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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended April 2, 2010
 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 o
    Non-accelerated filer o
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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FORWARD-LOOKING STATEMENTS
  
    
    expectations regarding the market share of our products, growth in the markets we serve and our market opportunities;
    
    our expectation that we will be able to sustain the recoverability of our goodwill, intangible and tangible long-term assets;
    
    expectations that we will be able to use our net operating losses and other tax attributes to offset future taxable income;
    
    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;
    
    expectations regarding the sale of our real property in Newport Beach;
    
    expectations, subject to the qualifications expressed, regarding the sufficiency of our existing sources of liquidity,
together with cash expected to be generated from operations, to fund our operations, research and development, anticipated
capital expenditures, and working capital for at least the next twelve months;
    
    our expectation that our largest customers will continue to account for a substantial portion of our revenue;
    
    expectations regarding our contractual obligations and commitments;
    
    our expectation that we will be able to protect our products and services with proprietary technology and intellectual
property protection;
    
    our expectation that we will be able to meet our lease obligations (and other financial commitments); and
    
    our 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.
  1




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##### 



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 INDEX
 PAGEPART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:Consolidated Balance Sheets  April 2, 2010 (unaudited) and October 2, 2009
    
    
    3Unaudited Consolidated Statements of Operations  Fiscal Quarter and Six Fiscal Months Ended April 2,
2010 and April 3, 2009
    
    
    4Unaudited Consolidated Statements of Cash Flows  Six Fiscal Months Ended April 2, 2010 and April 3, 2009
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURE
    
    
    43EX-10.1.1EX-10.1.2EX-10.1.3EX-10.2EX-10.3EX-10.3.1EX-10.6EX-10.6.1EX-10.6.2EX-10.6.3EX-10.6.4EX-10.6.5EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except for par value amounts)
 April 2,
    
    
    October 2,2010
    
    
    2009 (1)(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    187,526
    
    
    $
    125,385Restricted cash
    
    
    
    
    
    
    8,500Receivables, net of allowances of $333 and $453
    
    
    27,798
    
    
    
    30,110Inventories, net
    
    
    9,570
    
    
    
    9,216Other current assets
    
    
    30,557
    
    
    
    26,148Assets held for sale
    
    
    12,247
    
    
    
    Total current assets
    
    
    267,698
    
    
    
    199,359Property, plant and equipment, net of accumulated depreciation of $39,734 and $70,139
    
    
    6,263
    
    
    
    15,299Goodwill
    
    
    109,908
    
    
    
    109,908Other assets
    
    
    47,686
    
    
    
    25,635Total assets
    
    $
    431,555
    
    
    $
    350,201LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    61,400Short-term debt
    
    
    120,817
    
    
    
    28,653Accounts payable
    
    
    18,007
    
    
    
    24,553Accrued compensation and benefits
    
    
    9,696
    
    
    
    8,728Other current liabilities
    
    
    33,450
    
    
    
    33,978Total current liabilities
    
    
    181,970
    
    
    
    157,312Long-term debt
    
    
    173,381
    
    
    
    228,578Other liabilities
    
    
    59,261
    
    
    
    62,089Total liabilities
    
    
    414,612
    
    
    
    447,979Commitments and contingencies (Note 6)Shareholders equity (deficit):Preferred and junior preferred stock: 20,000 and 5,000 shares authorized, respectively
    
    
    
    
    
    
    Common stock, $0.01 par value: 200,000 shares authorized; 81,187 and 56,917
shares issued and outstanding at April 2, 2010 and October 2, 2009, respectively
    
    
    812
    
    
    
    570Additional paid-in capital
    
    
    4,916,168
    
    
    
    4,833,919Accumulated deficit
    
    
    (4,910,530
    )
    
    
    (4,929,743
    )Accumulated other comprehensive income (loss)
    
    
    10,493
    
    
    
    (2,524
    )Total shareholders equity (deficit)
    
    
    16,943
    
    
    
    (97,778
    )Total liabilities and shareholders equity (deficit)
    
    $
    431,555
    
    
    $
    350,201
 
 (1)
    
    Amounts reflect the retrospective application of FASB ASC 470-20 adopted
effective October 3, 2009 (See Note 3).  3




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, in thousands, except per share amounts)
 Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009 (1)
    
    
    2010
    
    
    2009 (1)Net revenues
    
    $
    61,868
    
    
    $
    43,965
    
    
    $
    123,681
    
    
    $
    101,428Cost of goods sold (2)
    
    
    24,087
    
    
    
    18,930
    
    
    
    48,291
    
    
    
    43,876Gross margin
    
    
    37,781
    
    
    
    25,035
    
    
    
    75,390
    
    
    
    57,552Operating expenses:Research and development (2)
    
    
    14,100
    
    
    
    12,766
    
    
    
    27,345
    
    
    
    26,333Selling, general and administrative (2)
    
    
    12,681
    
    
    
    17,060
    
    
    
    25,083
    
    
    
    34,926Amortization of intangible assets
    
    
    284
    
    
    
    1,340
    
    
    
    680
    
    
    
    1,857Gain on sale of intellectual property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,858
    )Special (credits) charges
    
    
    (210
    )
    
    
    2,016
    
    
    
    136
    
    
    
    12,593Total operating expenses
    
    
    26,855
    
    
    
    33,182
    
    
    
    53,244
    
    
    
    62,851Operating income (loss)
    
    
    10,926
    
    
    
    (8,147
    )
    
    
    22,146
    
    
    
    (5,299
    )Interest expense
    
    
    7,775
    
    
    
    8,633
    
    
    
    17,278
    
    
    
    17,259Other (income) expense, net
    
    
    (7,755
    )
    
    
    (1,815
    )
    
    
    (14,959
    )
    
    
    112Income (loss) from continuing operations before income taxes and loss on
equity method investments
    
    
    10,906
    
    
    
    (14,965
    )
    
    
    19,827
    
    
    
    (22,670
    )Income tax provision
    
    
    331
    
    
    
    175
    
    
    
    101
    
    
    
    643Income (loss) from continuing operations before loss on equity method
investments
    
    
    10,575
    
    
    
