% convertible subordinated notes due 2007                     3,678       --       1,839
</TABLE>



                                       8
<PAGE>   9

5. INVENTORIES

Inventories, net consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                 March 31,   September 30,
                                                    2000         1999
                                                 ---------   -------------
<S>                                              <C>         <C>
Raw materials, parts, and supplies                $ 31,474      $ 29,998
Work-in-process                                    167,069       160,781
Finished goods                                      63,160        33,698
                                                  --------      --------
Inventories, net                                  $261,703      $224,477
                                                  ========      ========
</TABLE>

6. CONVERTIBLE SUBORDINATED NOTES

In February 2000, Conexant completed a private offering of $650 million
principal amount of its 4% Convertible Subordinated Notes due 2007 for net
proceeds (after costs of issuance) of approximately $631.3 million. The notes
are general unsecured obligations of Conexant and interest on the notes is
payable in arrears semiannually on each February 1 and August 1. The notes are
convertible, at the option of the holder, into shares of the Company's common
stock at a conversion price of $108 per share, subject to certain adjustments.
The notes may be redeemed, at Conexant's option, on or after February 6, 2003 at
a declining premium to par.

7. CONTINGENT LIABILITIES

Claims have been asserted against Conexant for utilizing the intellectual
property rights of others in certain of the Company's products. The resolution
of these matters may entail the negotiation of a license agreement, a
settlement, or the resolution of such claims through arbitration or litigation.

On October 14, 1997, Brent Townshend ("Townshend") filed suit against Rockwell
and Conexant in the Superior Court of California for San Mateo County seeking an
injunction to halt the sale of products containing Conexant's K56Flex(TM)
chipsets and requesting unspecified damages, claiming that Conexant had engaged
in unfair competition, misappropriation of trade secrets, breach of contract and
breach of confidence by using technical information allegedly disclosed in
confidence by Mr. Townshend to accelerate its development of 56 Kbps modem
technology. In January 1999, Townshend dismissed his State Court action and
re-filed the same claims and three new claims for patent infringement in the
U.S. District Court for the Northern District of California. In the Federal
action, Townshend alleges that each of his patents (the "Townshend Patents")
covers certain aspects of the V.90 standard and are infringed by Conexant's 56
Kbps products. In the Federal action, Townshend seeks injunctive relief,
compensatory damages, restitution and exemplary and punitive damages. Townshend
and 3Com Corporation had publicly announced that 3Com was the exclusive licensee
for the Townshend Patents and acted as Townshend's agent in sublicensing the
Townshend Patents to third parties. More recently, Townshend and 3Com publicly
announced that Townshend has reacquired exclusive control over the licensing and
enforcement of the patents as well as other ownership rights, while 3Com
retained a non-exclusive license to practice the Townshend inventions. Conexant
has filed its answer to Townshend and counterclaims against Townshend and claims
against 3Com. On a hearing on a Motion to Dismiss filed by Townshend and 3Com,
the claims against 3Com have been dismissed, and a portion of the counterclaims
against Townshend were likewise dismissed. Conexant is vigorously defending its
position that it independently developed the 56 Kbps modem technology using
entirely its own skills and public domain information and will vigorously
contest the infringement claims and the validity of the asserted patents.

Various other lawsuits, claims and proceedings have been or may be instituted or
asserted against Rockwell or Conexant or their respective subsidiaries,
including those pertaining to product liability, intellectual property,
environmental, safety and health, and employment matters.

In connection with the Distribution, Conexant assumed responsibility for all
contingent liabilities and current and future litigation (including
environmental and intellectual property proceedings) against Rockwell or its
subsidiaries in respect of Semiconductor Systems.



                                       9
<PAGE>   10

The outcome of litigation cannot be predicted with certainty and some lawsuits,
claims or proceedings may be disposed of unfavorably to Conexant. Many
intellectual property disputes have a risk of injunctive relief and there can be
no assurance that a license will be granted. Injunctive relief could have a
material adverse effect on the financial condition or results of operations of
Conexant. Based on its evaluation of matters which are pending or asserted and
taking into account Conexant's reserves for such matters, management of Conexant
believes the disposition of such matters will not have a material adverse effect
on the financial condition or results of operations of Conexant.

8.  ACQUISITIONS

In March 2000, Conexant completed its acquisition of Maker Communications, Inc.
("Maker"), a fabless semiconductor company that develops and markets
high-performance programmable network processors, software solutions, and
development tools. Consideration for the acquisition of Maker consisted of 12.7
million shares of Conexant common stock and options to purchase an additional
1.6 million shares of Conexant common stock, based upon an exchange ratio of
0.66 of a share of Conexant common stock for each share of Maker common stock.
The total value of the consideration for the acquisition of Maker was
approximately $979.6 million.

In January 2000, Conexant acquired Microcosm Communications Limited
("Microcosm"), a technology leader in the field of high-speed integrated
circuits for fiber optic communications located in Bristol, England.
Consideration for the acquisition consisted of 1.5 million shares of Conexant
common stock, options to purchase an additional 94 thousand shares, and
approximately $3.1 million in cash. The total value of such consideration was
approximately $103.8 million. Additional consideration of up to $18 million,
initially held back for the payment of contingent indemnification obligations,
may become payable in April 2001. The shareholders and option holders of
Microcosm could also receive additional consideration of up to $51.4 million,
payable in the form of shares of common stock and stock options, if certain
performance and technology goals are achieved.

Also in January 2000, Conexant acquired the wireless broadband business unit of
Oak Technology, Inc. located in Bristol, England through the acquisition of all
outstanding ordinary shares of its wholly-owned subsidiary, Oak Technology Ltd.
and certain assets related to that business. The value of the consideration for
the acquisition was approximately $27.9 million, paid in a combination of 294
thousand shares of Conexant common stock and $5 million in cash.

In November 1999, Conexant acquired Istari Design Inc. ("Istari"), a provider of
consulting and contract engineering services for communication systems design
and implementation. The Company intends for Istari to be integrated with its
product development organizations. Aggregate consideration for the acquisition
was $6.0 million, paid in the form of $0.4 million cash and 101 thousand shares
of Conexant common stock.

