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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended July 3, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-24923
 CONEXANT SYSTEMS, INC.
  Delaware
    
    25-1799439(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 4000 MacArthur Boulevard
Newport Beach, California 92660-3095
 (949) 483-4600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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FORWARD-LOOKING STATEMENTS
  
    
    our beliefs, subject to the qualifications expressed, regarding the sufficiency of our
existing sources of liquidity and cash to fund our operations, research and development,
anticipated capital expenditures and our working capital needs for at least the next 12
months and that we will be able to repatriate cash from our foreign operations on a timely
and cost effective basis and that we will be able to sustain the recoverability of our
goodwill, intangible and tangible long-term assets;
    
    expectations that we will have sufficient capital needed to remain in business and
repay our indebtedness as it becomes due;
    
    expectations that we will be able to continue to meet NASDAQ listing requirements;
    
    expectations regarding the market share of our products, growth in the markets we serve
and our market opportunities;
    
    expectations regarding price and product competition;
    
    continued demand and future growth in demand for our products in the communications, PC
and consumer markets we serve;
    
    our plans and expectations regarding the transition of our semiconductor products to
smaller line width geometries;
    
    our product development plans;
    
    our expectation that our largest customers will continue to account for a substantial
portion of our revenue;
    
    expectations regarding our contractual obligations and commitments;
    
    expectation that we will be able to protect our products and services with proprietary
technology and intellectual property protection;
    
    expectation that we will be able to meet our lease obligations (and other financial
commitments);
    
    expectation that we will be able to continue to rely on third party manufacturers to
manufacture, assemble and test our products to meet our customers demands; and
    
    expectations regarding the proposed sale of our Broadband Access Products business to
Ikanos Communications, Inc.
  1




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##### 



CONEXANT SYSTEMS, INC.
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets  July 3, 2009 and October 3, 2008
    
    
    3Condensed Consolidated Statements of Operations  Fiscal Quarter and Nine Fiscal Months
Ended July 3, 2009 and June 27, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine Fiscal Months Ended July 3, 2009
and June 27, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    42Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    55Item 4. Controls and Procedures
    
    
    56PART II. OTHER INFORMATION
    
    
    56Item 1. Legal Proceedings
    
    
    56Item 1A. Risk Factors
    
    
    57Item 6. Exhibits
    
    
    70SIGNATURE
    
    
    71EX-31.1EX-31.2EX-32
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
(unaudited, in thousands, except for share and par value amounts)
 July 3,
    
    
    October 3,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    123,394
    
    
    $
    105,883Restricted cash
    
    
    14,500
    
    
    
    26,800Receivables, net of allowances of $553 and $834
    
    
    40,588
    
    
    
    48,997Inventories, net
    
    
    8,352
    
    
    
    19,372Other current assets
    
    
    34,306
    
    
    
    37,938Current assets held for sale
    
    
    16,928
    
    
    
    29,730Total current assets
    
    
    238,068
    
    
    
    268,720Property, plant and equipment, net of accumulated depreciation of
$66,005 and $78,344
    
    
    12,075
    
    
    
    17,410Goodwill
    
    
    110,094
    
    
    
    110,412Intangible assets, net
    
    
    6,314
    
    
    
    10,611Other assets
    
    
    33,447
    
    
    
    39,250Total assets
    
    $
    399,998
    
    
    $
    446,403LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    17,707Short-term debt
    
    
    30,739
    
    
    
    40,117Accounts payable
    
    
    27,086
    
    
    
    34,894Accrued compensation and benefits
    
    
    8,070
    
    
    
    13,201Other current liabilities
    
    
    32,787
    
    
    
    43,189Current liabilities to be assumed
    
    
    3,446
    
    
    
    3,995Total current liabilities
    
    
    102,128
    
    
    
    153,103Long-term debt
    
    
    391,400
    
    
    
    373,693Other liabilities
    
    
    68,462
    
    
    
    56,341Total liabilities
    
    
    561,990
    
    
    
    583,137Commitments
and contingencies (Note 6)Shareholders deficit:Preferred and junior preferred stock
    
    
    
    
    
    
    Common stock, $0.01 par value: 100,000 shares authorized; 49,913 and 49,601
shares issued and outstanding
    
    
    500
    
    
    
    496Additional paid-in capital
    
    
    4,749,152
    
    
    
    4,744,140Accumulated deficit
    
    
    (4,907,923
    )
    
    
    (4,879,208
    )Accumulated other comprehensive loss
    
    
    (3,676
    )
    
    
    (2,083
    )Shareholder notes receivable
    
    
    (45
    )
    
    
    (79
    )Total shareholders deficit
    
    
    (161,992
    )
    
    
    (136,734
    )Total liabilities and shareholders deficit
    
    $
    399,998
    
    
    $
    446,403
  3




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)
 Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenues
    
    $
    50,844
    
    
    $
    73,902
    
    
    $
    152,272
    
    
    $
    250,389Cost of
goods sold (1)
    
    
    20,533
    
    
    
    32,309
    
    
    
    64,409
    
    
    
    103,089Gross margin
    
    
    30,311
    
    
    
    41,593
    
    
    
    87,863
    
    
    
    147,300Operating expenses:Research and
development (1)
    
    
    12,450
    
    
    
    10,339
    
    
    
    38,783
    
    
    
    43,368Selling,
general and administrative (1)
    
    
    14,813
    
    
    
    22,659
    
    
    
    49,739
    
    
    
    58,733Amortization of intangible assets
    
    
    690
    
    
    
    699
    
    
    
    2,547
    
    
    
    2,269Gain on sale of intellectual property
    
    
    
    
    
    
    
    
    
    
    (12,858
    )
    
    
    Special charges
    
    
    1,060
    
    
    
    8,459
    
    
    
    13,653
    
    
    
    15,910Total operating expenses
    
    
    29,013
    
    
    
    42,156
    
    
    
    91,864
    
    
    
    120,280Operating
income (loss)
    
    
    1,298
    
    
    
    (563
    )
    
    
    (4,001
    )
    
    
    27,020Interest expense
    
    
    5,035
    
    
    
    5,894
    
    
    
    15,634
    
    
    
    21,822Other (income) expense, net
    
    
    (3,567
    )
    
    
    (2,997
    )
    
    
    (3,455
    )
    
    
    6,766Loss from continuing operations before income taxes and (loss) gain on
equity method investments
    
    
    (170
    )
    
    
    (3,460
    )
    
    
    (16,180
    )
    
    
    (1,568
    )Provision for income taxes
    
    
    176
    
    
    
    93
    
    
    
    819
    
    
    
    362Loss from continuing operations before (loss) gain on equity method
investments
    
    
    (346
    )
    
    
    (3,553
    )
    
    
    (16,999
    )
    
    
    (1,930
    )(Loss) gain on equity method investments
    
    
    (485
    )
    
    
    53
    
    
    
    (2,166
    )
    
    
    3,612(Loss) income from continuing operations
    
    
    (831
    )
    
    
    (3,500
    )
    
    
    (19,165
    )
    
    
    1,682Income
(loss) from discontinued operations, net of tax (1)
    
    
    3,557
    
    
    
    (146,371
    )
    
    
    (9,554
    )
    
    
    (302,775
    )Net income
(loss)
    
    $
    2,726
    
    
    $
    (149,871
    )
    
    $
    (28,719
    )
    
    $
    (301,093
    )(Loss) income per share from continuing operations  basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.39
    )
    
    $
    0.03Income (loss) per share from discontinued operations  basic
    
    $
    0.07
    
    
    $
    (2.96
    )
    
    $
    (0.19
    )
    
    $
    (6.14
    )Income (loss) per share from discontinued operations  diluted
    
    $
    0.07
    
    
    $
    (2.96
    )
    
    $
    (0.19
    )
    
    $
    (6.11
    )Net income (loss) per share  basic
    
    $
    0.05
    
    
    $
    (3.03
    )
    
    $
    (0.58
    )
    
    $
    (6.11
    )Net income (loss) per share  diluted
    
    $
    0.05
    
    
    $
    (3.03
    )
    
    $
    (0.58
    )
    
    $
    (6.08
    )Shares used in basic per-share computations
    
    
    49,867
    
    
    
    49,450
    
    
    
    49,760
    
    
    
    49,333Shares used in diluted per-share computations
    
    
    49,867
    
    
    
    49,450
    
    
    
    49,760
    
    
    
    49,570
 
 (1)
    
    These captions include non-cash employee stock-based compensation expense as follows
(see Note 7): Fiscal Quarter Ended
    
