##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 28, 2007
 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 BoulevardNewport Beach, California
    
    92660-3095(Address of principal executive offices)
    
    (Zip code)
   Title of each class:
    
    Name of each exchange on which registered:Common Stock, $0.01 Par Value Per Share
    
    The Nasdaq Stock Market, LLC(including associated Preferred Share Purchase Rights)
  þ o
 o þ
 þ o
 þ
  þ o o
 o þ
  Documents Incorporated by Reference




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FORWARD-LOOKING STATEMENTS
  
    
    pricing pressures and other competitive factors;
    
    the timing of our new product introductions and product quality;
    
    our ability to anticipate trends and develop products for which there will be market
demand;
    
    successful development of new products;
    
    the substantial losses we have incurred recently;
    
    the ability of management to structure and execute on new restructuring plans;
    
    the risk that capital needed for our business and to repay our indebtedness will not be
available when needed;
    
    changes in product mix and product obsolescence;
    
    our ability to develop and implement new technologies and to obtain protection for the
related intellectual property;
    
    the uncertainties of litigation, including claims of infringement of third-party
intellectual property rights or demands that we license third-party technology, and the
demands it may place on the time and attention of our management and the expense it may
place on our company;
    
    continuing volatility in the technology sector and the semiconductor industry;
    
    the cyclical nature of the semiconductor industry and the markets addressed by our
products and our customers products;
    
    the risk that the value of our common stock may be adversely affected by market
volatility;
    
    the availability of manufacturing capacity;
    
    the ability of our customers to manage inventory;
    
    demand for and market acceptance of new and existing products;
    
    general economic and political conditions and conditions in the markets we address;
    
    possible disruptions in commerce related to terrorist activity or armed conflict,
  1




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##### 



CONEXANT SYSTEMS, INC.
 TABLE OF CONTENTS
 PAGEPART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    20Item 2.
    
    Properties
    
    
    20Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    23Item 6.
    
    Selected Financial Data
    
    
    25Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8.
    
    Financial Statements and Supplementary Data
    
    
    45Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    89Item 9A.
    
    Controls and Procedures
    
    
    89Item 9B.
    
    Other Information
    
    
    91PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    92Item 11.
    
    Executive Compensation
    
    
    92Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    92Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    92Item 14.
    
    Principal Accountant Fees and Services
    
    
    92PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    93Exhibit 10-e-1EXHIBIT 10-k-2Exhibit 10-k-12Exhibit 10-k-13Exhibit 10-k-14EXHIBIT 10-p-2Exhibit 10-q-1EXHIBIT 10-r-5EXHIBIT 12EXHIBIT 21EXHIBIT 23Exhibit 24EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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PART I
 
 Item 1. Business
 General
  sm
  Acquisitions:
 
    
    On February 27, 2004, we completed a merger with GlobespanVirata, Inc. (GlobespanVirata)
with GlobespanVirata becoming a wholly-owned subsidiary of Conexant Systems, Inc. In
exchange for 100% of the outstanding shares of common stock of GlobespanVirata
(approximately 150.7 million shares), we issued 1.198 shares of Conexant common stock for
each share of GlobespanVirata common stock outstanding (or approximately 180.6 million
shares of Conexant common stock) and each outstanding option and warrant to purchase
GlobespanVirata common stock was adjusted and converted into an option or warrant to
purchase Conexant common stock-based on the 1.198 merger ratio (or approximately
43.6 million options and warrants to purchase shares of Conexant common stock). In May
2004, the GlobespanVirata, Inc. subsidiary was renamed Conexant, Inc., and hereinafter will
be referred to as Conexant, Inc. Except where otherwise noted, the financial information
contained herein represents our continuing operations including the results of
GlobespanVirata since February 28, 2004, following the completion of the merger.
 Divestitures:
 
    
    On June 27, 2003, we completed the distribution to our shareholders of all outstanding
shares of our wholly owned subsidiary Mindspeed Technologies, Inc. (Mindspeed), to which we
contributed our Internet infrastructure business, including the stock of certain
subsidiaries, and certain other assets and liabilities, including $100.0 million in cash.
In the Mindspeed spin-off, Conexant shareholders received one share of Mindspeed common
stock for every three Conexant shares held and the Conexant shareholders continued to hold
their Conexant shares. Mindspeed issued us a warrant to purchase 30 million shares of
Mindspeed common stock, representing approximately 20 percent of Mindspeeds outstanding
common stock on a
 3




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diluted basis. The warrant is exercisable until June 27, 2013 at an exercise price of $3.408
per share. The fair value of the warrant is recorded as an asset on our consolidated
balance sheet.
    