    (15,140
    )
    
    
    19,726
    
    
    
    (23,313
    )Income (loss) on equity method investments
    
    
    209
    
    
    
    (835
    )
    
    
    (245
    )
    
    
    (1,681
    )Income (loss) from continuing operations
    
    
    10,784
    
    
    
    (15,975
    )
    
    
    19,481
    
    
    
    (24,994
    )Income (loss) from discontinued operations, net of tax (2)
    
    
    95
    
    
    
    (1,138
    )
    
    
    (268
    )
    
    
    (13,111
    )Net income (loss)
    
    $
    10,879
    
    
    $
    (17,113
    )
    
    $
    19,213
    
    
    $
    (38,105
    )Income (loss) per share from continuing operations  basic
    
    $
    0.16
    
    
    $
    (0.32
    )
    
    $
    0.30
    
    
    $
    (0.50
    )Income (loss) per share from continuing operations  diluted
    
    $
    0.15
    
    
    $
    (0.32
    )
    
    $
    0.30
    
    
    $
    (0.50
    )Income (loss) per share from discontinued operations  basic
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.27
    )Income (loss) per share from discontinued operations  diluted
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.27
    )Net income (loss) per share  basic
    
    $
    0.16
    
    
    $
    (0.34
    )
    
    $
    0.30
    
    
    $
    (0.77
    )Net income (loss) per share  diluted
    
    $
    0.15
    
    
    $
    (0.34
    )
    
    $
    0.29
    
    
    $
    (0.77
    )Shares used in basic per-share computations
    
    
    69,136
    
    
    
    49,755
    
    
    
    64,579
    
    
    
    49,706Shares used in diluted per-share computations
    
    
    70,513
    
    
    
    49,755
    
    
    
    65,273
    
    
    
    49,706
 
 (1)
    
    Amounts reflect the retrospective application of FASB ASC 470-20 adopted
effective October 3, 2009 (See Note 3).(2)
    
    These captions include non-cash employee stock-based compensation
expense as follows (in thousands) (See Note 7): Fiscal Quarter Ended
    
    Six Fiscal Months EndedApril 2,
    
    April 3,
    
    April 2,
    
    April 3,2010
    
    2009
    
    2010
    
    2009Cost of goods sold
    
    $
    95
    
    
    $
    82
    
    
    $
    153
    
    
    $
    119Research and development
    
    
    544
    
    
    
    294
    
    
    
    945
    
    
    
    729Selling, general and administrative
    
    
    1,216
    
    
    
    1,274
    
    
    
    2,253
    
    
    
    2,987Income (loss) from discontinued operations, net of tax
    
    
    5
    
    
    
    583
    
    
    
    (30
    )
    
    
    771
  4




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, in thousands)
 Six Fiscal Months EndedApril 2,
    
    
    April 3,2010
    
    
    2009 (1)Cash flows from operating activities:Net Income (loss)
    
    $
    19,213
    
    
    $
    (38,105
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation
    
    
    1,906
    
    
    
    4,659Amortization of intangible assets
    
    
    680
    
    
    
    6,255Reversal of provision for bad debts, net
    
    
    (120
    )
    
    
    Charges for (reversal of) inventory provisions, net
    
    
    32
    
    
    
    (24
    )Amortization of debt discount
    
    
    6,979
    
    
    
    6,895Deferred income taxes
    
    
    118
    
    
    
    (158
    )Stock-based compensation
    
    
    3,321
    
    
    
    4,606Increase in fair value of derivative instruments
    
    
    (18,201
    )
    
    
    (90
    )Losses on equity method investments
    
    
    1,099
    
    
    
    2,560Other-than-temporary impairment of marketable securities
    
    
    
    
    
    
    2,635Other-than-temporary impairment of cost method investments
    
    
    
    
    
    
    135Loss on termination of swap
    
    
    1,728
    
    
    
    Loss on extinguishment of secured debt
    
    
    614
    
    
    
    Loss on extinguishment of convertible debt
    
    
    9,991
    
    
    
    Gain on sale of marketable securities
    
    
    (7,734
    )
    
    
    Gain on sale of intellectual property
    
    
    
    
    
    
    (12,858
    )Other items, net
    
    
    234
    
    
    
    1,006Changes in assets and liabilities:Receivables
    
    
    2,432
    
    
    
    11,825Inventories
    
    
    (386
    )
    
    
    19,319Accounts payable
    
    
    (9,935
    )
    
    
    (16,529
    )Accrued expenses and other current liabilities
    
    
    1,065
    
    
    
    (12,743
    )Other, net
    
    
    (1,817
    )
    
    
    16,521Net cash provided by (used in) operating activities
    
    
    11,219
    
    
    
    (4,091
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (525
    )
    
    
    (347
    )Proceeds from sale of property, plant and equipment
    
    
    397
    
    
    
    Payments for acquisitions
    
    
    (625
    )
    
    
    (3,578
    )Proceeds from sales of marketable securities
    
    
    8,030
    
    
    
    Release of restricted cash
    
    
    8,500
    
    
    
    9,300Proceeds from sale of intellectual property, net of expenses of $132
    
    
    
    
    
    
    14,548Net cash provided by investing activities
    
    
    15,777
    
    
    
    19,923Cash flows from financing activities:Net repayments of short-term debt, including debt costs of $483 and $901
    
    
    (29,136
    )
    
    
    (11,297
    )Extinguishment of long-term debt
    
    
    (166,676
    )
    
    
    Proceeds from common stock offerings, net of expenses of $4,872
    
    
    62,519
    
    
    
    Proceeds from issuance of long-term bonds, net of expenses of $4,911
    
    
    168,449
    
    
    
    Proceeds from issuance of common stock under employee stock plans
    
    
    18
    
    
    
    28Repurchase of shares upon exercise of employee stock awards
    
    
    (29
    )
    
    
    Interest rate swap security deposit
    
    
    
    
    
    
    (207
    )Repayment of shareholder note receivable
    
    
    
    
    
    
    32Net cash provided by (used in) financing activities
    
    
    35,145
    
    
    