    Nine Fiscal Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2009
    
    2008
    
    2009
    
    2008Cost of goods sold
    
    $
    77
    
    
    $
    139
    
    
    $
    196
    
    
    $
    310Research and development
    
    
    17
    
    
    
    290
    
    
    
    746
    
    
    
    2,024Selling, general and administrative
    
    
    423
    
    
    
    4,879
    
    
    
    3,410
    
    
    
    7,854Income (loss) from discontinued operations, net of tax
    
    
    236
    
    
    
    1,395
    
    
    
    1,007
    
    
    
    3,565
  4




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
 Nine Fiscal Months EndedJuly 3,
    
    
    June 27,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (28,719
    )
    
    $
    (301,093
    )Adjustments to reconcile net loss to net cash provided by (used in) operating
activities, net of effects of acquisitions:Depreciation
    
    
    6,595
    
    
    
    16,779Amortization of intangible assets
    
    
    6,967
    
    
    
    11,690Asset impairments
    
    
    
    
    
    
    263,513Reversal of provision for bad debts, net
    
    
    (225
    )
    
    
    (698
    )Charges for inventory provisions, net
    
    
    46
    
    
    
    6,225Deferred income taxes
    
    
    (94
    )
    
    
    80Stock-based compensation
    
    
    5,359
    
    
    
    13,753Loss on termination of defined benefit plan
    
    
    
    
    
    
    6,294(Increase) decrease in fair value of derivative instruments
    
    
    (1,256
    )
    
    
    12,780Losses (gains) on equity method investments
    
    
    3,046
    
    
    
    (3,612
    )Other-than-temporary impairment of marketable securities
    
    
    2,635
    
    
    
    Other-than-temporary impairment of cost method investments
    
    
    135
    
    
    
    Gain on sale of marketable securities
    
    
    (1,856
    )
    
    
    Gain on resolution of pre-acquisition contingency
    
    
    (1,054
    )
    
    
    Gain on sale of intellectual property
    
    
    (12,858
    )
    
    
    Other items, net
    
    
    1,773
    
    
    
    789Changes in assets and liabilities:Receivables
    
    
    8,634
    
    
    
    3,058Inventories
    
    
    18,009
    
    
    
    4,406Accounts payable
    
    
    (7,808
    )
    
    
    (18,831
    )Accrued expenses and other current liabilities
    
    
    (10,194
    )
    
    
    (11,718
    )Accrued restructuring expenses
    
    
    9,481
    
    
    
    2,696Other, net
    
    
    2,066
    
    
    
    (19,530
    )Net cash provided by (used in) operating activities
    
    
    682
    
    
    
    (13,419
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (555
    )
    
    
    (4,240
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    8,949Proceeds from resolution of pre-acquisition contingency
    
    
    2,186
    
    
    
    Payments for acquisitions
    
    
    (3,578
    )
    
    
    Purchases of equity securities
    
    
    
    
    
    
    (755
    )Proceeds from sales of marketable securities
    
    
    2,310
    
    
    
    Deposit of restricted cash
    
    
    
    
    
    
    (29,000
    )Release of restricted cash
    
    
    12,570
    
    
    
    Proceeds from sale of intellectual property, net of expenses of $132
    
    
    14,548
    
    
    
    Net cash provided by (used in) investing activities
    
    
    27,481
    
    
    
    (25,046
    )Cash flows from financing activities:Net repayments of short-term debt, including debt costs of $901 and $1,118
    
    
    (10,279
    )
    
    
    (3,941
    )Repurchases and retirements of long-term debt
    
    
    
    
    
    
    (53,600
    )Proceeds from issuance of common stock
    
    
    28
    
    
    
    710Interest rate swap security deposit
    
    
    (437
    )
    
    
    (4,250
    )Repayment of shareholder note receivable
    
    
    36
    
    
    
    25Net cash used in financing activities
    
    
    (10,652
    )
    
    
    (61,056
    )Net increase (decrease) in cash and cash equivalents
    
    
    17,511
    
    
    
    (99,521
    )Cash and cash equivalents at beginning of period
    
    
    105,883
    
    
    
    234,147Cash and cash equivalents at end of period
    
    $
    123,394
    
    
    $
    134,626
  5




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Description of Business
  2. Sale of Assets and Discontinued Operations
 Sale of Broadband Media Processing
     Sale of Broadband Access Products
  6




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July 3,
    
    
    October 3,2009
    
    
    2008Inventories, net
    
    $
    10,930
    
    
    $
    17,067Other current assets
    
    
    331
    
    
    
    599Total current assets
    
    
    11,261
    
    
    
    17,666Property, plant and equipment, net
    
    
    4,667
    
    
    
    7,502Goodwill
    
    
    1,000
    
    
    
    Intangible assets, net
    
    
    
    
    
    
    4,360Other assets
    
    
    
    
    
    
    202Total assets
    
    $
    16,928
    
    
    $
    29,730Accrued compensation and benefits
    
    $
    2,020
    
    
    $
    1,788Other current liabilities
    
    
    829
    
    
    
    645Total current liabilities
    
    
    2,849
    
    
    
    2,433Other liabilities
    
    
    597
    
    
    
    1,562Total liabilities
    
    $
    3,446
    
    
    $
    3,995
   7




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3. Basis of Presentation and Significant Accounting Policies
 Interim Reporting 
  Fiscal Periods
 Use of Estimates 
 Revenue Recognition 
   8




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Liquidity 
   Restricted Cash 
  Investments 
 9




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Income Taxes 
  Review of Accounting for Research and Development Costs 
 Derivative Financial Instruments 
 Interest Rate Swaps 
 10




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Supplemental Cash Flow Information 
 Net Income (loss) Per Share 
 11




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Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Employee stock options
    
    
    5,054
    
    
    
    8,426
    
    
    
    5,905
    
    
    
    8,9174.00% convertible subordinated notes due March 2026
    
    
    5,081
    
    
    
    5,081
    
    
    
    5,081
    
    
    
    5,08110,135
    
    
    
    13,507
    
    
    
    10,986
    
    
    
    13,998Weighted average shares for basic net income (loss) per share
    
    
    49,867
    
    
    
    49,450
    
    
    
    49,760
    
    
    
    49,333Employee stock options and restricted stock units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,917Weighted average shares for diluted income (loss) per share
    
    
    49,867
    
    
    
    49,450
    
    
    
    49,760
    
    
    
    58,250
 Cash flows 
 Nine FiscalMonths EndedJune 27,2008Accrued expenses and other current liabilities, before reclassification
    
    $
    (13,627
    )Accrued restructuring expenses
    
    
    1,909Accrued expenses and other current liabilities, after reclassification
    
    $
    (11,718
    )Other, net, before reclassification
    
    $
    (16,043
    )Accrued restructuring expenses
    
    
    (4,605
    )Expenses related to short-term debt
    
    
    1,118Other, net, after reclassification
    
    $
    (19,530
    )Repayments of short-term debt, including debt costs, before correction
    
    $
    (2,823
    )Expenses related to short-term debt
    
    
    (1,118
    )Repayments of short-term debt, including debt costs, after correction
    
    $
    (3,941
    )
 Business Enterprise Segments 
 Goodwill 
  12




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Recently Adopted Accounting Pronouncements
   13




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
    
    Level 1: Quoted prices in active markets for identical assets or liabilities.
    
    Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full
term of the related assets or liabilities.
    
    Level 3: Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
       14




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1.
    
    The period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements.2.
    
    The circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements.3.
    