    In March 2002, we and The Carlyle Group formed a new specialty foundry company named
Jazz Semiconductor, Inc. (Jazz). We contributed our Newport Beach, California wafer
fabrication operations and related assets and liabilities and certain intellectual property
to Jazz in exchange for $19.3 million in cash and an equity interest in Jazz, having an
estimated fair value of $42.5 million. In February 2007, the Company sold its ownership
interest in Jazz. During fiscal 2007, the Company received proceeds of $105.6 million as a
result this sale. Additionally, immediately prior to the closing of the sale, the Company
made an equity investment of $10.0 million in stock of Jazz which the Company sold in the
fourth quarter of fiscal 2007 for cash proceeds of $4.2 million.
    
    On June 25, 2002, we completed the distribution to our shareholders of all outstanding
shares of our wholly-owned subsidiary Washington Sub, Inc. (Washington), to which we
contributed our wireless communications business, other than certain assets and liabilities
which we retained. Immediately thereafter, Washington merged with and into Alpha
Industries, Inc. (Alpha), with Alpha the surviving corporation. As a result of these
transactions, Conexant shareholders received 0.351 of a share of Alpha common stock for
each Conexant share held and the Conexant shareholders continued to hold their Conexant
shares. Upon completion of these events, Alpha and its subsidiaries purchased our
semiconductor assembly and test facility located in Mexicali, Mexico and our package design
team that supports the Mexicali facility (together, the Mexicali Operations) for $150.0
million. Effective June 26, 2002, Alpha changed its name to Skyworks Solutions, Inc.
(Skyworks). In fiscal 2007, we sold our remaining investment in Skyworks which was
comprised of 6.2 million shares of Skyworks common stock for an average price per share of
$8.14 and received $50.4 million on the sale of the shares.
 Strategy
  
    
    Employ a market-focused business model allowing us to concentrate our resources on large
and growing targeted markets;
    
    Expand strategic relationships with industry-leading OEMs/ODMs and maximize design wins
and share-of-wallet (SOW);
    
    Focus our product portfolio on our key technologies and competencies which include
digital signal processing (DSP), analog mixed-signal (AMS), radio frequency integrated
circuits (RFICs), system-on-a-chip (SoC) and support software to enable our customers
applications;
    
    Capitalize on the depth of our global engineering talent to create complete system
solutions that provide enhanced functionality and accelerate the adoption of our products
by being in close geographic proximity to our customers;
    
    Operate as a fabless semiconductor company, which allows us to focus our resources on
designing, developing and marketing our products, while minimizing operating infrastructure
costs and capital expenditures; and
    
    Enter targeted markets with compelling solutions combining silicon and software that
will reduce the time-to-market for our customers.
 Market Focused Product Lines
  4




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Imaging and PC Media Products
       5




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Broadband Access Products
       6




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Broadband Media Processing Products
      7




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Research and Development
    Manufacturing
    8




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Quality and Reliability
    
    
    determine the quality, reliability and performance objectives for new products;
    
    provide program/project management, resource identification and facilities;
    
    ensure verification and validation activities;
    
    provide criteria for acceptability; and
    
    clearly define records that are necessary to provide confidence of conformity of the
processes and resulting product.
  Customers, Marketing and Sales
    Fiscal Year Ended2007
    
    2006
    
    2005Americas
    
    
    11
    %
    
    
    10
    %
    
    
    12
    %Asia-Pacific
    
    
    83
    %
    
    
    82
    %
    
    
    80
    %Europe, Middle East and Africa
    
    
    6
    %
    
    
    8
    %
    
    
    8
    %100
    %
    
    
    100
    %
    
    
    100
    %
  9




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Backlog
  Competition
   Intellectual Property and Proprietary Rights
  Environmental Regulation
  Employees
  10




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Available Information
  11




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Item 1A. Risk Factors
   We are subject to intense competition.
   
    
    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.
  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;
    
    timely 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;
    
    invest in significant amounts of research and development; and
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
    
    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 operate in the highly cyclical semiconductor industry, which is subject to significant downturns
that may negatively impact our business, financial condition and results of operations.
  Our operating results may be negatively affected by substantial quarterly and annual fluctuations
and market downturns.
  
    
    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;
    
    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.
  13




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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; or
    
    license technology from the third party claiming infringement, which license may not
be available on commercially reasonable terms, or at all.
 The value of our common stock may be adversely affected by market volatility.
  
    
    our operating and financial performance and prospects;
    
    our ability to repay our debt;
    
    the depth and liquidity of the market for our common stock;
    
    investor perception of us and the industry and markets in which we operate;
    
    our inclusion in, or removal from, any equity market indices;
    
    the level of research coverage of our common stock;
    
    changes in earnings estimates or buy/sell recommendations by analysts;
    
    judgments favorable or adverse to us; and
    
    general financial, domestic, international, economic and other market conditions
 We have recently incurred substantial losses and may incur additional future losses.
  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.
  14




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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; and
    
    some of our customers offer or may offer products that compete with our products.
  We are subject to the risks of doing business internationally.
  
    
    difficulty in obtaining distribution and support;
    
    limitations on our ability under local laws to protect our intellectual property;
    
    currency exchange rate fluctuations;
    
    local economic and political conditions;
    
    disruptions of commerce and capital or trading markets due to or related to
terrorist activity or armed conflict;
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
    
    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.
    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 face a risk that capital needed for our business and to repay our debt obligations will not be
available when we need it.
  16




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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.
  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.
  17




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Because of the lengthy sales cycles of many of our products, we may incur significant expenses
before we generate any revenues related to those products.
  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.
      18




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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.
  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.
  19




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Uncertainties involving litigation could adversely affect our business.
  Our success depends, in part, on our ability to effect suitable investments, alliances and
acquisitions.
   