The acquisitions have each been recorded under the purchase method of
accounting. The value of the consideration for each acquisition has been
allocated among the assets and liabilities acquired, including identified
intangible assets and in-process research and development ("IPRD"), based upon
estimated fair values. The excess of the value of the consideration over the net
assets acquired is allocated to goodwill. An aggregate of $145.9 million was
allocated to IPRD, and expensed immediately upon completion of the acquisitions
of Maker and Microcosm, because the technological feasibility of products under
development had not been established and no future alternative uses existed.

The fiscal 2000 acquisitions are summarized below (in thousands):

<TABLE>
<CAPTION>
                                         Shares of                                 Goodwill and
                                       common stock  Total value of                 identified
Transaction                               issued     consideration       IPRD       intangibles
-----------                            ------------  --------------   ---------    ------------
<S>                                        <C>         <C>            <C>           <C>
Maker                                      12,651      $ 979,591      $ 118,500     $ 894,148
Microcosm                                   1,523        103,827         27,400        86,798
Wireless broadband unit of Oak                294         27,855             --        27,332
Istari                                        101          6,000             --         5,981
</TABLE>

Consideration includes cash paid and the fair value of common stock issued and
options assumed.



                                       10
<PAGE>   11

The results of operations of the acquired companies are included in the
consolidated financial statements from the dates of acquisition. The pro forma
statement of operations data below assumes that each of the companies had been
acquired at the beginning of fiscal 1999. This pro forma data includes
amortization of goodwill and identified intangibles from that date. However, the
impact of the charges for IPRD has been excluded. This pro forma data is
presented for informational purposes only, and is not necessarily indicative of
the results of future operations nor of the results that would have been
achieved had the acquisitions taken place at the beginning of fiscal 1999.

<TABLE>
<CAPTION>
                                                  Six months ended
 (in thousands, except per share data)                March 31,
                                            ---------------------------
                                                2000             1999
                                            -----------       ---------
<S>                                         <C>               <C>
Net revenues                                $ 1,020,494       $ 619,881

Net loss                                         (7,918)       (144,411)

Net loss per share - basic and diluted      $     (0.04)      $   (0.71)
</TABLE>

In addition to the transactions discussed above, in October 1999, Conexant
entered into a $150 million strategic agreement with a vendor under which
Conexant will receive foundry capacity to support its future growth. As part of
the agreement, Conexant advanced $75 million to the vendor and will advance an
additional $75 million to the vendor in fiscal 2001.

9. GOODWILL AND INTANGIBLES, NET

Goodwill is recorded when the consideration paid for acquisitions exceeds the
fair value of the net tangible and intangible assets acquired. Goodwill and
other intangibles are amortized on a straight-line basis over the periods
indicated below. Reviews are regularly performed to determine whether facts or
circumstances exist which indicate that the carrying value of the asset is
impaired. The Company assesses the recoverability of its assets by comparing the
projected undiscounted net cash flows associated with those assets against their
respective carrying amounts. Impairment, if any, is based on the excess of the
carrying amount over the fair value of those assets. No impairment has been
indicated to date.

Goodwill and intangibles consist of the following (in thousands):

<TABLE>
<CAPTION>
                                              March 31,      September 30,
                             Life in years      2000             1999
                             -------------   -----------     -------------
<S>                          <C>             <C>             <C>
Goodwill                        3 - 10       $   812,976       $ 20,316
Developed technology            5 - 8.5          224,046         40,346
Other intangibles               2 - 10            50,379         12,603
                                             -----------       --------
                                               1,087,401         73,265
Accumulated amortization                         (53,184)       (25,441)
                                             -----------       --------
                                             $ 1,034,217       $ 47,824
                                             ===========       ========
</TABLE>

10. SUPPLEMENTAL CASH FLOW DISCLOSURES

Cash paid for interest, net of amounts capitalized, was $5.7 million and $14
thousand for the six months ended March 31, 2000 and March 31, 1999,
respectively. Cash paid for income taxes for the six months ended March 31, 2000
was $9.6 million. For the six months ended March 31, 1999, the Company paid no
income taxes. In periods prior to the Distribution, all interest and income tax
payments were made by Rockwell.

Significant noncash transactions during the six months ended March 31, 2000
include income tax benefits of approximately $160.8 million resulting from
employee stock transactions which were credited to additional capital. During
the six months ended March 31, 1999, Conexant transferred its wafer fabrication
facilities in Colorado Springs, Colorado (and the related tax benefit) with a
book value of approximately $59 million to Rockwell as well as certain other tax
benefits of $25 million related to a litigation matter.



                                       11
<PAGE>   12

11. SUBSEQUENT EVENTS

In April 2000, Conexant acquired Applied Telecom, Inc., a supplier of
telecommunications hardware and software products. Consideration for the
acquisition consisted of $4.3 million in cash, 121 thousand shares of Conexant
common stock, and certain options to purchase Conexant common stock. The
aggregate value of such consideration was approximately $15.1 million. The
shareholders and option holders of Applied Telecom could receive additional
consideration of up to $5.7 million, payable in the form of shares of common
stock and stock options, if certain performance and technology goals are
achieved.

Also in April 2000, Conexant announced that it had agreed to acquire Philsar
Semiconductor Inc., a developer of RF semiconductor solutions for personal
wireless connectivity, including emerging standards such as Bluetooth, and RF
components for third-generation (3G) digital cellular handsets. Consideration
for the acquisition of Philsar will be between 2.685 million and 3.0 million
shares of Conexant common stock, depending upon the closing market price of
Conexant common stock for an agreed upon period prior to the closing. The
aggregate value of such consideration may exceed $200 million. The transaction
is subject to customary closing conditions, including the approval of Philsar's
shareholders. While no assurance can be given, the transaction is expected to be
completed during the third quarter of fiscal 2000.



                                       12
<PAGE>   13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

This information should be read in conjunction with the unaudited consolidated
condensed financial statements and the notes thereto included in this Quarterly
Report, and the audited consolidated financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended September 30, 1999.