    The disclosures that an entity should make about events or transactions that occurred
after the balance sheet date.
  Recently Issued Accounting Pronouncements
      15




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4. Fair Value of Certain Financial Assets and Liabilities
  Level 1
    
    
    Level 2
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    123,394
    
    
    $
    
    
    
    $
    123,394Restricted
cash
    
    
    14,500
    
    
    
    
    
    
    
    14,500Other equity securities
    
    
    
    
    
    
    5,446
    
    
    
    5,446Mindspeed warrant
    
    
    
    
    
    
    2,307
    
    
    
    2,307Long-term restricted cash
    
    
    6,489
    
    
    
    
    
    
    
    6,489Total
Assets
    
    $
    144,383
    
    
    $
    7,753
    
    
    $
    152,136Liabilities:Interest rate swap financial instruments
    
    $
    
    
    
    $
    2,754
    
    
    $
    2,754Total
Liabilities
    
    $
    
    
    
    $
    2,754
    
    
    $
    2,754
      TotalShort-term
debt
    
    $
    30,739Long-term debt: senior secured notes
    
    
    140,075Long-term debt: convertible subordinated notes
    
    
    107,813$
    278,627
  17




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5. Supplemental Financial Information
 Inventories
  July 3,
    
    
    October 3,2009
    
    
    2008Work-in-process
    
    $
    4,569
    
    
    $
    8,413Finished goods
    
    
    3,783
    
    
    
    10,959Total inventories, net
    
    $
    8,352
    
    
    $
    19,372
  Intangible Assets
  July 3, 2009
    
    
    October 3, 2008Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Book
    
    
    Carrying
    
    
    Accumulated
    
    
    BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueDeveloped technology
    
    $
    800
    
    
    $
    (462
    )
    
    $
    338
    
    
    $
    11,042
    
    
    $
    (9,963
    )
    
    $
    1,079Product licenses
    
    
    2,400
    
    
    
    (526
    )
    
    
    1,874
    
    
    
    11,032
    
    
    
    (7,105
    )
    
    
    3,927Other intangible assets
    
    
    7,240
    
    
    
    (3,138
    )
    
    
    4,102
    
    
    
    8,240
    
    
    
    (2,635
    )
    
    
    5,605$
    10,440
    
    
    $
    (4,126
    )
    
    $
    6,314
    
    
    $
    30,314
    
    
    $
    (19,703
    )
    
    $
    10,611
  Remainder of2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    ThereafterAmortization expense
    
    $
    439
    
    
    $
    1,353
    
    
    $
    1,237
    
    
    $
    1,237
    
    
    $
    1,031
    
    
    $
    1,017
  Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of goods sold
    
    $
    388
    
    
    $
    532
    
    
    $
    1,144
    
    
    $
    1,685Research and development
    
    
    78
    
    
    
    8
    
    
    
    179
    
    
    
    27Selling, general and administrative
    
    
    224
    
    
    
    159
    
    
    
    1,224
    
    
    
    557$
    690
    
    
    $
    699
    
    
    $
    2,547
    
    
    $
    2,269
  Goodwill
  18




---



##### Table of Contents



Goodwill at October 3, 2008
    
    $
    110,412Additions
    
    
    Other adjustments
    
    
    (318
    )Goodwill at July 3, 2009
    
    $
    110,094
   Mindspeed Warrant
   Short-Term Debt
  19




---



##### Table of Contents



Long-Term Debt
  July 3,
    
    
    October 3,2009
    
    
    2008Floating rate senior secured notes due November 2010
    
    $
    141,400
    
    
    $
    141,4004.00% convertible subordinated notes due March 2026 with a conversion price of $49.20
    
    
    250,000
    
    
    
    250,000Total
    
    
    391,400
    
    
    
    391,400Less: current portion of long-term debt
    
    
    
    
    
    
    (17,707
    )Long-term debt
    
    $
    391,400
    
    
    $
    373,693
 Floating rate senior secured notes due November 2010 
 20




---



##### Table of Contents



4.00% convertible subordinated notes due March 2026 
 Acquisitions 
 6. Commitments and Contingencies
 Legal Matters
  21




---



##### Table of Contents



IPO Litigation 
 Class Action Suit
 Guarantees and Indemnifications
  22




---



##### Table of Contents



7. Stock-Based Award Plans
  Stock Option Plans
   Fiscal Quarter Ended
    
    Nine Fiscal Months EndedJuly 3,
    
    June 27,
    
    July 3,
    
    June 27,2009
    
    2008
    
    2009
    
    2008Stock option plans:Expected dividend yield
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Expected stock price volatility
    
    
    87
    %
    
    
    67
    %
    
    
    78
    %
    
    
    68
    %Risk free interest rate
    
    
    1.96
    %
    
    
    3.20
    %
    
    
    2.02
    %
    
    
    3.20
    %Average expected life (in years)
    
    
    5.00
    
    
    
    5.25
    
    
    
    4.86
    
    
    
    5.25Stock purchase plans:Expected dividend yield
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Expected stock price volatility
    
    
    
    
    
    
    68
    %
    
    
    74
    %
    
    
    68
    %Risk free interest rate
    
    
    
    
    
    
    3.00
    %
    
    
    3.14
    %
    
    
    3.00
    %Average expected life (in years)
    
    
    
    
    
    
    0.50
    
    
    
    0.50
    
    
    
    0.50
  23




---



##### Table of Contents



WeightedAverageExerciseShares
    
    PriceOutstanding, October 3, 2008
    
    
    7,357
    
    
    $
    23.54Granted
    
    
    70
    
    
    
    1.04Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (2,771
    )
    
    
    23.26Outstanding, July 3, 2009
    
    
    4,656
    
    
    
    23.37Shares vested and expected to vest, July 3, 2009
    
    
    4,574
    
    
    
    23.56Exercisable, July 3, 2009
    
    
    4,123
    
    
    $
    24.69
    1999 Long Term Incentive Plan, 2001 Performance Share Plan and 2004 New Hire Equity Incentive Plan
  24




---



##### Table of Contents



1999 Long Term Incentive Plan
  WeightedAverageGrant DateShares
    
    Fair ValueOutstanding, October 3, 2008
    
    
    225
    
    
    $
    5.31Granted
    
    
    
    
    
    
    Vested
    
    
    (206
    )
    
    
    5.28Forfeited
    
    
    
    
    
    
    Outstanding, July 3, 2009
    
    
    19
    
    
    $
    5.67
  2001 Performance Share Plan
  WeightedAverageGrant DateShares
    
    Fair ValueOutstanding, October 3, 2008
    
    
    175
    
    
    $
    8.00Granted
    
    
    
    
    
    
    Vested
    
    
    (175
    )
    
    
    8.00Forfeited
    
    
    
    
    
    
    Outstanding, July 3, 2009
    
    
    
    
    
    $
    
  25




---



##### Table of Contents



2004 New Hire Plan
  WeightedAverageGrant DateShares
    
    Fair ValueOutstanding, October 3, 2008
    
    
    74
    
    
    $
    10.59Granted
    
    
    
    
    
    
    Vested
    
    
    (32
    )
    
    
    11.33Forfeited
    
    
    (25
    )
    
    
    13.70Outstanding, July 3, 2009
    
    
    17
    
    
    $
    4.50
  Employee Stock Purchase Plan
   Directors Stock Plan
  26




---



##### Table of Contents



8. Comprehensive Loss
  Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    2,726
    
    
    $
    (149,871
    )
    
    $
    (28,719
    )
    
    $
    (301,093
    )Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    525
    
    
    
    (797
    )
    
    
    (1,230
    )
    
    
    706Unrealized gains on marketable securities
    
    
    
    
    
    
    480
    
    
    
    650
    
    
    
    480Unrealized losses on foreign currency forward hedge contracts
    
    
    
    
    
    
    4,154
    
    
    
    (153
    )
    
    
    1,972Unrealized losses on interest rate swap contracts
    
    
    (211
    )
    
    
    
    
    
    
    (2,803
    )
    
    
    Realized loss on impairment of marketable securities
    
    
    
    
    
    
    
    
    
    
    1,986
    
    
    
    Realized gain on sale of marketable securities
    
    
    (702
    )
    
    
    
    
    
    
    (702
    )
    
    
    Gains on settlement of foreign currency forward hedge contracts
    
    
    
    
    
    
    
    
    
    
    659
    
    
    
    Minimum pension liability adjustments
    
    
    
    
    
    
    4,832
    
    
    
    
    
    
    
    3,759Other comprehensive (loss) income
    
    
    (388
    )
    
    
    8,669
    
    
    
    (1,593
    )
    
    
    6,917Comprehensive income (loss)
    
    $
    2,338
    
    
    $
    (141,202
    )
    
    $
    (30,312
    )
    
    $
    (294,176
    )
  July 3,
    
    
    October 3,2009
    
    
    2008Foreign currency translation adjustments
    
    $
    (922
    )
    
    $
    308Unrealized losses on marketable securities
    
    
    
    
    
    
    (1,934
    )Unrealized losses on derivative instruments
    
    
    (2,754
    )
    
    
    (457
    )Accumulated other comprehensive loss
    
    $
    (3,676
    )
    
    $
    (2,083
    )
 9. Income Taxes
  10. Gain on Sale of Intellectual Property
  11. Special Charges
  27




---



##### Table of Contents



Restructuring Charges
   Fiscal 2009 Restructuring Actions 
  WorkforceReductionsCharged to costs and expenses
    
    $
    2,709Cash payments
    
    
    (2,278
    )Restructuring balance, July 3, 2009
    
    $
    431
 Fiscal 2008 Restructuring Actions 
  28




---



##### Table of Contents



Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    6,254
    
    
    $
    1,762
    
    
    $
    8,016Cash payments
    
    
    (6,161
    )
    