    
    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.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  20




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Leased Square
    
    Owned SquareFootage
    
    Footage
    
    TotalUnited States:Newport Beach, California
    
    
    142
    
    
    
    67
    
    
    
    209Red Bank, New Jersey
    
    
    100
    
    
    
    
    
    
    
    100San Diego, California
    
    
    99
    
    
    
    
    
    
    
    99Other
    
    
    108
    
    
    
    
    
    
    
    108449
    
    
    
    67
    
    
    
    516India
    
    
    218
    
    
    
    23
    
    
    
    241China
    
    
    116
    
    
    
    
    
    
    
    116Other Asia
    
    
    45
    
    
    
    
    
    
    
    45Europe
    
    
    30
    
    
    
    
    
    
    
    30858
    
    
    
    90
    
    
    
    948
    
 Item 3. Legal Proceedings
 IPO Litigation 
 21




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Class Action
Suit  Graden v. Conexant,
et al.
 Orckit 
 
 Item 4. Submission of Matters to a Vote of Security Holders
  22




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  High
    
    LowFiscal year ended September 28, 2007:Fourth quarter
    
    $
    1.57
    
    
    $
    1.05Third quarter
    
    
    1.68
    
    
    
    1.23Second quarter
    
    
    2.20
    
    
    
    1.61First quarter
    
    
    2.36
    
    
    
    1.71Fiscal year ended September 29, 2006:Fourth quarter
    
    $
    2.47
    
    
    $
    1.60Third quarter
    
    
    3.90
    
    
    
    2.14Second quarter
    
    
    3.60
    
    
    
    2.28First quarter
    
    
    2.72
    
    
    
    1.70
   23




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Shareowner Return Performance Graph
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 9/02


9/03


9/04


9/05


9/06


9/07Conexant Systems, Inc.


100.00



619.44



175.11



195.90



218.88



131.33S&P 500


100.00



124.40



141.65



159.01



176.17



205.13NASDAQ Electronic Components


100.00



192.60



157.24



185.10



172.56



208.68 
 *
    
    $100 invested on 9/30/02 in stock or index-including reinvestment of dividends. Fiscal year ending September 30.Copyright
©
2007, Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm 24




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Item 6. Selected Financial Data
   Fiscal Year Ended2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in thousands, except per share amounts)Statement of Operations Data:Net revenues
    
    $
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
    
    
    $
    901,854
    
    
    $
    599,977Cost of goods sold (1)(2)
    
    
    450,537
    
    
    
    542,309
    
    
    
    493,973
    
    
    
    523,129
    
    
    
    338,161Gain on cancellation of supply agreement (3)
    
    
    
    
    
    
    (17,500
    )
    
    
    
    
    
    
    
    
    
    
    Gross margin
    
    
    358,332
    
    
    
    445,978
    
    
    
    228,766
    
    
    
    378,725
    
    
    
    261,816Operating expenses:Research and development (2)
    
    
    278,685
    
    
    
    269,736
    
    
    
    267,996
    
    
    
    239,971
    
    
    
    159,354Selling, general and administrative (2)
    
    
    107,030
    
    
    
    131,226
    
    
    
    117,861
    
    
    
    125,474
    
    
    
    93,426Amortization of intangible assets
    
    
    22,099
    
    
    
    30,705
    
    
    
    32,322
    
    
    
    20,769
    
    
    
    3,437In-process research and development (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,818
    
    
    
    Asset impairments (5)
    
    
    350,913
    
    
    
    85
    
    
    
    3,761
    
    
    
    
    
    
    
    Special charges (6)
    
    
    36,034
    
    
    
    73,159
    
    
    
    42,216
    
    
    
    32,801
    
    
    
    18,379Total operating expenses
    
    
    794,761
    
    
    
    504,911
    
    
    
    464,156
    
    
    
    579,833
    
    
    
    274,596Operating loss
    
    
    (436,429
    )
    
    
    (58,933
    )
    
    
    (235,390
    )
    
    
    (201,108
    )
    
    
    (12,780
    )Interest expense
    
    
    (48,986
    )
    
    
    (38,130
    )
    
    
    (33,691
    )
    
    
    (30,708
    )
    
    
    (28,120
    )Other income (expense), net
    
    
    36,148
    
    
    
    (14,472
    )
    