    (11,444
    )Net increase in cash and cash equivalents
    
    
    62,141
    
    
    
    4,388Cash and cash equivalents at beginning of period
    
    
    125,385
    
    
    
    105,883Cash and cash equivalents at end of period
    
    $
    187,526
    
    
    $
    110,271
 
 (1)
    
    Amounts reflect the retrospective application of FASB ASC 470-20 adopted
effective October 3, 2009 (See Note 3).  5




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




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3. Basis of Presentation and Significant Accounting Policies
 Interim Reporting
  Fiscal Periods
 Use of Estimates
 Revenue Recognition
 Restricted Cash
  Investments
 Assets Held for Sale
 Income Taxes
  7




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Accounting for Convertible Debt
    8




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April 2,
    
    
    October 2,2010
    
    
    2009Principal of the liability component of 4.00% convertible
subordinated notes
    
    $
    127,708
    
    
    $
    250,000Unamortized debt discount
    
    
    (6,891
    )
    
    
    (21,422
    )Net carrying amount of liability component of 4.00%
convertible subordinated notes
    
    $
    120,817
    
    
    $
    228,578Net carrying amount of equity component of 4.00% convertible
subordinated notes (net of $1,742 issuance costs)
    
    $
    66,045
    
    
    $
    66,045
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Contractual interest coupon
    
    $
    2,326
    
    
    $
    2,500
    
    
    $
    4,798
    
    
    $
    5,000Amortization of the debt discount on the liability component
    
    
    3,397
    
    
    
    3,475
    
    
    
    6,958
    
    
    
    6,896Total
    
    $
    5,723
    
    
    $
    5,975
    
    
    $
    11,756
    
    
    $
    11,896Effective interest rate for the liability component for the period
    
    
    9.95
    %
    
    
    9.56
    %
    
    
    9.95
    %
    
    
    9.52
    %
  2010
    
    2011Estimated debt discount amortization expense
    
    $
    3,718
    
    
    $
    3,173
  CONSOLIDATED BALANCE SHEETS
 October 2, 2009As Reported
    
    
    Effect of Change
    
    
    As AdjustedASSETSTotal current assets:
    
    $
    199,359
    
    
    $
    
    
    
    $
    199,359Property, plant and equipment, net
    
    
    15,299
    
    
    
    
    
    
    
    15,299Goodwill
    
    
    109,908
    
    
    
    
    
    
    
    109,908Other assets
    
    
    26,284
    
    
    
    (649
    )
    
    
    25,635Total assets
    
    $
    350,850
    
    
    $
    (649
    )
    
    $
    350,201LIABILITIES AND SHAREHOLDERS DEFICITTotal current liabilities:
    
    $
    157,312
    
    
    $
    
    
    
    $
    157,312Long-term debt
    
    
    250,000
    
    
    
    (21,422
    )
    
    
    228,578Other liabilities
    
    
    62,089
    
    
    
    
    
    
    
    62,089Total liabilities
    
    
    469,401
    
    
    
    (21,422
    )
    
    
    447,979Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    Shareholders deficit:Preferred and junior preferred stock
    
    
    
    
    
    
    
    
    
    
    Common stock
    
    
    570
    
    
    
    
    
    
    
    570Additional paid-in capital
    
    
    4,767,874
    
    
    
    66,045
    
    
    
    4,833,919Accumulated deficit
    
    
    (4,884,471
    )
    
    
    (45,272
    )
    
    
    (4,929,743
    )Accumulated other comprehensive loss
    
    
    (2,524
    )
    
    
    
    
    
    
    (2,524
    )
 9




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October 2, 2009As Reported
    
    
    Effect of Change
    
    
    As AdjustedTotal shareholders deficit
    
    
    (118,551
    )
    
    
    20,773
    
    
    
    (97,778
    )Total liabilities and shareholders deficit
    
    $
    350,850
    
    
    $
    (649
    )
    
    $
    350,201
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Fiscal Quarter Ended April 3, 2009
    
    
    Six Fiscal Months Ended April 3, 2009Effect of
    
    
    
    
    
    
    
    
    
    
    Effect ofAs Reported
    
    
    Change
    
    
    As Adjusted
    
    
    As Reported
    
    
    Change
    
    
    As AdjustedInterest expense
    
    $
    5,276
    
    
    $
    3,357
    
    
    $
    8,633
    
    
    $
    10,599
    
    
    $
    6,660
    
    
    $
    17,259Loss from continuing operations before 
income taxes and (loss) gain on equity method investments
    
    
    (11,608
    )
    
    
    (3,357
    )
    
    
    (14,965
    )
    
    
    (16,010
    )
    
    
    (6,660
    )
    
    
    (22,670
    )Loss from continuing operations before (loss) gain on
equity method investments
    
    
    (11,783
    )
    
    
    (3,357
    )
    
    
    (15,140
    )
    
    
    (16,653
    )
    
    
    (6,660
    )
    
    
    (23,313
    )Loss from continuing operations
    
    
    (12,618
    )
    
    
    (3,357
    )
    
    
    (15,975
    )
    
    
    (18,334
    )
    
    
    (6,660
    )
    
    
    (24,994
    )Net loss
    
    $
    (13,756
    )
    
    $
    (3,357
    )
    
    $
    (17,113
    )
    
    $
    (31,445
    )
    
    $
    (6,660
    )
    
    $
    (38,105
    )Net loss per share  basic and diluted
    
    $
    (0.28
    )
    
    $
    (0.06
    )
    
    $
    (0.34
    )
    
    $
    (0.63
    )
    
    $
    (0.14
    )
    
    $
    (0.77
    )Shares used in basic and diluted per-share 
computations
    
    
    49,755
    
    
    
    
    
    
    
    49,755
    
    
    
    49,706
    
    
    
    
    
    
    
    49,706
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Fiscal Months Ended April 3, 2009Effect ofAs Reported
    
    
    Change
    
    
    As AdjustedCash flows from operating activitiesNet loss
    
    $
    (31,445
    )
    
    $
    (6,660
    )
    
    $
    (38,105
    )Debt discount amortization
    
    
    
    
    
    
    6,895
    
    
    