The results of operations for the periods prior to the January 1, 1999 spin-off
from Rockwell reflect the Company's operations as a subsidiary of Rockwell. The
results of operations subsequent to that date reflect the Company's operations
as a stand-alone entity. The results of operations for periods when the Company
was a subsidiary of Rockwell may not be indicative of the results of operations
of the Company had it been a stand-alone entity during such periods.

RESULTS OF OPERATIONS

NET REVENUES

The following table summarizes the net revenues of the Company's five product
platforms (dollars in thousands):

<TABLE>
<CAPTION>
                             Three months ended March 31,        Six months ended March 31,
                           -------------------------------    -------------------------------
                              2000     Change       1999         2000     Change       1999
                           ---------   ------    ---------    ----------  ------    ---------
<S>                        <C>           <C>     <C>          <C>           <C>     <C>
Personal Computing         $ 179,290     20%     $ 149,557    $  369,386    22%     $ 301,833
Network Access               125,224    166%        47,021       243,771   175%        88,749
Wireless Communications       95,958     68%        57,099       198,976    94%       102,313
Digital Infotainment          73,140     72%        42,644       140,266    71%        82,088
Personal Imaging              28,116     36%        20,611        59,292    62%        36,627
                           ---------    ---      ---------    ----------   ---      ---------
Totals                     $ 501,728     58%     $ 316,932    $1,011,691    65%     $ 611,610
                           =========    ===      =========    ==========   ===      =========

Revenue mix:

Personal Computing              36%                   47%            36%                  49%
Network Access                  25%                   15%            24%                  15%
Wireless Communications         19%                   18%            20%                  17%
Digital Infotainment            15%                   13%            14%                  13%
Personal Imaging                 5%                    7%             6%                   6%
</TABLE>

Net revenues for the second quarter and first six months of fiscal 2000 compared
to fiscal 1999 included revenue growth in each of the Company's product
platforms. The "expansion platform" products (all products excluding the
Personal Computing products) continue to be the Company's fastest-growing
products, with aggregate revenue growth of 93% and 107% for the second quarter
and first six months of fiscal 2000, respectively, compared with the
year-earlier periods.

In the Company's Personal Computing platform, the growth in net revenues
reflects continued solid unit demand in sales of PC dial-up modems, with unit
shipments for the fiscal second quarter increasing over 50% year-over-year.
Sales of the Company's V.90 software modem portfolio, which accounted for
approximately 30% of total PC dial-up modem shipments, increased over 300% from
their year-earlier levels. The Company also achieved strong growth in sales of
embedded modems, enabling communications in a variety of devices including
gaming consoles, web browsers, and personal digital assistants. Unit shipments
of embedded modem products increased 275% and 194%, respectively, for the second
quarter and first six months of fiscal 2000 compared to the prior year.

Revenue growth in the Company's Network Access product platform for the second
quarter and first six months of fiscal 2000 came from each of the three Network
Access businesses -- multi-service access, WAN transport, and broadband access
-- as demand continued to be fueled by the ongoing global network infrastructure
upgrade in



                                       13
<PAGE>   14

support of the increase in Internet traffic. In the multi-service access
business, shipments of the AnyPort multi-service access product family enjoyed
strong growth as networking original equipment manufacturers ("OEMs") continued
their deployment of multi-service IP gateways. The WAN transport portfolio had
significant growth as the result of the strong demand for SONET transceivers,
network processors and ATM physical-layer solutions, T/E framers, and line
interface units. In the Company's broadband access portfolio, including
symmetrical and asymmetrical digital subscriber line products, shipments
increased 188% due to continued strong demand from a broad customer base of DSL
access multiplexer and customer premise equipment manufacturers.

Within the Wireless Communications platform, revenue growth for the second
quarter and first six months of fiscal 2000 compared to the fiscal 1999 periods
was principally driven by the digital cellular portion of the Company's wireless
business. The Company continued to benefit from strong end market demand for
digital cellular handsets worldwide, and achieved continued growth in shipments
of power amplifiers and radio frequency subsystems used in both CDMA and GSM
digital cellular handsets. Conexant's GSM system initiative also contributed to
the growth in revenues for the second fiscal quarter and first six months
compared to the year-earlier periods. For the second quarter, these gains were
slightly offset by lower sales of digital cordless telephone chipsets; however,
after the strong holiday selling season in the fiscal first quarter, the digital
cordless telephone business showed modest growth for the first six months of
fiscal 2000 compared to the prior year.

In the Digital Infotainment platform, the increased revenues for the second
quarter and first six months of fiscal 2000 over the fiscal 1999 periods reflect
strong demand for the Company's video processing solutions, satellite tuners and
demodulators. Shipments of PCI and side-port video decoders (for "TV in the PC"
applications) increased over 80% for the second quarter of fiscal 2000 compared
to the year-earlier period. In addition, the Company achieved substantial growth
in shipments of satellite set-top box tuners and demodulators and modems for
back-channel telephony solutions.

Net revenues for Personal Imaging for second quarter and first six months of
fiscal 2000 compared to same periods of fiscal 1999 reflect continued strong
demand for fax modems and facsimile engines from leading office equipment OEMs,
and increased penetration of the expanding multifunction peripheral market. In
addition, revenues for the fiscal 1999 periods were affected by the economic
recession in the Asia-Pacific markets during that period.

GROSS MARGIN

<TABLE>
<CAPTION>
                            Three months ended March 31,            Six months ended March 31,
                         --------------------------------       ---------------------------------
                           2000       Change       1999           2000       Change        1999
                         --------     ------     --------       --------     ------      --------
<S>                      <C>          <C>        <C>            <C>          <C>         <C>
Gross margin             $232,269       78%      $130,255       $464,786       123%      $208,179
Percent of revenues            46%                     41%            46%                      34%
</TABLE>

The gross margins achieved in the second quarter and first six months of fiscal
2000 reflect a shift in the Company's product mix toward higher-margin products.
The gross margin improvement also reflects higher factory utilization at the
Company's wafer fabrication facilities in the fiscal 2000 periods, which
resulted from increased unit sales volume. Gross margins for the first six
months of fiscal 1999 were adversely affected by unusually high inventory costs
which resulted from low manufacturing capacity utilization during the preceding
four months.