    
    106,055
    
    
    
    (83,522
    )
    
    
    25,431Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,021Income (loss) before income taxes and gain (loss) on equity
method investments
    
    
    (449,267
    )
    
    
    (111,535
    )
    
    
    (163,026
    )
    
    
    (315,338
    )
    
    
    26,552Provision (benefit) for income taxes (7)
    
    
    4,377
    
    
    
    2,892
    
    
    
    2,322
    
    
    
    243,733
    
    
    
    (129
    )Income (loss) from continuing operations before gain (loss)
on equity method investments
    
    
    (453,644
    )
    
    
    (114,427
    )
    
    
    (165,348
    )
    
    
    (559,071
    )
    
    
    26,681Gain (loss) on equity method investments
    
    
    51,182
    
    
    
    (8,164
    )
    
    
    (10,642
    )
    
    
    14,422
    
    
    
    (3,119
    )Income (loss) from continuing operations
    
    
    (402,462
    )
    
    
    (122,591
    )
    
    
    (175,990
    )
    
    
    (544,649
    )
    
    
    23,562Loss from discontinued operations (8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (728,877
    )Net loss
    
    $
    (402,462
    )
    
    $
    (122,591
    )
    
    $
    (175,990
    )
    
    $
    (544,649
    )
    
    $
    (705,315
    )Income (loss) from continuing operations
per share  basic and diluted
    
    $
    (0.82
    )
    
    $
    (0.26
    )
    
    $
    (0.37
    )
    
    $
    (1.40
    )
    
    $
    0.09Balance Sheet Data at Fiscal Year End:Working capital (9)
    
    $
    93,394
    
    
    $
    127,635
    
    
    $
    142,796
    
    
    $
    444,272
    
    
    $
    239,009Total assets
    
    
    985,969
    
    
    
    1,573,625
    
    
    
    1,581,524
    
    
    
    1,880,522
    
    
    
    931,707Short-term debt
    
    
    80,000
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    Current portion of long-term debt (10)
    
    
    58,000
    
    
    
    188,375
    
    
    
    196,825
    
    
    
    
    
    
    
    Long-term obligations (10)
    
    
    524,002
    
    
    
    601,189
    
    
    
    615,947
    
    
    
    790,178
    
    
    
    649,252Shareholders equity
    
    
    146,515
    
    
    
    510,098
    
    
    
    569,093
    
    
    
    828,387
    
    
    
    166,766
 
 (1)
    
    In fiscal 2005, in response to lower market prices and reduced end-customer demand for our
products, we recorded $44.1 million of inventory charges to establish additional excess and
obsolete inventory reserves and lower of cost or market inventory reserves. 25




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(2)
    
    We adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based
Payment, on October 1, 2005. As a result, stock-based compensation expense included within
cost of goods sold, research and development expense, and selling, general and administrative
expense in fiscal 2007 and 2006 is based on the fair value of all stock options, stock awards
and employee stock purchase plan shares. Stock-based compensation expense for earlier periods
is based on the intrinsic value of acquired or exchanged unvested stock options in business
combinations, which is in accordance with previous accounting standards. Non-cash employee
stock-based compensation expense included in our consolidated statements of operations was as
follows (in thousands): Fiscal Year Ended2007
    
    2006
    
    2005
    
    2004
    
    2003Cost of goods sold
    
    $
    473
    
    
    $
    494
    
    
    $
    
    
    
    $
    
    
    
    $
    Research and development
    
    
    10,386
    
    
    
    21,110
    
    
    
    9,074
    
    
    
    5,370
    
    
    
    477Selling, general and administrative
    
    
    8,892
    
    
    
    23,971
    
    
    
    2,976
    
    
    
    1,773
    
    
    
    1,272
 
 (3)
    
    In fiscal 2006, Conexant and Jazz Semiconductor, Inc. (Jazz) terminated a wafer supply and
services agreement. In lieu of credits towards future purchases of product from Jazz, we
received additional shares of Jazz common stock and recorded a gain of $17.5 million.(4)
    
    In fiscal 2004, we recorded $160.8 million of in-process research and development expenses
related to the merger with GlobespanVirata, Inc.(5)
    
    In fiscal 2007, we recorded $309.5 million of goodwill impairment charges associated with
our Embedded Wireless Network and Broadband Media Processing product lines and $30.3 million
intangible impairment and $6.1 million property, plant and
equipment impairment associated with
our Embedded Wireless Network product lines.(6)
    
    Special charges include the following related to the settlement of legal matters and
restructuring charges (in thousands): Fiscal Year Ended2007
    
    2006
    
    2005
    
    2004
    
    2003Legal settlements
    
    $
    20,047
    
    
    $
    70,000
    
    
    $
    3,255
    
    
    $
    3,000
    
    
    $
    Restructuring charges
    
    
    12,131
    
    
    
    3,259
    
    
    
    28,049
    
    
    