    6,895Other items, net
    
    
    1,241
    
    
    
    (235
    )
    
    
    1,006Net cash used in operating activities
    
    $
    (4,091
    )
    
    $
    
    
    
    $
    (4,091
    )
 Derivative Financial Instruments
  Supplemental Cash Flow Information
 Net Income (loss) Per Share
  10




---



##### Table of Contents



Fiscal Quarter Ended
    
    Six Fiscal Months EndedApril 2,
    
    April 3,
    
    April 2,
    
    April 3,2010
    
    2009
    
    2010
    
    2009Employee stock options and restricted stock units
    
    
    3,386
    
    
    
    5,847
    
    
    
    3,649
    
    
    
    6,3244.00% convertible subordinated notes due March 2026
    
    
    4,676
    
    
    
    5,081
    
    
    
    4,802
    
    
    
    5,0818,062
    
    
    
    10,928
    
    
    
    8,451
    
    
    
    11,405
  Fiscal Quarter Ended
    
    Six Fiscal Months EndedApril 2,
    
    April 3,
    
    April 2,
    
    April 3,2010
    
    2009
    
    2010
    
    2009Weighted average shares for basic net income (loss) per share
    
    
    69,136
    
    
    
    49,755
    
    
    
    64,579
    
    
    
    49,706Employee stock options and restricted stock units
    
    
    1,377
    
    
    
    
    
    
    
    694
    
    
    
    Weighted average shares for diluted income (loss) per share
    
    
    70,513
    
    
    
    49,755
    
    
    
    65,273
    
    
    
    49,706
 Business Enterprise Segments
 Acquisitions
 Goodwill
 Recently Adopted Accounting Pronouncements
    11




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##### Table of Contents



Recently Issued Accounting Pronouncements
   4. Fair Value of Certain Financial Assets and Liabilities
  Level 1
    
    
    Level 2
    
    
    TotalAssets:Cash and cash equivalents
    
    $
    187,526
    
    
    $
    
    
    
    $
    187,526Marketable securities
    
    
    10,768
    
    
    
    
    
    
    
    10,768Mindspeed warrant
    
    
    
    
    
    
    23,254
    
    
    
    23,254Long-term restricted cash
    
    
    5,703
    
    
    
    
    
    
    
    5,703Total Assets
    
    $
    203,997
    
    
    $
    23,254
    
    
    $
    227,251
     12




---



##### Table of Contents



5. Supplemental Financial Information
 Inventories
  April 2,
    
    
    October 2,2010
    
    
    2009Work-in-process
    
    $
    6,641
    
    
    $
    5,002Finished goods
    
    
    2,929
    
    
    
    4,214Total inventories, net
    
    $
    9,570
    
    
    $
    9,216
  Intangible Assets
  April 2, 2010
    
    
    October 2, 2009Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Book
    
    
    Carrying
    
    
    Accumulated
    
    
    BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueProduct licenses
    
    
    2,400
    
    
    
    (821
    )
    
    
    1,579
    
    
    $
    2,400
    
    
    $
    (628
    )
    
    $
    1,772Other intangible assets
    
    
    6,830
    
    
    
    (3,533
    )
    
    
    3,297
    
    
    
    6,830
    
    
    
    (3,045
    )
    
    
    3,785$
    9,230
    
    
    $
    (4,354
    )
    
    $
    4,876
    
    
    $
    9,230
    
    
    $
    (3,673
    )
    
    $
    5,557
  2010
    
    2011
    
    2012
    
    2013
    
    ThereafterAmortization expense
    
    $
    568
    
    
    $
    1,137
    
    
    $
    1,137
    
    
    $
    1,017
    
    
    $
    1,017
 Assets Held for Sale
  April 2,2010Land
    
    $
    1,662Land and leasehold improvements, net
    
    
    307Buildings, net
    
    
    5,312Machinery and equipment, net
    
    
    268Site development costs
    
    
    4,698$
    12,247
  Mindspeed Warrant
  13




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##### Table of Contents



Debt
  April 2,
    
    
    October 2,2010
    
    
    20094.00% convertible subordinated notes due March 2026, net of debt discount of $6.9 million (1)
    
    $
    120,817
    
    
    $
    Accounts receivable financing facility
    
    
    
    
    
    
    28,653Current portion of long-term debt
    
    
    
    
    
    
    61,400Short-term debt
    
    $
    120,817
    
    
    $
    90,053Floating rate senior secured notes due November 2010
    
    $
    
    
    
    $
    61,4004.00% convertible subordinated notes due March 2026, net of debt discount of $21.4 million (1)
    
    
    
    
    
    
    228,57811.25% senior secured notes due March 2015, net of discount of $1,619
    
    
    173,381
    
    
    
    Total
    
    
    173,381
    
    
    
    289,978Less: current portion of long-term debt
    
    
    
    
    
    
    (61,400
    )Long-term debt
    
    $
    173,381
    
    
    $
    228,578
 
 (1)
    
    Amounts reflect the retrospective application of FASB ASC 470-20 adopted effective October 3, 2009 (See Note 3). 11.25% senior secured notes due 2015
 Floating rate senior secured notes due November 2010
 4.00% convertible subordinated notes due March 2026
 14




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##### Table of Contents



Accounts Receivable Financing Facility
     6. Commitments and Contingencies
 Legal Matters
  Guarantees and Indemnifications
  15




---



##### Table of Contents



7. Stock-Based Award Plans
  Stock Options
   Fiscal Quarter Ended
    
    Six Fiscal Months EndedApril 2,
    
    April 3,
    
    April 2,
    
    April 3,2010
    
    2009
    
    2010
    
    2009Stock option plans:Expected dividend yield
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Expected stock price volatility
    
    
    
    
    
    
    79
    %
    
    
    
    
    
    
    77
    %Risk free interest rate
    
    
    
    
    
    
    1.80
    %
    
    
    
    
    
    
    2.00
    %Average expected life (in years)
    
    
    
    
    
    
    4.68
    
    
    
    
    
    
    
    4.86Stock purchase plans:Expected dividend yield
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Expected stock price volatility
    