RESEARCH AND DEVELOPMENT

<TABLE>
<CAPTION>
                                 Three months ended March 31,           Six months ended March 31,
                              --------------------------------      ---------------------------------
                                2000       Change       1999          2000       Change       1999
                              --------     ------     --------      --------     ------    ----------
<S>                           <C>          <C>        <C>           <C>          <C>       <C>
Research and development      $100,095       45%      $68,802       $188,572       35%      $139,911
Percent of revenues                 20%                    22%            19%                     23%
</TABLE>

The Company has increased the focus of its research and development efforts in
the areas of Internet infrastructure, wireless communications, and broadband
access. The increase in research and development expenses for the second quarter
and first six months of fiscal 2000 compared with the prior year periods
principally reflects the higher compensation and related costs resulting from
the Company's increased investment in those areas. Subsequent to March 1999, the
Company's successful recruiting programs have increased its engineering team by
over 600 engineers, including over 100 engineers joining the Company through the
recently-completed acquisitions of Maker, Microcosm, and the wireless broadband
business unit of Oak Technology, Inc. The fiscal 1999 periods



                                       14
<PAGE>   15

reflect certain cost-cutting actions taken in the fourth quarter of fiscal 1998,
including headcount reductions, design center closures, and certain project
cancellations.

SELLING, GENERAL, AND ADMINISTRATIVE

<TABLE>
<CAPTION>
                            Three months ended March 31,            Six months ended March 31,
                         --------------------------------       ---------------------------------
                           2000       Change       1999           2000       Change        1999
                         --------     ------     --------       --------     ------      --------
<S>                      <C>          <C>        <C>            <C>          <C>         <C>
Selling, general, and
   administrative        $ 66,024       36%      $ 48,527       $134,192       19%       $112,543
Percent of revenues            13%                     15%            13%                      18%
</TABLE>

The change reflects the Company's continued development of its sales, marketing,
and business support functions since the spin-off from Rockwell at the end of
the fiscal 1999 first quarter. In particular, the Company has invested in the
expansion of its sales and marketing organizations, increasing its worldwide
sales organization to over 280 personnel to support its recent and anticipated
future sales growth. The higher fiscal 2000 selling, general and administrative
costs also reflect the continued development of infrastructure for a variety of
corporate functions, including the Company's information systems, human
resources, and finance teams. These factors were partially offset by lower
spending in fiscal 2000 for co-op advertising programs.

AMORTIZATION OF INTANGIBLES

<TABLE>
<CAPTION>
                            Three months ended March 31,            Six months ended March 31,
                         --------------------------------       ---------------------------------
                           2000       Change       1999           2000       Change        1999
                         --------     ------     --------       --------     ------      --------
<S>                      <C>          <C>        <C>            <C>          <C>         <C>
Amortization of
   intangibles           $ 25,337      1128%     $  2,063       $ 27,742      572%       $  4,127
</TABLE>

The higher amortization expense in the fiscal 2000 periods resulted from the
acquisitions of Maker, Microcosm, and the broadband wireless unit of Oak
Technology, each completed in second quarter of fiscal 2000. In connection with
these acquisitions, an aggregate of $1.0 billion was allocated to identifiable
intangible assets and goodwill. Such assets are being amortized over their
estimated lives (principally five years), increasing annual amortization expense
by approximately $200 million. Amortization expense for the third quarter of
fiscal 2000 and thereafter will increase from the second quarter level as the
acquisitions are reflected for a full fiscal quarter.

PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT: In connection with the
acquisitions of Maker and Microcosm, Conexant recorded a second quarter fiscal
2000 charge of $145.9 million for the fair value of purchased in-process
research and development ("IPRD"). The fair values allocated to the intangible
assets acquired, including the IPRD, were based upon independent appraisals.

The fair value of the IPRD for each of the acquisitions was determined using the
income approach. Under the income approach, expected future after-tax cash flows
from each of the projects or product families ("projects") under development are
estimated and discounted to their net present value at an appropriate
risk-adjusted rate of return. Each project was analyzed to determine the
technological innovations included in the project; the existence and utilization
of core technology; the complexity, cost and time to complete the remaining
development efforts; the existence of any alternative future use or current
technological feasibility; and the stage of completion in development. Future
cash flows for each project were estimated based on forecasted revenues and
costs, taking into account the expected life cycles of the products and the
underlying technology, relevant market sizes and industry trends.

The projects were then classified as developed technology, IPRD completed, IPRD
to-be-completed, or future development. The estimated future cash flows for each
were discounted to approximate fair value. Discount rates were derived from a
weighted average cost of capital analysis, adjusted upward to reflect additional
risks inherent in the development process, including the probability of
achieving technological success and market acceptance. The IPRD charge includes
only the fair value of IPRD completed. The fair value assigned to developed
technology is included in identifiable intangible assets, and the fair values
assigned to IPRD to-be-completed and future development are included in
goodwill. The Company believes the amounts determined for IPRD, as well as
developed technology, are representative of fair values and do not exceed the
amounts an independent party would pay for these projects. Failure to deliver
new projects to the market timely, or to achieve expected market acceptance or
revenue and expense forecasts could have a significant impact on the financial
results and operations of the acquired businesses.



                                       15
<PAGE>   16

The total charge for IPRD for the Maker acquisition (completed in March 2000)
was $118.5 million. Maker is a fabless semiconductor company that develops and
markets high-performance programmable network processors, software solutions,
and development tools targeting markets requiring high-intensity communications
processing. IPRD projects relating to seven product families were identified and
valued. The projects are directed toward the development of high-performance
programmable communications processors and applications software. Maker's IPRD
projects ranged from 55% to 92% complete and averaged approximately 75%
complete, with aggregate estimated costs to complete all of the projects of $5.7
million. The IPRD projects principally are expected to be completed within 12
months of the acquisition date. The average discount rates used were 30% for
IPRD projects and 20% for developed technology, which reflect the specific risks
associated with each of the intangible assets. Conexant's weighted average cost
of capital was estimated at 18%.