    9,264
    
    
    
    5,215
 
 (7)
    
    In fiscal 2004, we recorded a $255.7 million charge to increase the valuation allowance for
our deferred tax assets.(8)
    
    In fiscal 2003 the loss from discontinued operations (net of income taxes) represents the
operating results of the Mindspeed Technologies Internet infrastructure business which we
disposed of in June 2003.(9)
    
    Working capital is defined as current assets minus current liabilities.Beginning in March 2006, we consider our available-for-sale portfolio as available for use in
our current operations. Accordingly, from that date we have classified all marketable
securities as short-term, even though the stated maturity dates may be more than one year
beyond the current balance sheet date. Prior to March 2006, short-term marketable securities
consisted of debt securities with remaining maturity dates of one year or less and equity
securities of publicly-traded companies, and long-term marketable securities consisted of debt
securities with remaining maturity dates of greater than one year. For periods prior to March
2006, long-term marketable securities are excluded from the calculation of working capital.Beginning in March 2006, we reclassified the long-term portion of our restructuring accruals,
principally consisting of future rental commitments under operating leases, from current
liabilities to other long-term liabilities on our consolidated balance sheet. The long-term
portion of restructuring accruals for all prior periods have been similarly reclassified.
These reclassifications did not affect our total assets, total liabilities, total
shareholders equity, results of operations or cash flows and did not have a material impact
on current liabilities, long-term liabilities or the calculation of working capital for any
period presented.In November 2006, we issued $275.0 million aggregate principal amount of floating rate senior
secured notes due November 2010. Proceeds from this issuance, net of fees, were approximately
$268.1 million. We used the net proceeds of this offering, together with available cash, cash
equivalents and marketable securities on hand, to retire our outstanding $456.5 million
aggregate principal amount of convertible subordinated notes in February 2007. Because the
net proceeds from this offering were used to repay at maturity a portion of the convertible
subordinated notes due February 2007, 26




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$268.1 million of the $456.5 million convertible subordinated notes has been reclassified as
long-term debt on our consolidated balance sheet as of September 29, 2006, in accordance with
SFAS No. 6, Classification of Short-Term Obligations Expected to Be Refinanced.(10)
    
    As discussed in note (9) above, $268.1 million of the $456.5 million convertible
subordinated notes due February 2007 has been reclassified as long-term debt on our
consolidated balance sheet as of September 29, 2006, in accordance with SFAS No. 6,
Classification of Short-Term Obligations Expected to Be Refinanced. 27




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis in conjunction with our Consolidated
Financial Statements and related Notes thereto included in Part II, Item 8 of this Report and the
Risk Factors included in Part I, Item 1A of this report, as well as other cautionary statements and
risks described elsewhere in this report
 Overview
   Business Enterprise Segments
   
    
    the nature of products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services; and
    
    the methods used to distribute their products or provide their services.
  
    
    the sale of semiconductor products is the only material source of revenue for each
of our four operating segments;
    
    the products sold by each of our operating segments use the same standard
manufacturing process;
    
    the products marketed by each of our operating segments are sold to similar
customers; and
    
    all of our products are sold through our internal sales force and common
distributors.
  28




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Fiscal Year Ended2007
    
    
    2006
    
    
    2005Imaging and PC Media
    
    $
    311,275
    
    
    $
    397,635
    
    
    $
    332,141Broadband Access Products
    
    
    212,953
    
    
    
    267,847
    
    
    
    192,038Broadband Media Processing Products
    
    
    235,284
    
    
    
    217,565
    
    
    
    102,413Embedded Wireless Networking
Products
    
    
    49,357
    
    
    
    87,740
    
    
    
    96,147$
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Imaging and PC Media
    
    $
    311,275
    
    
    $
    397,635
    
    
    $
    332,141Broadband Access Products
    
    
    262,310
    
    
    
    355,587
    
    
    
    288,185Broadband Media
Processing Products
    
    
    235,284
    
    
    
    217,565
    
    
    
    102,413$
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
 Results of Operations
 Net Revenues
   29




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Gross Margin
     30




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Fiscal Year Ended2007
    
    
    2006E&O reserves, beginning of period
    
    $
    36,632
    
    
    $
    44,833Additions
    
    
    10,589
    
    
    
    14,766Release upon sales of product
    
    
    (10,036
    )
    
    
    (11,718
    )Scrap
    
    
    (12,937
    )
    
    
    (7,082
    )Standards adjustments and other
    
    
    (2,067
    )
    
    
    (4,167
    )E&O reserves, end of period
    
    $
    22,181
    
    
    $
    36,632
    Fiscal Year Ended2007
    
    
    2006LCM reserves, beginning of period
    
    $
    1,761
    
    
    $
    6,739Additions
    
    
    783
    
    
    
    4,093Release upon sales of product
    
    
    (1,942
    )
    
    
    (9,025
    )Standards adjustments and other
    
    
    (223
    )
    