    
    94
    %
    
    
    74
    %
    
    
    94
    %
    
    
    74
    %Risk free interest rate
    
    
    0.17
    %
    
    
    3.14
    %
    
    
    0.17
    %
    
    
    3.14
    %Average expected life (in years)
    
    
    0.50
    
    
    
    0.50
    
    
    
    0.50
    
    
    
    0.50
  16




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##### Table of Contents



WeightedAverage ExerciseShares
    
    PriceOutstanding, October 2, 2009
    
    
    4,210
    
    
    $
    23.20Granted
    
    
    
    
    
    
    Exercised
    
    
    (30
    )
    
    
    0.59Forfeited
    
    
    (1,021
    )
    
    
    18.40Outstanding, April 2, 2010
    
    
    3,159
    
    
    
    24.92Shares vested and expected to vest, April 2, 2010
    
    
    3,156
    
    
    
    24.94Exercisable, April 2, 2010
    
    
    2,989
    
    
    $
    25.76
   Restricted Stock Units
   WeightedAverage GrantShares
    
    Date Fair ValueOutstanding, October 2, 2009
    
    
    165
    
    
    $
    2.82Granted
    
    
    3,575
    
    
    
    2.87Vested
    
    
    (42
    )
    
    
    2.80Forfeited
    
    
    (88
    )
    
    
    2.79Outstanding, April 2, 2010
    
    
    3,610
    
    
    $
    2.87
  Employee Stock Purchase Plan
  17




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##### Table of Contents



8. Comprehensive Income (Loss)
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    10,879
    
    
    $
    (17,113
    )
    
    $
    19,213
    
    
    $
    (38,105
    )Other comprehensive income (loss):Foreign currency translation adjustments
    
    
    427
    
    
    
    (660
    )
    
    
    820
    
    
    
    (1,755
    )Unrealized gains on marketable securities
    
    
    10,469
    
    
    
    664
    
    
    
    10,469
    
    
    
    650Unrealized losses on foreign currency forward hedge contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153
    )Unrealized losses on interest rate swap contracts
    
    
    
    
    
    
    (408
    )
    
    
    
    
    
    
    (2,592
    )Realized loss on impairment of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,986Realized loss on interest rate swap contracts
    
    
    
    
    
    
    
    
    
    
    1,728
    
    
    
    Gains on settlement of foreign currency forward hedge contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    659Other comprehensive income (loss)
    
    
    10,896
    
    
    
    (404
    )
    
    
    13,017
    
    
    
    (1,205
    )Comprehensive income (loss)
    
    $
    21,775
    
    
    $
    (17,517
    )
    
    $
    32,230
    
    
    $
    (39,310
    )
  April 2,
    
    
    October 2,2010
    
    
    2009Unrealized gain on marketable securities
    
    $
    10,469
    
    
    $
    Foreign currency translation adjustments
    
    
    24
    
    
    
    (796
    )Unrealized losses on derivative instruments
    
    
    
    
    
    
    (1,728
    )Accumulated other comprehensive income (loss)
    
    $
    10,493
    
    
    $
    (2,524
    )
 9. Income Taxes
  10. Gain on Sale of Intellectual Property
  11. Special Charges
  18




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##### Table of Contents



Restructuring Charges
   Fiscal 2009 Restructuring Actions  .
  WorkforceReductionsCharged to costs and expenses
    
    $
    4,893Cash payments
    
    
    (3,311
    )Restructuring balance, October 2, 2009
    
    
    1,582Charged to costs and expenses
    
    
    (69
    )Cash payments
    
    
    (1,227
    )Restructuring balance, April 2, 2010
    
    $
    286
 Fiscal 2008 Restructuring Actions
    19




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##### 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
    
    
    580
    
    
    
    36
    
    
    
    616Reclassification to other current liabilities and other liabilities
    
    
    
    
    
    
    (127
    )
    
    
    (127
    )Cash payments
    
    
    (673
    )
    
    
    (876
    )
    
    
    (1,549
    )Restructuring balance, October 2, 2009
    
    
    
    
    
    
    64
    
    
    
    64Charged to costs and expenses
    
    
    
    
    
    
    94
    
    
    
    94Cash payments
    
    
    
    
    
    
    (44
    )
    
    
    (44
    )Restructuring balance, April 2, 2010
    
    $
    
    
    
    $
    114
    
    
    $
    114
 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
    )
    
    
    16,130
    
    
    
    16,129Cash payments
    
    
    (15
    )
    
    
    (5,579
    )
    
    
    (5,594
    )Restructuring balance, October 2, 2009
    
    
    
    
    
    
    27,233
    
    
    
    27,233Charged to costs and expenses
    
    
    
    
    
    
    495
    
    
    
    495Cash payments
    
    
    
    
    
    
    (2,882
    )
    
    
    (2,882
    )Restructuring balance, April 2, 2010
    
    $
    
    
    
    $
    24,846
    
    
    $
    24,846
 Fiscal 2006 and 2005 Restructuring Actions
 20




---



##### Table of Contents



Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalRestructuring balance, October 1, 2005
    
    $
    3,609
    
    
    $
    25,220
    
    
    $
    28,829Charged to costs and expenses
    
    
    1,852
    
    
    
    1,407
    
    
    
    3,259Reclassification from accrued compensation and benefits and other
    
    
    1,844
    
    
    
    55
    
    
    
    1,899Cash payments
    
    
    (5,893
    )
    
    
    (8,031
    )
    
    
    (13,924
    )Restructuring balance, September 29, 2006
    
    
    1,412
    
    
    
    18,651
    
    
    
    20,063Reclassification to other current liabilities and other liabilities
    
    
    
    
    
    
    (2,687
    )
    
    
    (2,687
    )Charged to costs and expenses
    
    
    55
    
    
    
    559
    
    
    
    614Cash payments
    
    
    (1,336
    )
    
    
    (4,007
    )
    
    
    (5,343
    )Restructuring balance, September 28, 2007
    
    
    131
    
    
    
    12,516
    
    
    
    12,647Reclassification from other current liabilities and other liabilities
    
    
    
    
    
    
    3,359
    
    
    