    
    (731
    )
    
    
    (6,892
    )Restructuring balance, October 3, 2008
    
    
    93
    
    
    
    1,031
    
    
    
    1,124Charged to costs and expenses
    
    
    583
    
    
    
    (16
    )
    
    
    567Reclassification to other current liabilities and other liabilities
    
    
    
    
    
    
    (175
    )
    
    
    (175
    )Cash payments
    
    
    (676
    )
    
    
    (440
    )
    
    
    (1,116
    )Restructuring balance, July 3, 2009
    
    $
    
    
    
    $
    400
    
    
    $
    400
 Fiscal 2007 Restructuring Actions 
  Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    9,477
    
    
    $
    2,040
    
    
    $
    11,517Non-cash items
    
    
    
    
    
    
    4,868
    
    
    
    4,868Cash payments
    
    
    (5,841
    )
    
    
    (268
    )
    
    
    (6,109
    )Restructuring balance, September 28, 2007
    
    
    3,636
    
    
    
    6,640
    
    
    
    10,276Charged to costs and expenses
    
    
    11
    
    
    
    6,312
    
    
    
    6,323Non-cash items
    
    
    
    
    
    
    8,039
    
    
    
    8,039Cash payments
    
    
    (3,631
    )
    
    
    (4,309
    )
    
    
    (7,940
    )Restructuring balance, October 3, 2008
    
    
    16
    
    
    
    16,682
    
    
    
    16,698Charged to costs and expenses
    
    
    (1
    )
    
    
    10,577
    
    
    
    10,576Cash payments
    
    
    (15
    )
    
    
    (4,014
    )
    
    
    (4,029
    )Restructuring balance, July 3, 2009
    
    $
    
    
    
    $
    23,245
    
    
    $
    23,245
 Fiscal 2006 and 2005 Restructuring Actions 
 29




---



##### Table of Contents



Facilityand OtherRestructuring balance, October 3, 2008
    
    $
    11,037Charged to costs and expenses
    
    
    4,317Cash payments
    
    
    (1,355
    )Restructuring balance, July 3, 2009
    
    $
    13,999
 30




---



##### Table of Contents



12. Other (income) expense, net
  Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Investment and interest income
    
    $
    (281
    )
    
    $
    (1,171
    )
    
    $
    (1,589
    )
    
    $
    (5,990
    )Gain on sale of investments
    
    
    (1,803
    )
    
    
    (145
    )
    
    
    (1,856
    )
    
    
    (874
    )Other-than-temporary impairment of marketable securities
and cost based investments
    
    
    
    
    
    
    
    
    
    
    2,770
    
    
    
    (Increase) decrease in the fair value of derivative instruments
    
    
    (1,166
    )
    
    
    (1,881
    )
    
    
    (1,762
    )
    
    
    12,662Other
    
    
    (317
    )
    
    
    200
    
    
    
    (1,018
    )
    
    
    968Other (income) expense, net
    
    $
    (3,567
    )
    
    $
    (2,997
    )
    
    $
    (3,455
    )
    
    $
    6,766
   13. Related Party Transactions
 Mindspeed Technologies, Inc.
  Lease Agreement 
 31




---



##### Table of Contents



14. Geographic Information
  Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008United States
    
    $
    715
    
    
    $
    2,556
    
    
    $
    4,391
    
    
    $
    7,070Other Americas
    
    
    536
    
    
    
    2,128
    
    
    
    2,682
    
    
    
    7,042Total Americas
    
    
    1,251
    
    
    
    4,684
    
    
    
    7,073
    
    
    
    14,112China
    
    
    33,522
    
    
    
    50,175
    
    
    
    97,360
    
    
    
    160,923Taiwan
    
    
    3,989
    
    
    
    4,629
    
    
    
    11,041
    
    
    
    13,871Japan
    
    
    3,075
    
    
    
    3,230
    
    
    
    8,896
    
    
    
    14,078Malaysia
    
    
    2,838
    
    
    
    1,963
    
    
    
    8,006
    
    
    
    5,276Thailand
    
    
    751
    
    
    
    2,138
    
    
    
    4,250
    
    
    
    8,431Singapore
    
    
    3,292
    
    
    
    4,673
    
    
    
    8,804
    
    
    
    21,616South Korea
    
    
    1,468
    
    
    
    788
    
    
    
    3,252
    
    
    
    6,160Other Asia-Pacific
    
    
    54
    
    
    
    107
    
    
    
    1,234
    
    
    
    290Total Asia-Pacific
    
    
    48,989
    
    
    
    67,703
    
    
    
    142,843
    
    
    
    230,645Europe, Middle East and Africa
    
    
    604
    
    
    
    1,515
    
    
    
    2,356
    
    
    
    5,632$
    50,844
    
    
    $
    73,902
    
    
    $
    152,272
    
    
    $
    250,389
   July 3,
    
    
    October 3,2009
    
    
    2008United States
    
    $
    39,772
    
    
    $
    49,240India
    
    
    1,329
    
    
    
    2,627Other Asia-Pacific
    
    
    2,058
    
    
    
    4,208Europe, Middle East and Africa
    
    
    21
    
    
    
    35$
    43,180
    
    
    $
    56,110
 15. Supplemental Guarantor Financial Information
  32




---



##### Table of Contents



33




---



##### Table of Contents



July 3, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    94,238
    
    
    $
    
    
    
    $
    29,156
    
    
    $
    
    
    
    $
    123,394Restricted cash
    
    
    6,000
    
    
    
    
    
    
    
    8,500
    
    
    
    
    
    
    
    14,500Receivables, net
    
    
    3,428
    
    
    
    169,158
    
    
    
    37,160
    
    
    
    (169,158
    )
    
    
    40,588Inventories
    
    
    8,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,352Other current assets
    
    
    28,181
    
    
    
    
    
    
    
    6,125
    
    
    
    
    
    
    
    34,306Current assets held for sale
    
    
    14,034
    
    
    
    
    
    
    
    2,894
    
    
    
    
    
    
    
    16,928Total current assets
    
    
    154,233
    
    
    
    169,158
    
    
    
    83,835
    
    
    
    (169,158
    )
    
    
    238,068Property and equipment, net
    
    
    9,157
    
    
    
    
    
    
    
    2,918
    
    
    
    
    
    
    
    12,075Goodwill
    
    
    17,910
    
    
    
    89,087
    
    
    
    3,097
    
    
    
    
    
    
    
    110,094Intangible assets, net
    
    
    5,962
    
    
    
    
    
    
    
    352
    
    
    
    
    
    
    
    6,314Other assets
    
    
    31,142
    
    
    
    
    
    
    
    2,305
    
    
    
    
    
    
    
    33,447Investments in subsidiaries
    
    
    274,592
    
    
    
    19,851
    
    
    
    
    
    
    
    (294,443
    )
    
    
    Total assets
    
    $
    492,996
    
    
    $
    278,096
    
    
    $
    92,507
    
    
    $
    (463,601
    )
    
    $
    399,998Current liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Short-term debt
    
    
    
    
    
    
    
    
    
    
    30,739
    
    
    
    
    
    
    
    30,739Accounts payable
    
    
    159,687
    
    
    
    
    
    
    
    36,557
    
    
    
    (169,158
    )
    
    
    27,086Accrued compensation and benefits
    
    
    5,415
    
    
    
    
    
    
    
    2,655
    
    
    
    
    
    
    
    8,070Other current liabilities
    
    
    28,613
    
    
    
    932
    
    
    
    3,242
    
    
    
    
    
    
    
    32,787Current liabilities to be assumed
    
    
    2,893
    
    
    
    
    
    
    
    553
    
    
    
    
    
    
    
    3,446Total current liabilities
    
    
    196,608
    
    
    
    932
    
    
    
    73,746
    
    
    
    (169,158
    )
    
    
    102,128Long-term debt
    
    
    391,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,400Other liabilities
    
    
    66,980
    
    
    
    
    
    
    
    1,482
    
    
    
    
    
    
    
    68,462Total liabilities
    
    
    654,988
    
    
    
    932
    
    
    
    75,228
    
    
    
    (169,158
    )
    
    
    561,990Shareholders (deficit) equity
    
    
    (161,992
    )
    
    
    277,164
    
    
    
    17,279
    
    
    
    (294,443
    )
    
    
    (161,992
    )Total liabilities and equity (deficit)
    
    $
    492,996
    
    
    $
    278,096
    
    
    $
    92,507
    
    
    $
    (463,601
    )
    
    $
    399,998
 34




---



##### Table of Contents



October 3, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    69,738
    
    
    $
    
    
    