    
    (46
    )LCM reserves, end of period
    
    $
    379
    
    
    $
    1,761
 Research and Development
   31




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Selling, General and Administrative
    Amortization of Intangible Assets
    Asset Impairments
   32




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Special Charges
 Fiscal Year Ended(in thousands)
    
    2007
    
    
    2006
    
    
    2005Litigation charges
    
    $
    20,047
    
    
    $
    70,000
    
    
    $
    3,255Restructuring charges
    
    
    12,131
    
    
    
    3,259
    
    
    
    28,049Integration charges (credits)
    
    
    
    
    
    
    (400
    )
    
    
    7,748Other special charges
    
    
    3,856
    
    
    
    300
    
    
    
    3,164$
    36,034
    
    
    $
    73,159
    
    
    $
    42,216
    Interest Expense
   33




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Other Income (Expense), Net
 Fiscal Year Ended(in thousands)
    
    2007
    
    
    2006
    
    
    2005Investment and interest income
    
    $
    13,833
    
    
    $
    17,921
    
    
    $
    6,457Increase (decrease) in the fair value of
derivative instruments
    
    
    (952
    )
    
    
    (16,666
    )
    
    
    7,147Impairment of equity securities
    
    
    
    
    
    
    (19,872
    )
    
    
    Gains on investments in equity securities
    
    
    17,016
    
    
    
    4,414
    
    
    
    91,285Other
    
    
    6,251
    
    
    
    (269
    )
    
    
    1,166$
    36,148
    
    
    $
    (14,472
    )
    
    $
    106,055
    Provision for Income Taxes
    34




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##### Table of Contents



Gain (Loss) on Equity Method Investments
     Liquidity and Capital Resources
  September 28,
    
    
    September 29,(in thousands)
    
    2007
    
    
    2006Cash and cash equivalents
    
    $
    235,605
    
    
    $
    225,626Marketable debt securities
    
    
    
    
    
    
    83,620Subtotal
    
    
    235,605
    
    
    
    309,246Marketable equity securities  Skyworks (6.2 million
shares at September 29, 2006)
    
    
    
    
    
    
    32,089Total cash, cash equivalents and marketable securities
    
    $
    235,605
    
    
    $
    341,335
   35




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Fiscal Year Ended2007
    
    
    2006
    
    
    2005Net cash used in operating activities
    
    $
    (11,851
    )
    
    $
    (68,325
    )
    
    $
    (59,758
    )Net cash provided by investing activities
    
    
    205,179
    
    
    
    2,647
    
    
    
    122,190Net cash (used in) provided by financing activities
    
    
    (183,349
    )
    
    
    88,600
    
    
    
    1,241Net increase in cash and cash equivalents
    
    $
    9,979
    
    
    $
    22,922
    
    
    $
    63,673
   36




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37




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Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5(in thousands)
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    yearsLong-term debt
    
    $
    525,000
    
    
    $
    58,000
    
    
    $
    
    
    
    $
    467,000
    
    
    $
    Short-term debt
    
    
    80,000
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    Interest on debt
    
    
    107,303
    
    
    
    36,988
    
    
    
    60,364
    
    
    
    9,951
    
    
    
    Operating leases
    
    
    144,123
    
    
    
    27,737
    
    
    
    42,307
    
    
    
    25,768
    
    
    
    48,311Capital leases
    
    
    48
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    Assigned leases
    
    
    3,068
    
    
    
    717
    
    
    
    1,282
    
    
    
    1,069
    
    
    
    Purchase commitments
    
    
    56,007
    
    
    
    35,017
    
    
    
    15,540
    
    
    
    5,450
    
    
    
    Capital commitments
    
    
    3,011
    
    
    
    3,011
    
    
    
    
    
    
    
    
    
    
    
    $
    918,560
    
    
    $
    241,518
    
    
    $
    119,493
    
    
    $
    509,238
    
    
    $
    48,311
 
     Off-Balance Sheet Arrangements
  38




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Special Purpose Entities
   Recent Accounting Pronouncements
     39




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Critical Accounting Policies
  Business combinations
  Revenue recognition
   Allowance for doubtful accounts
  40




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Inventories
  Long-lived assets
   Deferred income taxes
  41




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Valuation of warrants
  Valuation of equity securities
  Stock-based compensation
    42




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Restructuring charges
  43




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
       (in thousands)
    
    Carrying Value
    
    Fair ValueCash and cash equivalents
    
    $
    235,605
    
    
    $
    235,605Mindspeed warrant
    
    
    15,519
    
    
    
    15,519Short-term debt
    
    
    80,000
    
    
    
    80,000Long-term debt: senior secured notes
    
    
    275,000
    
    
    
    276,375Long-term debt: convertible subordinated notes
    
    
    250,000
    
    
    
    207,969
  44




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Item 8. Financial Statements and Supplementary Data
 CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 September 28,
    