    3,359Charged to costs and expenses
    
    
    (130
    )
    
    
    285
    
    
    
    155Cash payments
    
    
    (1
    )
    
    
    (5,123
    )
    
    
    (5,124
    )Restructuring balance, October 3, 2008
    
    
    
    
    
    
    11,037
    
    
    
    11,037Charged to costs and expenses
    
    
    
    
    
    
    4,989
    
    
    
    4,989Cash payments
    
    
    
    
    
    
    (2,175
    )
    
    
    (2,175
    )Restructuring balance, October 2, 2009
    
    
    
    
    
    
    13,851
    
    
    
    13,851Charged to costs and expenses
    
    
    
    
    
    
    293
    
    
    
    293Cash payments
    
    
    
    
    
    
    (906
    )
    
    
    (906
    )Restructuring balance, April 2, 2010
    
    $
    
    
    
    $
    13,238
    
    
    $
    13,238
 12. Other (Income) Expense, net
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Investment and interest income
    
    $
    (64
    )
    
    $
    (451
    )
    
    $
    (120
    )
    
    $
    (1,308
    )Gain on sale of investments
    
    
    (3,621
    )
    
    
    
    
    
    
    (7,734
    )
    
    
    (53
    )Loss on extinguishment of secured debt
    
    
    
    
    
    
    
    
    
    
    614
    
    
    
    Loss on extinguishment of convertible debt
    
    
    9,481
    
    
    
    
    
    
    
    9,991
    
    
    
    Other-than-temporary impairment of marketable securities
and cost based investments
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    2,770Increase in the fair value of derivative instruments
    
    
    (13,916
    )
    
    
    (1,078
    )
    
    
    (18,201
    )
    
    
    (596
    )Other
    
    
    365
    
    
    
    (421
    )
    
    
    491
    
    
    
    (701
    )Other (income) expense, net
    
    $
    (7,755
    )
    
    $
    (1,815
    )
    
    $
    (14,959
    )
    
    $
    112
  21




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##### Table of Contents



13. Related Party Transactions
 Mindspeed Technologies, Inc.
  Lease Agreement 
 14. Geographic Information
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009United States
    
    $
    3,103
    
    
    $
    1,449
    
    
    $
    5,841
    
    
    $
    3,676Other Americas
    
    
    1,129
    
    
    
    656
    
    
    
    2,385
    
    
    
    2,146Total Americas
    
    
    4,232
    
    
    
    2,105
    
    
    
    8,226
    
    
    
    5,822China
    
    
    35,461
    
    
    
    28,551
    
    
    
    71,211
    
    
    
    63,838Other Asia-Pacific
    
    
    21,486
    
    
    
    12,558
    
    
    
    42,541
    
    
    
    30,016Total Asia-Pacific
    
    
    56,947
    
    
    
    41,109
    
    
    
    113,752
    
    
    
    93,854Europe, Middle East and Africa
    
    
    689
    
    
    
    751
    
    
    
    1,703
    
    
    
    1,752$
    61,868
    
    
    $
    43,965
    
    
    $
    123,681
    
    
    $
    101,428
   April 2,
    
    
    October 2,2010
    
    
    2009United States
    
    $
    22,620
    
    
    $
    26,064India
    
    
    1,125
    
    
    
    1,971China
    
    
    960
    
    
    
    2,309Other Asia-Pacific
    
    
    1,108
    
    
    
    610Europe, Middle East and Africa
    
    
    4
    
    
    
    18$
    25,817
    
    
    $
    30,972
  22




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##### Table of Contents



15. Subsequent Events
   23




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
   Critical Accounting Policies
  Sale of Property
  Sale of Broadband Access Products Business
  24




---



##### Table of Contents



Sale of Broadband Media Processing Business
  Recent Financing Activities
    Results of Operations
 Net Revenues
     Gross Margin
    25




---



##### Table of Contents



Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009E&O reserves at beginning of period
    
    $
    4,297
    
    
    $
    10,576
    
    
    $
    6,392
    
    
    $
    12,579Additions
    
    
    841
    
    
    
    696
    
    
    
    1,069
    
    
    
    1,315Release upon sales of product
    
    
    (615
    )
    
    
    (915
    )
    
    
    (1,034
    )
    
    
    (1,579
    )Scrap
    
    
    (1,245
    )
    
    
    (1,313
    )
    
    
    (3,136
    )
    
    
    (3,026
    )Standards adjustments and other
    
    
    
    
    
    
    150
    
    
    
    (13
    )
    
    
    (95
    )E&O reserves at end of period
    
    $
    3,278
    
    
    $
    9,194
    
    
    $
    3,278
    
    
    $
    9,194
    Research and Development
    Selling, General and Administrative
  26




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##### Table of Contents



Amortization of Intangible Assets
    Gain on Sale of Intellectual Property
  Special Charges (Credits)
   Interest Expense
   Other (income) expense, net
  Fiscal Quarter Ended
    
    
    Six Fiscal Months EndedApril 2,
    
    
    April 3,
    
    
    April 2,
    
    
    April 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Investment and interest income
    
    $
    (64
    )
    
    $
    (451
    )
    
    $
    (120
    )
    
    $
    (1,308
    )Gain on sale of investments
    
    
    (3,621
    )
    
    
    
    
    
    
    (7,734
    )
    
    
    (53
    )Loss on extinguishment of secured debt
    
    
    
    
    
    
    
    
    
    
    614
    
    
    
    Loss on extinguishment of convertible debt
    
    
    9,481
    
    
    
    
    
    
    
    9,991
    
    
    
    Other-than-temporary impairment of marketable securities
and cost based investments
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    2,770Increase in the fair value of derivative instruments
    
    
    (13,916
    )
    
    
    (1,078
    )
    
    
    (18,201
    )
    
    
    (596
    )Other
    
    
    365
    
    
    
    (421
    )
    
    
    491
    
    
    
    (701
    )Other (income) expense, net
    
    $
    (7,755
    )
    
    $
    (1,815
    )
    
    $
    (14,959
    )
    
    $
    112
  27




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##### Table of Contents



Provision for Income Taxes
  Liquidity and Capital Resources
        Six Fiscal Months EndedApril 2,
    