    $
    36,145
    
    
    $
    
    
    
    $
    105,883Restricted cash
    
    
    18,000
    
    
    
    
    
    
    
    8,800
    
    
    
    
    
    
    
    26,800Receivables
    
    
    
    
    
    
    169,158
    
    
    
    57,584
    
    
    
    (177,745
    )
    
    
    48,997Inventories
    
    
    19,372
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,372Other current assets
    
    
    32,998
    
    
    
    3
    
    
    
    4,937
    
    
    
    
    
    
    
    37,938Current assets held for sale
    
    
    25,248
    
    
    
    
    
    
    
    4,482
    
    
    
    
    
    
    
    29,730Total current assets
    
    
    165,356
    
    
    
    169,161
    
    
    
    111,948
    
    
    
    (177,745
    )
    
    
    268,720Property and equipment, net
    
    
    11,292
    
    
    
    
    
    
    
    6,118
    
    
    
    
    
    
    
    17,410Goodwill
    
    
    17,911
    
    
    
    89,404
    
    
    
    3,097
    
    
    
    
    
    
    
    110,412Intangible assets, net
    
    
    4,167
    
    
    
    5,992
    
    
    
    452
    
    
    
    
    
    
    
    10,611Other assets
    
    
    36,753
    
    
    
    
    
    
    
    2,497
    
    
    
    
    
    
    
    39,250Investments in subsidiaries
    
    
    291,511
    
    
    
    19,188
    
    
    
    
    
    
    
    (310,699
    )
    
    
    Total assets
    
    $
    526,990
    
    
    $
    283,745
    
    
    $
    124,112
    
    
    $
    (488,444
    )
    
    $
    446,403Current liabilities:Current portion of long-term debt
    
    $
    17,707
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,707Short-term debt
    
    
    
    
    
    
    
    
    
    
    40,117
    
    
    
    
    
    
    
    40,117Accounts payable
    
    
    164,057
    
    
    
    
    
    
    
    48,582
    
    
    
    (177,745
    )
    
    
    34,894Accrued compensation and benefits
    
    
    10,841
    
    
    
    
    
    
    
    2,360
    
    
    
    
    
    
    
    13,201Other current liabilities
    
    
    39,592
    
    
    
    932
    
    
    
    2,665
    
    
    
    
    
    
    
    43,189Current liabilities to be assumed
    
    
    3,135
    
    
    
    
    
    
    
    860
    
    
    
    
    
    
    
    3,995Total current liabilities
    
    
    235,332
    
    
    
    932
    
    
    
    94,584
    
    
    
    (177,745
    )
    
    
    153,103Long-term debt
    
    
    373,693
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373,693Other liabilities
    
    
    54,699
    
    
    
    
    
    
    
    1,642
    
    
    
    
    
    
    
    56,341Total liabilities
    
    
    663,724
    
    
    
    932
    
    
    
    96,226
    
    
    
    (177,745
    )
    
    
    583,137Shareholders (deficit) equity
    
    
    (136,734
    )
    
    
    282,813
    
    
    
    27,886
    
    
    
    (310,699
    )
    
    
    (136,734
    )Total liabilities and equity (deficit)
    
    $
    526,990
    
    
    $
    283,745
    
    
    $
    124,112
    
    
    $
    (488,444
    )
    
    $
    446,403
 35




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##### Table of Contents



Fiscal Quarter Ended July 3, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    44,161
    
    
    $
    360
    
    
    $
    6,323
    
    
    $
    
    
    
    $
    50,844Cost of goods sold
    
    
    14,806
    
    
    
    
    
    
    
    5,727
    
    
    
    
    
    
    
    20,533Gross margin
    
    
    29,355
    
    
    
    360
    
    
    
    596
    
    
    
    
    
    
    
    30,311Operating expenses:Research and development
    
    
    12,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,450Selling, general and administrative
    
    
    13,980
    
    
    
    
    
    
    
    833
    
    
    
    
    
    
    
    14,813Amortization of intangible assets
    
    
    665
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    690Special charges
    
    
    (201
    )
    
    
    
    
    
    
    1,261
    
    
    
    
    
    
    
    1,060Total operating expenses
    
    
    26,894
    
    
    
    
    
    
    
    2,119
    
    
    
    
    
    
    
    29,013Operating income (loss)
    
    
    2,461
    
    
    
    360
    
    
    
    (1,523
    )
    
    
    
    
    
    
    1,298Equity (loss) in income of subsidiaries
    
    
    962
    
    
    
    1,147
    
    
    
    
    
    
    
    (2,109
    )
    
    
    Interest expense
    
    
    4,632
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    5,035Other income, net
    
    
    (865
    )
    
    
    
    
    
    
    (2,702
    )
    
    
    
    
    
    
    (3,567
    )(Loss) income from continuing operations before income
taxes and loss on equity method investments
    
    
    (344
    )
    
    
    1,507
    
    
    
    776
    
    
    
    (2,109
    )
    
    
    (170
    )Provision for income taxes
    
    
    156
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    176(Loss) income from continuing operations before loss on
equity method investments
    
    
    (500
    )
    
    
    1,507
    
    
    
    756
    
    
    
    (2,109
    )
    
    
    (346
    )Loss on equity method investments
    
    
    (485
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (485
    )(Loss) income from continuing operations
    
    
    (985
    )
    
    
    1,507
    
    
    
    756
    
    
    
    (2,109
    )
    
    
    (831
    )Income (loss) from discontinued operations
    
    
    3,711
    
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    3,557Net income (loss)
    
    $
    2,726
    
    
    $
    1,507
    
    
    $
    602
    
    
    $
    (2,109
    )
    
    $
    2,726
 36




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##### Table of Contents



Fiscal Quarter Ended June 27, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    68,763
    
    
    $
    1,503
    
    
    $
    3,636
    
    
    $
    
    
    
    $
    73,902Cost of goods sold
    
    
    29,060
    
    
    
    
    
    
    
    3,249
    
    
    
    
    
    
    
    32,309Gross margin
    
    
    39,703
    
    
    
    1,503
    
    
    
    387
    
    
    
    
    
    
    
    41,593Operating expenses:Research and development
    
    
    9,844
    
    
    
    
    
    
    
    495
    
    
    
    
    
    
    
    10,339Selling, general and administrative
    
    
    21,453
    
    
    
    
    
    
    
    1,206
    
    
    
    
    
    
    
    22,659Amortization of intangible assets
    
    
    673
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    699Special charges
    
    
    8,301
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    8,459Total operating expenses
    
    
    40,271
    
    
    
    
    
    
    
    1,885
    
    
    
    
    
    
    
    42,156Operating (loss) income
    
    
    (568
    )
    
    
    1,503
    
    
    
    (1,498
    )
    
    
    
    
    
    
    (563
    )(Loss) equity in income of subsidiaries
    
    
    (88,792
    )
    
    
    5,237
    
    
    
    
    
    
    
    83,555
    
    
    
    Interest expense
    
    
    4,940
    
    
    
    
    
    
    
    954
    
    
    
    
    
    
    
    5,894Other expense (income), net
    
    
    7,618
    
    
    
    
    
    
    
    (10,615
    )
    
    
    
    
    
    
    (2,997
    )(Loss) income from continuting operations before income
taxes and gain on equity method investments
    
    
    (101,918
    )
    
    
    6,740
    
    
    
    8,163
    
    
    
    83,555
    
    
    
    (3,460
    )Provision for income taxes
    
    
    (1,679
    )
    
    
    
    
    
    
    1,772
    
    
    
    
    
    
    
    93(Loss) income from continuting operations before gain on
equity method investments
    
    
    (100,239
    )
    
    
    6,740
    
    
    
    6,391
    
    
    
    83,555
    
    
    
    (3,553
    )Gain on equity method investments
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53(Loss) income from continuing operations
    
    
    (100,186
    )
    
    
    6,740
    
    
    
    6,391
    
    
    
    83,555
    
    
    
    (3,500
    )Loss from discontinued operations
    
    
    (49,685
    )
    
    
    (96,468
    )
    
    
    (218
    )
    
    
    
    
    
    
    (146,371
    )Net (loss) income
    
    $
    (149,871
    )
    
    $
    (89,728
    )
    
    $
    6,173
    
    
    $
    83,555
    
    
    $
    (149,871
    )
 37




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##### Table of Contents



Nine Fiscal Months Ended July 3, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    136,586
    
    
    $
    1,859
    
    
    $
    13,827
    
    
    $
    
    
    
    $
    152,272Cost of goods sold
    
    
    51,709
    
    
    
    
    
    
    