The total charge for IPRD for the Microcosm acquisition (completed in January
2000) was $27.4 million. Microcosm is a technology leader in the field of
high-speed integrated circuits for fiber optic communications. IPRD projects
relating to four product families were identified and valued. The projects are
directed toward the development of high-performance programmable communications
processors. Microcosm's IPRD projects ranged from 77% to 90% complete and
averaged approximately 84% complete, with total estimated costs to complete all
of the projects of $0.8 million. The IPRD projects are principally expected to
be completed within twelve months of the acquisition date. The average discount
rates used were 35% for IPRD projects and 25% for developed technology, which
reflect the specific risks associated with each of the intangible assets.
Conexant's weighted average cost of capital was estimated at 20%.

SPECIAL CHARGES - ROCKWELL-RETAINED ASSETS: In the first quarter of fiscal 1999,
Conexant recorded a special charge for an additional asset impairment of $20
million for the Colorado Springs wafer fabrication facilities as a result of
Rockwell's decision to further write-down the facilities, which were retained by
Rockwell as part of the spin-off. This non-cash charge was required to be
reported in the Company's last fiscal quarter as a subsidiary of Rockwell.

SPECIAL CHARGES - OTHER: In the first fiscal quarter of 1999, Conexant recorded
additional special charges of approximately $18 million. The additional charges
include approximately $17 million relating to a voluntary early retirement
program and $1 million relating to decommissioning equipment, activities at
foreign subsidiaries, and contract cancellations at the Colorado Springs wafer
fabrication facilities.

OTHER INCOME, NET

<TABLE>
<CAPTION>
                            Three months ended March 31,            Six months ended March 31,
                         --------------------------------       ---------------------------------
                           2000       Change       1999           2000       Change        1999
                         --------     ------     --------       --------     ------      --------
<S>                      <C>          <C>        <C>            <C>          <C>         <C>
Other income, net        $    932       nm       $     17       $  1,510       nm        $   (126)
</TABLE>

nm = not meaningful

Other income, net for the second quarter and first six months of fiscal 2000
principally consists of interest expense on the Company's $1 billion principal
amount of convertible subordinated notes (issued subsequent to the second
quarter of fiscal 1999), offset by interest income on the Company's invested
cash balances. For the fiscal 1999 periods, other income, net reflects the
Company's lower outstanding debt and invested cash balances.

PROVISION (BENEFIT) FOR INCOME TAXES: For the first six months of fiscal 2000,
the Company's provision for income taxes was $50.4 million. In the similar
period of fiscal 1999, the Company recorded an income tax benefit of $36.9
million due to a loss from operations. Exclusive of the non-deductible charges
for IPRD and amortization of intangible assets resulting from the Company's
recently-completed acquisitions, the effective tax rate for the first six months
of fiscal 2000 was approximately 30% of pretax income. This rate reflects the
positive impact of state and federal research and experimentation tax credits
available to the Company. The Company anticipates that its effective tax rate,
exclusive of the non-deductible charges for IPRD and amortization of intangible
assets, will be approximately 30% for fiscal 2000.




                                       16
<PAGE>   17
LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $104.3 million for the six months
ended March 31, 2000, compared to $133.9 million for the similar period in
fiscal 1999. Operating cash flows reflect the Company's net loss of $80.5
million offset by noncash charges (depreciation and amortization, IPRD, and
other) of $269.1 million, and a net working capital increase of approximately
$84.3 million. Before the effect of working capital changes, operating cash flow
increased to $188.6 million for the first six months of fiscal 2000, compared to
$108.0 million for the fiscal 1999 period.

The fiscal 2000 working capital increase includes a $53.4 million increase in
receivables, principally due to higher quarterly sales. The receivables increase
also reflects the strong sales volume experienced near the end of the fiscal
second quarter. The Company's allowance for doubtful accounts decreased by $2.9
million during the fiscal 2000 period, resulting from the write-off of certain
previously-reserved accounts. The working capital change also included a $35.9
million build-up in inventories, principally reflecting higher inventory levels
in anticipation of new product ramps. With industry wafer fabrication capacity
continuing to tighten, the Company also took advantage of its recently-expanded
foundry relationships, drawing on currently-available wafer fabrication capacity
to stage materials for expected production requirements. The working capital
increase also reflects a $65.0 million reduction of accounts payable due to the
timing of vendor payments. These amounts were partially offset by a $68.3
million increase in accrued expenses and other current liabilities, and other
working capital changes.

Investing activities used $279.8 million of cash during the first six months of
fiscal 2000, compared to $33.4 million for the similar period in fiscal 1999.
Capital expenditures totaled $160.9 million during the fiscal 2000 period, as
the Company continued its investment in new process technologies including its
gallium arsenide wafer manufacturing facility in Newbury Park, California, new
silicon-based high performance RF specialty processes in Newport Beach,
California, and the expansion of assembly and test operations in Mexicali,
Mexico. Cash used for the Company's fiscal 2000 business acquisitions was
approximately $6.8 million, net of cash acquired of $11.6 million. In addition,
the Company made investments in, or advances to, businesses totaling $112.2
million, including a $75.0 million advance to a vendor and approximately $37.2
million of equity investments, principally in early-stage communications
technology companies. The vendor advance was made pursuant to a multi-year wafer
supply agreement under which the Company will receive foundry capacity to
support future growth. Cash used in investing activities during the fiscal 1999
period consisted of routine capital expenditures of $33.4 million.

The Company's financing activities provided cash of $707.9 million during the
first six months of fiscal 2000, representing the proceeds from the sale of the
4% Convertible Subordinated Notes due 2007 and proceeds from the exercise of
stock options ($76.6 million). During the similar period of fiscal 1999, cash
provided by financing activities of $44.6 million principally consisted of
short-term borrowings for working capital purposes of $100.0 million and
proceeds from the exercise of employee stock options of $3.3 million, partially
offset by the transfer of available cash balances to Rockwell and repayment of a
loan at the Company's Japanese subsidiary.