    
    April 3,2010
    
    
    2009Net cash provided by (used in) operating activities
    
    $
    11,219
    
    
    $
    (4,091
    )Net cash provided by investing activities
    
    
    15,777
    
    
    
    19,923Net cash provided by (used in) financing activities
    
    
    35,145
    
    
    
    (11,444
    )Net increase (decrease) in cash and cash equivalents
    
    $
    62,141
    
    
    $
    4,388
  28




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Contractual Obligations
  Off-Balance Sheet Arrangements
    Special Purpose Entities
     29




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##### Table of Contents



Recently Issued and Adopted Accounting Pronouncements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      Carrying Value
    
    Fair ValueCash and cash equivalents
    
    $
    187,526
    
    
    $
    187,526Other equity securities
    
    
    13,879
    
    
    
    13,879Mindspeed warrant
    
    
    23,254
    
    
    
    23,254Long-term restricted cash
    
    
    5,703
    
    
    
    5,703Short-term debt: convertible subordinated notes
    
    
    127,708
    
    
    
    127,282Long-term debt: Senior Secured Notes
    
    
    175,000
    
    
    
    175,000
 Exchange Rate Risk
   
 ITEM 4.
    
    CONTROLS AND PROCEDURES
  30




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 None
 
 ITEM 1A. RISK FACTORS
    Our operating and financial flexibility is limited by the terms of the agreement governing our
accounts receivable financing facility and the terms of the indenture governing our senior secured
notes due in 2015.
  We are a much smaller company than in the recent past and dependent on fewer products for our
success.
  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;
 31




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##### Table of Contents




    
    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;
    
    the laws and policies of the U.S. 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.
     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.
  32




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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 and expenses related to
carrying vacant property.
  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;
 33




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##### Table of Contents




    
    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 historically incurred substantial losses and may incur additional future losses.
  The value of our warrant to purchase 6.1 million shares of Mindspeed common stock is subject to
material increases and decreases in value based on factors beyond our control.
   Our ability to use our net operating losses (NOLs) and other tax attributes to offset future
taxable income could be limited by an ownership change and/or decisions by California and other
states to suspend the use of NOLs.
  34




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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.
   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.
   35




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##### Table of Contents



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;
    
    our customers perceptions of our liquidity and viability may have a negative impact on
their decisions to incorporate our products into their own 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 continued uncertainty in
global economic conditions; and
    
    our small size, our cost-savings efforts and any future liquidity constraints 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;
 36




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##### Table of Contents




    
    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.
  
    
    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, which we may not
be successful in developing; 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 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.
  37




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##### Table of Contents



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.
       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.
  38




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##### Table of Contents



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.
  Moreover, if we consummate such transactions, they could result in:
 
    
    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.
  39




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##### Table of Contents



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.
  Litigation could be costly and harmful to our business.
  We currently operate under tax holidays and favorable tax incentives in certain foreign
jurisdictions.
  The price of our common stock may fluctuate significantly, which may make it difficult for you to
resell your common stock when you want or at prices you find attractive.
  
    
    our operating and financial performance and prospects;
    
    the depth and liquidity of the market for our common stock;
    
    investor perception of us and the industry in which we operate;
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    general financial, domestic, international, economic and other market conditions;
    
    proposed acquisitions by us or our competitors;
    
    the hiring or departure of key personnel; and
    
    adverse judgments or settlements obligating us to pay damages.
  40




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##### Table of Contents



ITEM 5.
    
    OTHER INFORMATION
    For
    
    WithheldWilliam E. Bendush
    
    
    22,399,455
    
    
    
    1,859,057Balakrishnan S. Iyer
    
    
    21,078,162
    
    
    
    3,180,350Jerre L. Stead
    
    
    13,489,297
    
    
    
    10,769,215Broker non-vote
    
    
    26,805,428
  Shares (#)For
    
    
    33,496,208Against
    
    
    17,305,860Abstain
    
    
    261,869Broker non-vote
    
    
    N/A
  Shares (#)For
    
    
    19,640,255Against
    
    
    4,254,362Abstain
    
    
    363,892Broker non-vote
    
    
    26,805,428
  Shares (#)For
    
    
    49,643,613Against
    
    
    1,027,476Abstain
    
    
    392,848Broker non-vote
    
    
    N/A
 
 ITEM 6.
    
    EXHIBITS
 ExhibitNo.
    
    Description1.1
    
    Underwriting Agreement, dated March 4, 2010, between Conexant Systems,
Inc. and Goldman, Sachs & Co. (incorporated by reference to Exhibit
1.1 of the Companys Current Report on Form 8-K filed on March 5,
2010).3.1
    
    Certificate of Amendment of Restated Certificate of Incorporation of
Conexant Systems, Inc., as filed with the Secretary of State of the
State of Delaware on February 19, 2010 (incorporated by reference to
Exhibit 3.1 of the Companys Current Report on Form 8-K filed on
February 24, 2010).
 41




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##### Table of Contents



ExhibitNo.
    
    Description3.2
    
    Bylaws of Conexant Systems, Inc., as of December 18, 2009
(incorporated by reference to Exhibit 3.2 of the Companys Current
Report on Form 8-K filed on December 24, 2009).4.1
    
    Indenture, dated March 10, 2010, among Conexant Systems, Inc., the
subsidiary guarantors party thereto, and The Bank of New York Mellon
Trust Company, N.A., as Trustee and Collateral Trustee (incorporated
by reference to Exhibit 4.1 of the Companys Current Report on Form
8-K filed on March 11, 2010).4.2
    
    Blanket Lien Pledge and Security Agreement, dated March 10, 2010,
among Conexant Systems, Inc., the grantors party thereto, and The Bank
of New York Mellon Trust Company, N.A., as Collateral Trustee
(incorporated by reference to Exhibit 4.2 of the Companys Current
Report on Form 8-K filed on March 11, 2010).10.1*
    