    12,700
    
    
    
    
    
    
    
    64,409Gross margin
    
    
    84,877
    
    
    
    1,859
    
    
    
    1,127
    
    
    
    
    
    
    
    87,863Operating expenses:Research and development
    
    
    38,783
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,783Selling, general and administrative
    
    
    46,441
    
    
    
    
    
    
    
    3,298
    
    
    
    
    
    
    
    49,739Amortization of intangible assets
    
    
    2,471
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    2,547Gain on sale of intellectual property
    
    
    (12,858
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,858
    )Special charges
    
    
    11,529
    
    
    
    
    
    
    
    2,124
    
    
    
    
    
    
    
    13,653Total operating expenses
    
    
    86,366
    
    
    
    
    
    
    
    5,498
    
    
    
    
    
    
    
    91,864Operating
(loss) income
    
    
    (1,489
    )
    
    
    1,859
    
    
    
    (4,371
    )
    
    
    
    
    
    
    (4,001
    )(Loss) equity in income of subsidiaries
    
    
    (807
    )
    
    
    663
    
    
    
    
    
    
    
    144
    
    
    
    Interest expense
    
    
    14,209
    
    
    
    
    
    
    
    1,425
    
    
    
    
    
    
    
    15,634Other expense (income), net
    
    
    5,261
    
    
    
    
    
    
    
    (8,716
    )
    
    
    
    
    
    
    (3,455
    )(Loss) income from continuing operations before income
taxes and loss on equity method investments
    
    
    (21,766
    )
    
    
    2,522
    
    
    
    2,920
    
    
    
    144
    
    
    
    (16,180
    )Provision for income taxes
    
    
    (325
    )
    
    
    
    
    
    
    1,144
    
    
    
    
    
    
    
    819(Loss) income from continuing operations before
loss on equity method investments
    
    
    (21,441
    )
    
    
    2,522
    
    
    
    1,776
    
    
    
    144
    
    
    
    (16,999
    )Loss on equity method investments
    
    
    (2,166
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,166
    )(Loss) income from continuing operations
    
    
    (23,607
    )
    
    
    2,522
    
    
    
    1,776
    
    
    
    144
    
    
    
    (19,165
    )Loss from discontinued operations
    
    
    (5,112
    )
    
    
    (4,302
    )
    
    
    (140
    )
    
    
    
    
    
    
    (9,554
    )Net (loss) income
    
    $
    (28,719
    )
    
    $
    (1,780
    )
    
    $
    1,636
    
    
    $
    144
    
    
    $
    (28,719
    )
 38




---



##### Table of Contents



Nine Fiscal Months Ended June 27, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    222,264
    
    
    $
    6,726
    
    
    $
    21,399
    
    
    $
    
    
    
    $
    250,389Cost of goods sold
    
    
    83,838
    
    
    
    
    
    
    
    19,251
    
    
    
    
    
    
    
    103,089Gross margin
    
    
    138,426
    
    
    
    6,726
    
    
    
    2,148
    
    
    
    
    
    
    
    147,300Operating expenses:Research and development
    
    
    42,264
    
    
    
    
    
    
    
    1,104
    
    
    
    
    
    
    
    43,368Selling, general and administrative
    
    
    52,371
    
    
    
    
    
    
    
    6,362
    
    
    
    
    
    
    
    58,733Amortization of intangible assets
    
    
    2,193
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    2,269Special charges
    
    
    14,866
    
    
    
    
    
    
    
    1,044
    
    
    
    
    
    
    
    15,910Total operating expenses
    
    
    111,694
    
    
    
    
    
    
    
    8,586
    
    
    
    
    
    
    
    120,280Operating income (loss)
    
    
    26,732
    
    
    
    6,726
    
    
    
    (6,438
    )
    
    
    
    
    
    
    27,020(Loss) equity in income of subsidiaries
    
    
    (208,534
    )
    
    
    6,564
    
    
    
    
    
    
    
    201,970
    
    
    
    Interest expense
    
    
    18,298
    
    
    
    
    
    
    
    3,524
    
    
    
    
    
    
    
    21,822Other expense (income), net
    
    
    27,305
    
    
    
    
    
    
    
    (20,539
    )
    
    
    
    
    
    
    6,766(Loss) income from continuing operations before income
taxes and gain on equity method investments
    
    
    (227,405
    )
    
    
    13,290
    
    
    
    10,577
    
    
    
    201,970
    
    
    
    (1,568
    )Provision for income taxes
    
    
    (2,742
    )
    
    
    
    
    
    
    3,104
    
    
    
    
    
    
    
    362(Loss) income from continuing operations before gain on
equity method investments
    
    
    (224,663
    )
    
    
    13,290
    
    
    
    7,473
    
    
    
    201,970
    
    
    
    (1,930
    )Gain on equity method investments
    
    
    3,612
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,612(Loss) income from continuing operations
    
    
    (221,051
    )
    
    
    13,290
    
    
    
    7,473
    
    
    
    201,970
    
    
    
    1,682Loss from discontinued operations
    
    
    (80,042
    )
    
    
    (222,078
    )
    
    
    (655
    )
    
    
    
    
    
    
    (302,775
    )Net (loss) income
    
    $
    (301,093
    )
    
    $
    (208,788
    )
    
    $
    6,818
    
    
    $
    201,970
    
    
    $
    (301,093
    )
 39




---



##### Table of Contents



Nine Fiscal Months Ended July 3, 2009Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by operating activities
    
    $
    (13,550
    )
    
    $
    4,104
    
    
    $
    17,967
    
    
    $
    (7,674
    )
    
    $
    847Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (221
    )
    
    
    
    
    
    
    (334
    )
    
    
    
    
    
    
    (555
    )Proceeds from release of escrow
    
    
    2,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,075Payments for acquisitions
    
    
    (3,578
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,578
    )Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (188,532
    )
    
    
    188,532
    
    
    
    Proceeds from collection of purchased accounts receivable
    
    
    
    
    
    
    
    
    
    
    180,858
    
    
    
    (180,858
    )
    
    
    Proceeds from sales of equity securities
    
    
    2,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,256Release of restricted cash
    
    
    12,270
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    12,570Proceeds from sale of intellectual property, net
    
    
    14,548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,548Net cash provided by (used in) investing activities
    
    
    27,350
    
    
    
    
    
    
    
    (7,708
    )
    
    
    7,674
    
    
    
    27,316Cash flows from financing activities:Repayment of short-term debt, net of expenses
    
    
    
    
    
    
    
    
    
    
    (10,279
    )
    
    
    
    
    
    
    (10,279
    )Proceeds from issuance of company stock
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Intercompany, net
    
    
    11,073
    
    
    
    (4,104
    )
    
    
    (6,969
    )
    
    
    
    
    
    
    Interest rate swap security deposit
    
    
    (437
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )Repayment of shareholder note receivable
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Net cash provided by (used in) financing activities
    
    
    10,700
    
    
    
    (4,104
    )
    
    
    (17,248
    )
    
    
    
    
    
    
    (10,652
    )Net increase (decrease) in cash and cash equivalents
    
    
    24,500
    
    
    
    
    
    
    
    (6,989
    )
    
    
    
    
    
    
    17,511Cash and cash equivalents at beginning of period
    
    
    69,738
    
    
    
    
    
    
    
    36,145
    
    
    
    
    
    
    
    105,883Cash and cash equivalents at end of period
    
    $
    94,238
    
    
    $
    
    
    
    $
    29,156
    
    
    $
    
    
    
    $
    123,394
 40




---



##### Table of Contents



Nine Fiscal Months Ended June 27, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by operating activities
    
    $
    (35,881
    )
    
    $
    3,122
    
    
    $
    10,353
    
    
    $
    8,987
    
    
    $
    (13,419
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (2,437
    )
    
    
    
    
    
    
    (1,803
    )
    
    
    
    
    
    
    (4,240
    )Proceeds from sale of property, plant and equipment
    
    
    574
    
    
    
    
    
    
    
    8,375
    
    
    
    
    
    
    
    8,949Purchases of equity securites and other assets
    
    
    (755
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (755
    )Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (404,533
    )
    
    
    404,533
    
    
    
    Proceeds from collection of purchased accounts receivable
    
    
    
    
    
    
    
    
    
    
    413,520
    
    
    
    (413,520
    )
    
    
    Increase in restricted cash
    
    
    (29,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,000
    )Net cash (used in) provided by investing activities
    
    
    (31,618
    )
    
    
    
    
    
    
    15,559
    
    
    
    (8,987
    )
    
    
    (25,046
    )Cash flows from financing activities:Repayment of short-term debt, net of expenses
    