In February 2000, Conexant completed the sale of $650 million principal amount
of its 4% Convertible Subordinated Notes for net proceeds (after costs of
issuance) of approximately $631.3 million. The notes are general unsecured
obligations of Conexant and interest on the notes is payable in arrears
semiannually on each February 1 and August 1. The notes are convertible, at the
option of the holder, into shares of the Company's common stock at a conversion
price of $108 per share, subject to certain adjustments. The notes may be
redeemed, at Conexant's option, on or after February 6, 2003 at a declining
premium to par.

The Company's principal sources of liquidity are its existing cash reserves,
cash generated from operations, and available borrowings under its $350 million
secured credit facility. As of March 31, 2000, there were no borrowings
outstanding under the credit facility. Cash and cash equivalents at March 31,
2000 totaled $930.9 million compared to $398.5 million at September 30, 1999.
Working capital at March 31, 2000 was approximately $1.4 billion compared to
$604.5 million at September 30, 1999.

The Company believes that its existing sources of liquidity, along with cash
expected to be generated from future operations, will be sufficient to fund
operations, research and development efforts, and anticipated capital
expenditures and advances for the foreseeable future. However, the Company
continues to evaluate acquisition opportunities to extend its technology
portfolio and design expertise and expand its product offerings. The Company's
manufacturing operations are capital intensive, and the Company may need to
increase its capital spending to obtain sufficient manufacturing capacity to
support continued revenue growth. In order to complete any



                                       17
<PAGE>   18

such acquisitions or increased capital expenditures, the Company may seek to
obtain additional borrowings or issue additional shares of its common stock.
There can be no assurance that such financing will be available on terms
favorable to the Company, or at all.

RECENT ACQUISITIONS

In April 2000, Conexant acquired Applied Telecom, Inc., a supplier of
telecommunications hardware and software products. Consideration for the
acquisition consisted of $4.3 million in cash, 121 thousand shares of Conexant
common stock, and certain options to purchase Conexant common stock. The
aggregate value of such consideration was approximately $15.1 million. The
shareholders and option holders of Applied Telecom could receive additional
consideration of up to $5.7 million, payable in the form of shares of common
stock and stock options, if certain performance and technology goals are
achieved.

Also in April 2000, Conexant announced that it had agreed to acquire Philsar
Semiconductor Inc., a developer of RF semiconductor solutions for personal
wireless connectivity, including emerging standards such as Bluetooth, and RF
components for third-generation (3G) digital cellular handsets. Consideration
for the acquisition of Philsar will be between 2.685 million and 3.0 million
shares of Conexant common stock, depending upon the closing market price of
Conexant common stock for an agreed upon period prior to the closing. The
aggregate value of such consideration may exceed $200 million. The transaction
is subject to customary closing conditions, including the approval of Philsar's
shareholders. While no assurance can be given, the transaction is expected to be
completed during the third quarter of fiscal 2000.

The acquisitions will each be recorded under the purchase method of accounting.
As a result of the acquisition of Applied Telecom, and assuming completion of
the acquisition of Philsar, the Company expects to record additional goodwill
and intangible assets, the amount of which may exceed $200 million. The Company
expects to record additional non-deductible amortization expense in each of the
five years following the acquisitions, the amount of which may exceed $40
million annually. In addition, upon completion of the acquisition of Philsar,
the Company expects to record a non-recurring charge for the value of the IPRD,
the amount of which has not been determined. The purchase price allocation for
each of these acquisitions, including the amount of the charge for IPRD, is
preliminary and will be revised upon receipt of final valuation information.
Such revisions to the purchase price allocation will also affect the amounts of
amortization of intangible assets.

CAUTIONARY STATEMENT

This Quarterly Report contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties. These risks and uncertainties
include, but are not limited to: global economic and market conditions,
including the cyclical nature of the semiconductor industry and the markets
addressed by the Company's and its customers' products; demand for, and market
acceptance of, new and existing products; successful development of new
products; the timing of new product introductions; the successful integration of
acquisitions; the availability and extent of utilization of manufacturing
capacity and raw materials; pricing pressures and other competitive factors;
changes in product mix; fluctuations in manufacturing yields; product
obsolescence; the ability to develop and implement new technologies and to
obtain protection of the related intellectual property; the successful
implementation of the Company's diversification strategy; labor relations of the
Company, its customers and suppliers; and the uncertainties of litigation, as
well as other risks and uncertainties including those discussed in the Company's
Annual Report on Form 10-K for the year ended September 30, 1999 or detailed
from time to time in the Company's Securities and Exchange Commission filings.
Reference is made to the "Certain Business Risks" section on pages 10 to 20 of
the Annual Report. These forward-looking statements are made only as of the date
hereof, and the Company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.



                                       18
<PAGE>   19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's financial instruments include cash and cash equivalents,
marketable securities, and long-term debt. At March 31, 2000, the fair
values of the Company's cash and cash equivalents approximated their carrying
value due to the short maturities of these instruments. The Company's long-term
debt consists of convertible subordinated notes with interest at a fixed rate.
Consequently, the Company does not have significant cash flow exposure on its
long-term debt. However, the fair value of the convertible subordinated notes is
subject to significant fluctuation due to their convertibility into shares of
Conexant common stock.

The Company's marketable debt securities consist of commercial paper, corporate
bonds, and government securities, principally having remaining terms of one year
or less. Such securities are subject to interest rate risk. At March 31, 2000,
there were no material unrealized gains or losses on such securities. Marketable
equity securities consist of an equity investment in a semiconductor company,
initially made for the promotion of business and strategic objectives, which is
subject to equity price risk. All of the Company's marketable securities are
classified as available for sale and, as of March 31, 2000, unrealized gains of
$79.4 million (net of related income taxes of $49.0 million) on these securities
are included in other comprehensive income.