    Conexant Systems, Inc. 2010 Equity Incentive Plan (incorporated by
reference to Exhibit 99.1 of the Companys Current Report on Form 8-K
filed on February 22, 2010).10.1.1*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock
Unit Award Agreement under the Conexant Systems, Inc. 2010 Equity
Incentive Plan.10.1.2*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock
Unit Award Agreement (for Directors) under the Conexant Systems, Inc.
2010 Equity Incentive Plan.10.1.3*
    
    Form of Stock Option Award Grant Notice and Stock Option Agreement
under the Conexant Systems, Inc. 2010 Equity Incentive Plan.10.2*
    
    Conexant Systems, Inc. 2004 New-Hire Equity Incentive Plan, as amended.10.3*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock
Unit Award Agreement under the Conexant Systems, Inc. 2000
Non-Qualified Stock Plan.10.3.1*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock
Unit Award Agreement (for Directors) under the Conexant Systems, Inc.
2000 Non-Qualified Stock Plan.10.4*
    
    Conexant Systems, Inc. 2001 Employee Stock Purchase Plan, as amended
and restated (incorporated by reference to Exhibit 4.1 of the
Companys Registration Statement on Form S-8 filed on March 1, 2010).10.5
    
    Amendment No. 1 to Loan and Security Agreement, dated March 3, 2010,
by and between Conexant CF, LLC and Silicon Valley Bank (incorporated
by reference to Exhibit 10.1 of the Companys Current Report on Form
8-K filed on March 5, 2010).10.6
    
    Purchase and Sale Agreement and Joint Escrow Instructions, dated
January 12, 2010, by and between Conexant Systems, Inc. and City
Ventures, LLC.10.6.1
    
    Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated February 1, 2010, by and between Conexant Systems,
Inc. and City Ventures, LLC.10.6.2
    
    Second Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated February 19, 2010, by and between Conexant
Systems, Inc. and City Ventures, LLC.10.6.3
    
    Third Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated February 26, 2010, by and between Conexant
Systems, Inc. and City Ventures, LLC.10.6.4
    
    Fourth Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions, dated March 12, 2010, by and between Conexant Systems,
Inc. and City Ventures, LLC.10.6.5
    
    Letter, dated March 24, 2010, concerning termination of Purchase and
Sale Agreement and Joint Escrow Instructions from City Ventures, LLC
to Conexant Systems, Inc.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.
 42




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##### Table of Contents



SIGNATURE
  CONEXANT SYSTEMS, INC.
(Registrant)Date: May 7, 2010
    By
    /s/ JEAN HUJean HuChief Financial Officer, Treasurer and 
Senior Vice President, Business Development
(principal financial officer) 43




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description1.1
    
    Underwriting Agreement, dated March 4, 2010, between Conexant Systems, Inc. and Goldman, Sachs & Co. (incorporated by
reference to Exhibit 1.1 of the Companys Current Report on Form 8-K filed on March 5, 2010).3.1
    
    Certificate of Amendment of Restated Certificate of Incorporation of Conexant Systems, Inc., as filed with the Secretary
of State of the State of Delaware on February 19, 2010 (incorporated by reference to Exhibit 3.1 of the Companys Current
Report on Form 8-K filed on February 24, 2010).3.2
    
    Bylaws of Conexant Systems, Inc., as of December 18, 2009 (incorporated by reference to Exhibit 3.2 of the Companys
Current Report on Form 8-K filed on December 24, 2009).4.1
    
    Indenture, dated March 10, 2010, among Conexant Systems, Inc., the subsidiary guarantors party thereto, and The Bank of
New York Mellon Trust Company, N.A., as Trustee and Collateral Trustee (incorporated by reference to Exhibit 4.1 of the
Companys Current Report on Form 8-K filed on March 11, 2010).4.2
    
    Blanket Lien Pledge and Security Agreement, dated March 10, 2010, among Conexant Systems, Inc., the grantors party
thereto, and The Bank of New York Mellon Trust Company, N.A., as Collateral Trustee (incorporated by reference to Exhibit
4.2 of the Companys Current Report on Form 8-K filed on March 11, 2010).10.1*
    
    Conexant Systems, Inc. 2010 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 of the Companys Current
Report on Form 8-K filed on February 22, 2010).10.1.1*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the Conexant Systems,
Inc. 2010 Equity Incentive Plan.10.1.2*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement (for Directors) under the
Conexant Systems, Inc. 2010 Equity Incentive Plan.10.1.3*
    
    Form of Stock Option Award Grant Notice and Stock Option Agreement under the Conexant Systems, Inc. 2010 Equity Incentive
Plan.10.2*
    
    Conexant Systems, Inc. 2004 New-Hire Equity Incentive Plan, as amended.10.3*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the Conexant Systems,
Inc. 2000 Non-Qualified Stock Plan.10.3.1*
    
    Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement (for Directors) under the
Conexant Systems, Inc. 2000 Non-Qualified Stock Plan.10.4*
    
    Conexant Systems, Inc. 2001 Employee Stock Purchase Plan, as amended and restated (incorporated by reference to Exhibit
4.1 of the Companys Registration Statement on Form S-8 filed on March 1, 2010).10.5
    
    Amendment No. 1 to Loan and Security Agreement, dated March 3, 2010, by and between Conexant CF, LLC and Silicon Valley
Bank (incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed on March 5, 2010).10.6
    
    Purchase and Sale Agreement and Joint Escrow Instructions, dated January 12, 2010, by and between Conexant Systems, Inc.
and City Ventures, LLC.10.6.1
    
    Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, dated February 1, 2010, by and between Conexant
Systems, Inc. and City Ventures, LLC.10.6.2
    
    Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, dated February 19, 2010, by and between
Conexant Systems, Inc. and City Ventures, LLC.10.6.3
    
    Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, dated February 26, 2010, by and between
Conexant Systems, Inc. and City Ventures, LLC.
 44




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##### Table of Contents



ExhibitNo.
    
    Description10.6.4
    
    Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, dated March 12, 2010, by and between
Conexant Systems, Inc. and City Ventures, LLC.10.6.5
    
    Letter, dated March 24, 2010, concerning termination of Purchase and Sale Agreement and Joint Escrow Instructions from
City Ventures, LLC to Conexant Systems, Inc.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.
 45