    
    
    
    
    
    
    
    
    
    (3,941
    )
    
    
    
    
    
    
    (3,941
    )Repayment of long-term debt
    
    
    (53,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,600
    )Intercompany, net
    
    
    16,341
    
    
    
    (3,122
    )
    
    
    (13,219
    )
    
    
    
    
    
    
    Interest rate swap security deposit
    
    
    (4,250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,250
    )Proceeds from common stock
    
    
    710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    710Proceeds from shareholder loans
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Net cash used in financing activities
    
    
    (40,774
    )
    
    
    (3,122
    )
    
    
    (17,160
    )
    
    
    
    
    
    
    (61,056
    )Net (decrease) increase in cash and cash equivalents
    
    
    (108,273
    )
    
    
    
    
    
    
    8,752
    
    
    
    
    
    
    
    (99,521
    )Cash and cash equivalents at beginning of period
    
    
    199,263
    
    
    
    
    
    
    
    34,884
    
    
    
    
    
    
    
    234,147Cash and cash equivalents at end of period
    
    $
    90,990
    
    
    $
    
    
    
    $
    43,636
    
    
    $
    
    
    
    $
    134,626
 16. Subsequent Events
   41




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   Critical Accounting Policies
  42




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Goodwill Impairment Testing
   Discounted Cash Flow Analysis:
   Market Multiple Analysis:
 43




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##### Table of Contents



Interim Goodwill Test:
 Business Enterprise Segments 
 Sale of Broadband Media Processing Business
  Sale of Broadband Access Products Business
  44




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Results of Operations
 Net Revenues
       45




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Gross Margin
     Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008E&O reserves at beginning of period
    
    $
    9,193
    
    
    $
    13,884
    
    
    $
    12,579
    
    
    $
    11,986Additions
    
    
    634
    
    
    
    1,845
    
    
    
    1,949
    
    
    
    6,173Release upon sales of product
    
    
    (399
    )
    
    
    (338
    )
    
    
    (1,978
    )
    
    
    (1,274
    )Scrap
    
    
    (1,537
    )
    
    
    (1,610
    )
    
    
    (4,564
    )
    
    
    (3,023
    )Standards adjustments and other
    
    
    25
    
    
    
    (958
    )
    
    
    (70
    )
    
    
    (1,039
    )E&O reserves at end of period
    
    $
    7,916
    
    
    $
    12,823
    
    
    $
    7,916
    
    
    $
    12,823
   46




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Research and Development
    Selling, General and Administrative
    47




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Amortization of Intangible Assets
    Gain on Sale of Intellectual Property
  Special Charges
  Interest Expense
   48




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Other (income) expense, net
  Fiscal Quarter Ended
    
    
    Nine Fiscal Months EndedJuly 3,
    
    
    June 27,
    
    
    July 3,
    
    
    June 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Investment and interest income
    
    $
    (281
    )
    
    $
    (1,171
    )
    
    $
    (1,589
    )
    
    $
    (5,990
    )Gain on sale of investments
    
    
    (1,803
    )
    
    
    (145
    )
    
    
    (1,856
    )
    
    
    (874
    )Other-than-temporary impairment of marketable securities
and cost based investments
    
    
    
    
    
    
    
    
    
    
    2,770
    
    
    
    (Increase) decrease in the fair value of derivative instruments
    
    
    (1,166
    )
    
    
    (1,881
    )
    
    
    (1,762
    )
    
    
    12,662Other
    
    
    (317
    )
    
    
    200
    
    
    
    (1,018
    )
    
    
    968Other (income) expense, net
    
    $
    (3,567
    )
    
    $
    (2,997
    )
    
    $
    (3,455
    )
    
    $
    6,766
   Provision for Income Taxes
  Liquidity and Capital Resources
    49




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50




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Nine Fiscal Months EndedJuly 3,
    
    
    June 27,2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    682
    
    
    $
    (13,419
    )Net cash provided by (used in) investing activities
    
    
    27,481
    
    
    
    (25,046
    )Net cash used in financing activities
    
    
    (10,652
    )
    
    
    (61,056
    )Net increase (decrease) in cash and cash equivalents
    
    $
    17,511
    
    
    $
    (99,521
    )
    Contractual Obligations
  Off-Balance Sheet Arrangements
   51




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Special Purpose Entities
   Recently Adopted Accounting Pronouncements
    52




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##### Table of Contents




    
    Level 1: Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full
term of the related assets or liabilities.
 
    
    Level 3: Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
       1.
    
    The period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements.
 2.
    
    The circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements.
 3.
    
    The disclosures that an entity should make about events or transactions that occurred
after the balance sheet date.
 53




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Recently Issued Accounting Pronouncements
      54




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      55




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Carrying Value
    
    Fair ValueCash and cash equivalents
    
    $
    123,394
    
    
    $
    123,394Restricted
cash
    
    
    14,500
    
    
    
    14,500Other equity
securities
    
    
    5,446
    
    
    
    5,446Mindspeed
warrant
    
    
    2,307
    
    
    
    2,307Long-term restricted
cash
    
    
    6,489
    
    
    
    6,489Short-term
debt
    
    
    30,739
    
    
    
    30,739Interest rate swap financial instruments
    
    
    2,754
    
    
    
    2,754Long-term debt: senior secured notes
    
    
    141,400
    
    
    
    140,075Long-term debt: convertible subordinated notes
    
    
    250,000
    
    
    
    107,813
 Exchange Rate Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 IPO Litigation 
 56




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##### Table of Contents



Class Action Suit
 
 ITEM 1A. RISK FACTORS
   If our sale of the Broadband Access (BBA) business is not completed, our stock price and ability
to repay our debt obligations could be harmed.
 57




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
    
    a decline in our stock price;
    
    an inability to generate sufficient funds to repay our debt obligations;
    
    an inability to renew or successfully negotiate new credit facilities and/or refinance
our debt obligations;
    
    liability for the costs related to this transaction, which must be paid even if the
transaction is not completed; and
    
    possible litigation related to the failure to complete the transaction.
 After the anticipated completion of the sale of the BBA business, we will be a much smaller company
and will be more dependent on fewer product lines for our success.
  We face a risk that capital needed for our business and to repay our debt obligations will not be
available when we need it.
    58




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Our operating and financial flexibility is limited by the terms of our senior notes and our credit
facility.
  There could be a negative effect on the price of our common stock if we sell stock under our shelf
registration statement or if we issue equity securities in connection with a restructuring of any
or all of our floating rate notes or our convertible subordinated notes.
  If we fail to continue to meet all applicable continued listing requirements of The NASDAQ Global
Market and NASDAQ determines to delist our common stock, the market liquidity and market price of
our common stock could decline.
  The value of our common stock may be adversely affected by market volatility and other factors.
  59




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
    
    our operating and financial performance and prospects;
    
    our ability to repay or restructure our debt;
    
    the depth and liquidity of the market for our common stock;
    
    our shelf registration statement on Form S-3 pursuant to which we may sell securities up
to an aggregate offering price of $20,000,000;
    
    investor perception of us and the industry and markets in which we operate;
    
    investor perception of us as a going concern and of our ability to operate successfully
as a company with a smaller cash flow and with significant debt obligations;
    
    judgments favorable or adverse to us;
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    our inclusion in, or removal from, any equity market indices; and
    
    general financial, domestic, international, economic and other market conditions.
 We are subject to the risks of doing business internationally.
  
    
    difficulty in obtaining distribution and support;
    
    local economic and political conditions;
    
    limitations on our ability under local laws to protect our intellectual property;
    
    currency exchange rate fluctuations;
    
    disruptions of commerce and capital or trading markets due to or related to terrorist
activity, armed conflict, or natural disasters;
    
    restrictive governmental actions, such as restrictions on the transfer or repatriation
of funds and trade protection measures, including export duties and quotas and customs
duties and tariffs;
    
    changes in legal or regulatory requirements;
    
    the laws and policies of the United States and other countries affecting trade, foreign
investment and loans, and import or export licensing requirements; and
    
    tax laws, including the cost of services provided and products sold between us and our
subsidiaries which are subject to review by taxing authorities.
  60




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We operate in the highly cyclical semiconductor industry, which is subject to significant downturns
that may negatively impact our business, financial condition, cash flow and results of operations.
  We are subject to intense competition.
  61