The following table shows the fair values of the Company's investments and its
long-term debt as of March 31, 2000 (in thousands):

<TABLE>
<CAPTION>
                                                Carrying Value     Fair Value
                                                --------------     ----------
<S>                                               <C>              <C>
Cash and equivalents                              $  930,892       $  930,892
Marketable debt securities                            34,197           34,197
Marketable equity securities (including
    unrealized gains of $128.4 million)              143,776          143,776
Long-term debt                                     1,000,000        1,692,345
</TABLE>

The Company transacts business in various foreign currencies, and the Company
has established a foreign currency hedging program utilizing foreign currency
forward exchange contracts to hedge certain foreign currency transaction
exposures (principally the Japanese yen). Under this program, the Company seeks
to offset foreign currency transaction gains and losses with gains and losses on
the forward contracts, so as to mitigate its overall risk of foreign transaction
gains and losses. The Company does not enter into forward contracts for trading
purposes. At March 31, 2000, the Company held foreign currency forward exchange
contracts (to sell Japanese yen at specified rates) having an aggregate notional
amount of $30.2 million, at a notional weighted average exchange rate of
approximately 103.5 yen to one dollar. The gains and losses relating to these
forward contracts are deferred and included in the measurement of the foreign
currency transaction subject to the hedge. The net unrealized gain/loss on the
forward contracts outstanding at March 31, 2000 was not material to the
Company's consolidated financial statements. Based on the Company's overall
currency rate exposure at March 31, 2000, a 10 percent change in currency rates
would not have had a material effect on the financial position, results of
operations or cash flows of the Company.



                                       19
<PAGE>   20

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On October 14, 1997, Brent Townshend ("Townshend") filed suit against Rockwell
and Conexant in the Superior Court of California for San Mateo County seeking an
injunction to halt the sale of products containing Conexant's K56Flex(TM)
chipsets and requesting unspecified damages, claiming that Conexant had engaged
in unfair competition, misappropriation of trade secrets, breach of contract and
breach of confidence by using technical information allegedly disclosed in
confidence by Mr. Townshend to accelerate its development of 56 Kbps modem
technology. In January 1999, Townshend dismissed his State Court action and
re-filed the same claims and three new claims for patent infringement in the
U.S. District Court for the Northern District of California. In the Federal
action, Townshend alleges that each of his patents (the "Townshend Patents")
covers certain aspects of the V.90 standard and are infringed by Conexant's 56
Kbps products. In the Federal action, Townshend seeks injunctive relief,
compensatory damages, restitution and exemplary and punitive damages. Townshend
and 3Com Corporation had publicly announced that 3Com was the exclusive licensee
for the Townshend Patents and acted as Townshend's agent in sublicensing the
Townshend Patents to third parties. More recently, Townshend and 3Com publicly
announced that Townshend has reacquired exclusive control over the licensing and
enforcement of the patents as well as other ownership rights, while 3Com
retained a non-exclusive license to practice the Townshend inventions. Conexant
has filed its answer to Townshend and counterclaims against Townshend and claims
against 3Com. On a hearing on the Motion to Dismiss filed by Townshend and 3Com,
the claims against 3Com have been dismissed, and a portion of the counterclaims
against Townshend were likewise dismissed. Conexant is vigorously defending its
position that it independently developed the 56 Kbps modem technology using
entirely its own skills and public domain information and will vigorously
contest the infringement claims and the validity of the asserted patents.

On July 29, 1991, Shumpei Yamazaki filed suit against a Japanese subsidiary of
Rockwell in the Tokyo District Court, Twenty-ninth Civil Division for patent
infringement relating to Conexant's facsimile modem chipsets seeking 685 million
yen (approximately $6.3 million based on the exchange rate on April 28, 2000)
and court costs. In October 1998, the District Court rendered its decision
dismissing the suit, from which decision Mr. Yamazaki appealed. On April 12,
1999, Mr. Yamazaki presented his position, as well as additional causes of
action at the first portion of the appellate hearing. Conexant presented its
position to the appellate court on June 16, 1999. The Court will hear arguments
on Mr. Yamazaki's new causes of action in late spring or early summer 2000.
Conexant believes it has meritorious defenses to these claims and is vigorously
defending this action.

On May 30, 1997, Klaus Holtz filed suit against Rockwell in the U.S. District
Court for the Northern District of California for patent infringement relating
to Conexant's modem products utilizing the V.42bis standard for data
compression. On September 30, 1998, the Court barred any alleged damages arising
before May 30, 1997. On December 17, 1998, the Court issued an order construing
the claims of the patent. Conexant filed a motion for Summary Judgment of
Non-Infringement on February 22, 1999. A hearing was held thereon on June 14,
1999. On October 25, 1999, the Company was notified that the Court found in
favor of the Company and the case was dismissed. Holtz filed a notice of appeal
to the court of appeals for the Federal circuit on November 18, 1999, and has
filed his brief on April 7, 2000. Conexant believes it has meritorious defenses
to these claims and is vigorously defending this action.

Various other lawsuits, claims and proceedings have been or may be instituted or
asserted against Rockwell or Conexant or their respective subsidiaries,
including those pertaining to product liability, intellectual property,
environmental, safety and health, and employment matters.

In connection with the Distribution, Conexant assumed responsibility for all
current and future litigation (including environmental and intellectual property
proceedings) against Rockwell or its subsidiaries in respect of Semiconductor
Systems.

The outcome of litigation cannot be predicted with certainty and some lawsuits,
claims or proceedings may be disposed of unfavorably to Conexant. Many
intellectual property disputes have a risk of injunctive relief and there can be
no assurance that a license will be granted. Injunctive relief could have a
material adverse effect on the financial condition or results of operations of
Conexant. Based on its evaluation of matters which are pending or



                                       20
<PAGE>   21

asserted and taking into account Conexant's reserves for such matters,
management of Conexant believes the disposition of such matters will not have a
material adverse effect on the financial condition or results of operations of
Conexant.

ITEM 2. CHANGES IN SECURITIES

In January 2000, the Company issued shares of its common stock in connection
with the acquisitions of Microcosm Communications Limited (1,523,430 shares) and
the wireless broadband business unit of Oak Technology, Inc. (293,794 shares),
in each case pursuant to an exemption from registration. The holders of such
shares have been granted certain registration rights.

In April 2000, the Company issued shares of its common stock in connection with
the acquisition of Applied Telecom, Inc. (121,245 shares), pursuant to an
exemption from registration. The holders of such shares have been granted
certain registration rights.