    
    September 29,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    235,605
    
    
    $
    225,626Marketable securities
    
    
    
    
    
    
    115,709Restricted cash
    
    
    8,800
    
    
    
    8,800Receivables, net of allowances of $1,659 and $842, respectively
    
    
    80,906
    
    
    
    123,025Inventories, net
    
    
    63,174
    
    
    
    97,460Other current assets
    
    
    20,361
    
    
    
    19,353Total current assets
    
    
    408,846
    
    
    
    589,973Property, plant and equipment, net
    
    
    67,967
    
    
    
    65,405Goodwill
    
    
    406,323
    
    
    
    710,790Intangible assets, net
    
    
    26,067
    
    
    
    76,008Other assets
    
    
    76,766
    
    
    
    131,449Total assets
    
    $
    985,969
    
    
    $
    1,573,625LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    58,000
    
    
    $
    188,375Short-term debt
    
    
    80,000
    
    
    
    80,000Accounts payable
    
    
    80,667
    
    
    
    113,690Accrued compensation and benefits
    
    
    26,154
    
    
    
    28,307Other current liabilities
    
    
    70,631
    
    
    
    51,966Total current liabilities
    
    
    315,452
    
    
    
    462,338Long-term debt
    
    
    467,000
    
    
    
    518,125Other liabilities
    
    
    57,002
    
    
    
    83,064Total liabilities
    
    
    839,454
    
    
    
    1,063,527Commitments and contingencies (Note 8)Shareholders equity:Preferred and junior preferred stock
    
    
    
    
    
    
    Common stock, $0.01 par value: 1,000,000 shares authorized; 492,362
and 486,482 shares issued; and 492,362 and 485,200 shares
outstanding
    
    
    4,924
    
    
    
    4,866Treasury stock: zero and 1,282 shares, at cost
    
    
    
    
    
    
    (5,823
    )Additional paid-in capital
    
    
    4,721,298
    
    
    
    4,699,029Accumulated deficit
    
    
    (4,578,219
    )
    
    
    (4,175,757
    )Accumulated other comprehensive loss
    
    
    (1,385
    )
    
    
    (12,096
    )Shareholder notes receivable
    
    
    (103
    )
    
    
    (121
    )Total shareholders equity
    
    
    146,515
    
    
    
    510,098Total liabilities and shareholders equity
    
    $
    985,969
    
    
    $
    1,573,625
  45




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 Fiscal Year EndedSeptember 28,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Net revenues
    
    $
    808,869
    
    
    $
    970,787
    
    
    $
    722,739Cost of goods sold (1)
    
    
    450,537
    
    
    
    542,309
    
    
    
    493,973Gain on cancellation of supply agreement
    
    
    
    
    
    
    (17,500
    )
    
    
    Gross margin
    
    
    358,332
    
    
    
    445,978
    
    
    
    228,766Operating expenses:Research and development (1)
    
    
    278,685
    
    
    
    269,736
    
    
    
    267,996Selling, general and administrative (1)
    
    
    107,030
    
    
    
    131,226
    
    
    
    117,861Amortization of intangible assets
    
    
    22,099
    
    
    
    30,705
    
    
    
    32,322Asset impairments
    
    
    350,913
    
    
    
    85
    
    
    
    3,761Special charges
    
    
    36,034
    
    
    
    73,159
    
    
    
    42,216Total operating expenses
    
    
    794,761
    
    
    
    504,911
    
    
    
    464,156Operating loss
    
    
    (436,429
    )
    
    
    (58,933
    )
    
    
    (235,390
    )Interest expense
    
    
    (48,986
    )
    
    
    (38,130
    )
    
    
    (33,691
    )Other income (expense), net
    
    
    36,148
    
    
    
    (14,472
    )
    
    
    106,055Loss before income taxes and gain (loss) on equity
method investments
    
    
    (449,267
    )
    
    
    (111,535
    )
    
    
    (163,026
    )Provision for income taxes
    
    
    4,377
    
    
    
    2,892
    
    
    
    2,322Loss before gain (loss) on equity method investments
    
    
    (453,644
    )
    
    
    (114,427
    )
    
    
    (165,348
    )Gain (loss) on equity method investments
    
    
    51,182
    
    
    
    (8,164
    )
    
    
    (10,642
    )Net loss
    
    $
    (402,462
    )
    
    $
    (122,591
    )
    
    $
    (175,990
    )Net loss per share  basic and diluted
    
    $
    (0.82
    )
    
    $
    (0.26
    )
    
    $
    (0.37
    )Shares used in basic and diluted per-share computations
    
    
    489,402
    
    
    
    479,325
    
    
    
    470,658
 
 (1)
    
    These captions include non-cash employee stock-based compensation expense as
follows (see Note 1): Fiscal Year EndedSeptember 28,
    
    September 29,
    
    September 30,2007
    
    2006
    
    2005Cost of goods sold
    
    $
    473
    
    
    $
    494
    
    
    $
    Research and development
    
    
    10,386
    
    
    