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
    
    time-to-market;
    
    product quality, reliability and performance;
    
    level of integration;
    
    price and total system cost;
    
    compliance with industry standards;
    
    design and engineering capabilities;
    
    strategic relationships with customers;
    
    customer support;
    
    new product innovation; and
    
    access to manufacturing capacity.
   We own or lease a significant amount of space in which we do not conduct operations and doing so
exposes us to the financial risks of default by our tenants and subtenants.
  Our revenues, cash flow from operations and results of operations have fluctuated in the past and
may fluctuate in the future, particularly given adverse domestic and global economic conditions.
  
    
    changes in end-user demand for the products manufactured and sold by our customers;
    
    the timing of receipt, reduction or cancellation of significant orders by customers;
 62




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
    
    adverse economic conditions, including the unavailability or high cost of credit to our
customers;
    
    the inability of our customers to forecast demand based on adverse economic conditions;
    
    seasonal customer demand;
    
    the gain or loss of significant customers;
    
    market acceptance of our products and our customers products;
    
    our ability to develop, introduce and market new products and technologies on a timely
basis;
    
    the timing and extent of product development costs;
    
    new product and technology introductions by competitors;
    
    changes in the mix of products we develop and sell;
    
    fluctuations in manufacturing yields;
    
    availability and cost of products from our suppliers;
    
    intellectual property disputes; and
    
    the effect of competitive pricing pressures, including decreases in average selling
prices of our products.
  We have recently incurred substantial losses and may incur additional future losses.
  Our success depends on our ability to timely develop competitive new products and reduce costs.
  
    
    anticipate customer and market requirements and changes in technology and industry
standards;
    
    accurately define new products;
    
    complete development of new products and bring our products to market on a timely basis;
    
    differentiate our products from offerings of our competitors;
    
    achieve overall market acceptance of our products; and
    
    coordinate product development efforts between and among our sites, particularly in
India and China, to manage the development of products at remote geographic locations.
  63




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We have significant goodwill and intangible assets, and future impairment of our goodwill and
intangible assets could have a material negative impact on our financial condition and results of
operations.
  The loss of a key customer could seriously impact our revenue levels and harm our business. In
addition, if we are unable to continue to sell existing and new products to our key customers in
significant quantities or to attract new significant customers, our future operating results could
be adversely affected.
   
    
    most of our customers can stop incorporating our products into their own products with
limited notice to us and suffer little or no penalty;
    
    our agreements with our customers typically do not require them to purchase a minimum
quantity of our products;
    
    many of our customers have pre-existing or concurrent relationships with our current or
potential competitors that may affect the customers decisions to purchase our products;
    
    our customers face intense competition from other manufacturers that do not use our
products;
    
    some of our customers offer or may offer products that compete with our products;
    
    some of our customers liquidity may be negatively affected by the recent domestic and
global credit crisis;
 64




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
    
    our customers perceptions of our liquidity and viability may have a negative impact on
their decisions to incorporate our products into their own products; and
    
    our smaller size after the completion of our sale of the BBA business may limit our
ability to develop and deliver new products to customers.
   We may not be able to keep abreast of the rapid technological changes in our markets.
  
    
    rapid technological developments;
    
    rapid changes in customer requirements;
    
    frequent new product introductions and enhancements;
    
    short product life cycles with declining prices over the life cycle of the products; and
    
    evolving industry standards.
  We may be subject to claims of infringement of third-party intellectual property rights or demands
that we license third-party technology, which could result in significant expense and loss of our
ability to use, make, sell, export or import our products or one or more components comprising our
products.
  65




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##### Table of Contents




    
    pay substantial damages;
    
    cease the manufacture, use or sale of infringing products, processes or technologies;
    
    discontinue the use of infringing technology;
    
    expend significant resources to develop non-infringing technology; or
    
    license technology from the third party claiming infringement, which license may not be
available on commercially reasonable terms, or at all.
 If OEMs of communications electronics products do not design our products into their equipment, we
will be unable to sell those products. Moreover, a design win from a customer does not guarantee
future sales to that customer.
  Because of the lengthy sales cycles of many of our products, we may incur significant expenses
before we generate any revenues related to those products.
  Uncertainties involving the ordering and shipment of our products could adversely affect our
business.
  We are dependent upon third parties for the manufacture, assembly and test of our products.
  66




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We may experience difficulties in transitioning to smaller geometry process technologies or in
achieving higher levels of design integration, which may result in reduced manufacturing yields,
delays in product deliveries, increased expenses and loss of design wins to our competitors.
  67




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If we are not successful in protecting our intellectual property rights, it may harm our ability to
compete.
  
    
    the steps we take to prevent misappropriation or infringement of our intellectual
property or the intellectual property of our customers will be successful;
    
    any existing or future patents will not be challenged, invalidated or circumvented; or
    
    any of the measures described above would provide meaningful protection.
  Our success depends, in part, on our ability to effect suitable investments, alliances,
acquisitions and where appropriate, divestitures and restructurings.
   
    
    large initial one-time write-offs of in-process research and development;
    
    the incurrence of substantial debt and assumption of unknown liabilities;
    
    the potential loss of key employees from the acquired company;
    
    amortization expenses related to intangible assets; and
    
    the diversion of managements attention from other business concerns.
  68




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We may not be able to successfully protect our interests in the escrowed funds related to our sale
of assets to NXP B.V.
  We are required to use proceeds of certain asset dispositions to offer to repurchase our floating
rate senior secured notes due November 2010 if we do not use the proceeds within 360 days to invest
in assets (other than current assets), and this requirement limits our ability to use asset sale
proceeds to fund our operations.
  We may not be able to attract and retain qualified management, technical and other personnel
necessary for the design, development and sale of our products. Our success could be negatively
affected if key personnel leave.
  Uncertainties involving litigation could adversely affect our business.
  We currently operate under tax holidays and favorable tax incentives in certain foreign
jurisdictions.
  69




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Exhibit No.
    
    Description2.1
    
    Asset Purchase Agreement, dated as of April 21, 2009, by and between
Conexant Systems, Inc. and Ikanos Communications, Inc. (incorporated by
reference to Exhibit 2.1 of the Companys Current Report on Form 8-K filed
on April 24, 2009).3.1
    
    Bylaws of the Company, as of July 15, 2009 (incorporated by reference to
Exhibit 99.1 of the Companys amended Current Report on Form 8-K filed on
July 16, 2009).*10.1
    
    Amendment to Employment Agreement by and between D. Scott Mercer and
Conexant Systems, Inc., dated April 22, 2009 (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed on April
24, 2009).*10.2
    
    Amendment to Employment Agreement between Conexant Systems, Inc. and Mark
Peterson, dated April 22, 2009 (incorporated by reference to Exhibit 10.2
of the Companys Current Report on Form 8-K filed on April 24, 2009).31.1
    
    Certification of the Chief Executive Officer of Periodic Report Pursuant
to Rule 13a-15(a) or 15d-15(a).31.2
    
    Certification of the Chief Financial Officer of Periodic Report Pursuant
to Rule 13a-15(a) or 15d-15(a).32
    
    Certification by Chief Executive Officer and Chief Financial Officer of
Periodic Report Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Management contract or compensatory plan or arrangement 70




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SIGNATURE
  CONEXANT SYSTEMS, INC.
(Registrant)Date: August 12, 2009
    By
    /s/ JEAN HUJean HuChief Financial Officer, Treasurer and Senior Vice
President, Corporate Development
(principal financial officer) 71




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EXHIBIT INDEX
 Exhibit No.
    
    Description2.1
    
    Asset Purchase Agreement, dated as of April 21,
2009, by and between Conexant Systems, Inc. and
Ikanos Communications, Inc. (incorporated by
reference to Exhibit 2.1 of the Companys Current
Report on Form 8-K filed on April 24, 2009).3.1
    
    Bylaws of the Company, as of July 15, 2009 (incorporated by
reference to Exhibit 99.1 of the Companys Current Report on Form
8-K filed on July 16, 2009).*10.1
    
    Amendment to Employment Agreement by and between D.
Scott Mercer and Conexant Systems, Inc., dated
April 22, 2009 (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K filed on April 24, 2009).*10.2
    
    Amendment to Employment Agreement by and between
Mark Peterson, dated April 22, 2009 (incorporated
by reference to Exhibit 10.2 of the Companys
Current Report on Form 8-K filed on April 24,
2009).31.1
    
    Certification of the Chief Executive Officer of
Periodic Report Pursuant to Rule 13a-14(a) or
15d-14(a).31.2
    
    Certification of the Chief Financial Officer of
Periodic Report Pursuant to Rule 13a-15(a) or
15d-14(a).32
    
    Certification by Chief Executive Officer and Chief
Financial Officer of Periodic Report Pursuant to 18
U.S.C. Section 1350.
 
 *
    
    Management contract or compensatory plan or arrangement 72