Each outstanding share of common stock, par value $1 per share, of Conexant also
evidences one preferred share purchase right. Each preferred share purchase
right entitles the registered holder to purchase from Conexant one two-hundredth
of a share of Series A Junior Participating Preferred Stock. Pursuant to the
First Amendment to Rights Agreement dated as of December 9, 1999 between
Conexant and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, the
Rights Agreement dated as of November 30, 1998 was amended to increase the
exercise price of each preferred share purchase right to $300, subject to
adjustment.

In addition, the Rights Agreement was amended to provide that in connection with
the issuance or sale of Conexant's common stock following the date the preferred
share purchase rights are no longer attached to the common stock (the
"Distribution Date") and prior to the earlier of (1) the date the preferred
share purchase rights are redeemed and (2) the date the preferred share purchase
rights expire, (a) Conexant will, with respect to common stock issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement in existence prior to the Distribution Date, or upon the exercise,
conversion or exchange of securities, notes or debentures (pursuant to the terms
thereof) issued by Conexant and in existence prior to the Distribution Date, and
(b) Conexant may, in any other case, if deemed necessary or appropriate by the
board of directors, issue certificates representing the appropriate number of
preferred share purchase rights in connection with such issuance or sale.
Conexant will not be obligated to issue any of these certificates if, and to the
extent that, Conexant is advised by counsel that the issuance of those
certificates would create a significant risk of material adverse tax
consequences to Conexant or the person to whom such certificate would be issued
or would create a significant risk that the stock options or employee plans or
arrangements would fail to qualify for otherwise available special tax
treatment. In addition, no certificate will be issued if, and to the extent
that, appropriate adjustments otherwise have been made in lieu of the issuance
thereof.



                                       21
<PAGE>   22

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's annual meeting of shareowners was held on February 10, 2000 at the
Company's facilities in Newport Beach, California.

<TABLE>
<CAPTION>
                                                                                 Withheld/
                                                                               Abstentions/
                                                                                  Broker
                                                       For           Against     non-vote
                                                   -----------     ----------  ------------
<S>                                                <C>             <C>          <C>
      Election of directors:
          Dwight W. Decker                         173,915,984                    1,096,030
          F. Craig Farrill                         173,899,739                    1,112,275

      Proposal to approve an amendment to the
      Company's restated certificate of
      incorporation to increase the number of
      authorized shares of preferred stock from
      25,000,000 to 50,000,000                      98,456,598     45,499,415    31,056,001
      The foregoing proposal was not ratified.

      Proposal to approve an amendment to the
      Company's restated certificate of
      incorporation to increase the number of
      authorized shares of common stock from
      500,000,000 to 1,000,000,000                 155,745,592     18,264,997     1,001,425

      Proposal to approve an amendment to the
      Company's 1999 Long-Term incentive plan      130,689,046     42,025,252     2,297,716

      Proposal to ratify the appointment of
      Deloitte & Touche LLP as independent
      auditors for the Company                     173,633,126        595,571       783,317
</TABLE>



                                       22
<PAGE>   23

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

<TABLE>
<CAPTION>
<S>           <C>
      2.1     Agreement and Plan of Merger, dated as of December 18, 1999, among
              Conexant Systems, Inc., Merlot Acquisition Corp. and Maker
              Communications, Inc., filed as Exhibit 2.01 to the Company's
              Registration Statement on Form S-4 (Registration No. 333-96033),
              is incorporated herein by reference.

      2.2     Stock Purchase Agreement, dated as of January 6, 2000, by and
              among Conexant Systems, Inc. and the shareholders and option
              holders of Microcosm Communications Limited, filed as Exhibit 2.2
              to the Company's Quarterly Report on Form 10-Q for the quarter
              ended December 31, 1999, is incorporated by reference.

      4.1     Amendment to Restated Certificate of Incorporation of Conexant,
              filed as Exhibit 4.a.2 to the Company's Registration Statement on
              Form S-3 (Registration No. 333-30596), is incorporated herein by
              reference.

      4.2     Indenture, dated as of February 1, 2000, between the Company and
              Bank One Trust Company, National Association, as trustee,
              including the form of the Company's 4% Convertible Subordinated
              Notes Due February 1, 2007 attached as Exhibit A thereto, filed as
              Exhibit 4.04 to the Company's Registration Statement on Form S-4
              (Registration No. 333-96033), incorporated herein by reference.

     12       Statement re: computation of ratios

     27       Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K

Report on Form 8-K dated January 4, 2000, as amended January 11, 2000, reporting
the Company's agreement to acquire Maker Communications, Inc.

Report on Form 8-K dated February 16, 2000, containing historical financial
statements of Maker Communications, Inc. and pro forma financial information.

Report on Form 8-K dated March 10, 2000, reporting the completion of the
Company's acquisition of Maker Communications, Inc.

Report on Form 8-K dated April 3, 2000, containing historical financial
statements of Maker Communications, Inc. and pro forma financial information.

Report on Form 8-K dated April 12, 2000, reporting the Company's announcement of
the acquisition of Applied Telecomm, Inc. and the Company's agreement to acquire
Philsar Semiconductor Inc.



                                       23
<PAGE>   24

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          CONEXANT SYSTEMS, INC.
                                          (Registrant)

Date: May 8, 2000                         By  /s/ Balakrishnan S. Iyer
                                              ---------------------------------
                                              Balakrishnan S. Iyer
                                              Senior Vice President and
                                              Chief Financial Officer
                                              (principal financial officer)


Date: May 8, 2000                         By  /s/  Steven M. Thomson
                                              ---------------------------------
                                              Steven M. Thomson
                                              Vice President and Controller
                                              (principal accounting officer)


Date: May 8, 2000                         By  /s/  Dennis E. O'Reilly
                                              ---------------------------------
                                              Dennis E. O'Reilly
                                              Senior Vice President,
                                              General Counsel and Secretary



                                       24
<PAGE>   25

                                  EXHIBIT INDEX

<TABLE>

<S>           <C>
     12       Statement re: computation of ratios

     27       Financial Data Schedule.
</TABLE>