    21,110
    
    
    
    9,074Selling, general and administrative
    
    
    8,892
    
    
    
    23,971
    
    
    
    2,976
  46




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Fiscal Year EndedSeptember 28,
    
    
    September 29,
    
    
    September 30,2007
    
    
    2006
    
    
    2005Cash flows from operating activitiesNet loss
    
    $
    (402,462
    )
    
    $
    (122,591
    )
    
    $
    (175,990
    )Adjustments to reconcile net loss to net cash used in operating activities,
net of effects of acquisitions:Depreciation
    
    
    25,091
    
    
    
    19,670
    
    
    
    18,594Amortization of intangible assets
    
    
    22,099
    
    
    
    30,705
    
    
    
    32,322Asset impairments
    
    
    350,913
    
    
    
    
    
    
    
    Impairment of marketable and non-marketable securities
    
    
    
    
    
    
    20,286
    
    
    
    Provision for (reversal of) bad debts, net
    
    
    20
    
    
    
    (2,192
    )
    
    
    (1,587
    )(Reversal of) charges for inventory provisions, net
    
    
    (606
    )
    
    
    (1,884
    )
    
    
    44,084Deferred income taxes
    
    
    231
    
    
    
    (792
    )
    
    
    Stock-based compensation
    
    
    19,751
    
    
    
    44,945
    
    
    
    14,340Decrease (increase) in fair value of derivative instruments
    
    
    952
    
    
    
    16,666
    
    
    
    (7,147
    )(Gains) losses on equity method investments
    
    
    (51,182
    )
    
    
    8,164
    
    
    
    10,642Gain on cancellation of supply agreement
    
    
    
    
    
    
    (17,500
    )
    
    
    Gain on sales of equity securities, investments and other assets
    
    
    (17,016
    )
    
    
    (5,659
    )
    
    
    (91,264
    )Other items, net
    
    
    (4,920
    )
    
    
    (2,813
    )
    
    
    (1,229
    )Changes in assets and liabilities:Receivables
    
    
    42,099
    
    
    
    (33,593
    )
    
    
    99,535Inventories
    
    
    36,131
    
    
    
    (576
    )
    
    
    57,786Accounts payable
    
    
    (30,732
    )
    
    
    2,774
    
    
    
    (33,249
    )Agere patent litigation settlement
    
    
    
    
    
    
    
    
    
    
    (8,000
    )Accrued expenses and other current liabilities
    
    
    3,710
    
    
    
    (15,795
    )
    
    
    (23,285
    )Other, net
    
    
    (5,930
    )
    
    
    (8,140
    )
    
    
    4,690Net cash used in operating activities
    
    
    (11,851
    )
    
    
    (68,325
    )
    
    
    (59,758
    )Cash flows from investing activitiesProceeds from sale of equity securities and other assets
    
    
    168,186
    
    
    
    6,870
    
    
    
    97,244Proceeds from sales and maturities of marketable debt securities
    
    
    100,573
    
    
    
    146,219
    
    
    
    68,985Purchases of marketable securities
    
    
    (27,029
    )
    
    
    (93,646
    )
    
    
    (49,628
    )Purchases of property, plant and equipment
    
    
    (30,322
    )
    
    
    (34,011
    )
    
    
    (21,791
    )Payments for acquisitions, net of cash acquired
    
    
    (5,029
    )
    
    
    (11,531
    )
    
    
    (18,817
    )Purchases of equity securities
    
    
    (1,200
    )
    
    
    (2,454
    )
    
    
    (2,817
    )Restricted cash
    
    
    
    
    
    
    (8,800
    )
    
    
    Net proceeds from purchase and sale-leaseback of facility
    
    
    
    
    
    
    
    
    
    
    49,014Net cash provided by investing activities
    
    
    205,179
    
    
    
    2,647
    
    
    
    122,190Cash flows from financing activitiesProceeds from short-term debt, net of expenses of $1,198 and $1,541
    
    
    (1,198
    )
    
    
    78,459
    
    
    
    Proceeds from long-term debt, net of expenses of $10,240 and $6,417
    
    
    264,760
    
    
    
    243,583
    
    
    
    Repurchases and retirements of long-term debt
    
    
    (456,500
    )
    
    
    (254,684
    )
    
    
    Proceeds from issuance of common stock
    
    
    9,568
    
    
    
    21,050
    
    
    
    1,045Repayment of shareholder notes receivable
    
    
    21
    
    
    
    192
    
    
    
    196Net cash (used in) provided by financing activities
    
    
    (183,349
    )
    
    
    88,600
    
    
    
    1,241Net increase in cash and cash equivalents
    
    
    9,979
    
    
    
    22,922
    
    
    
    63,673Cash and cash equivalents at beginning of year
    
    
    225,626
    
    
    
    202,704
    
    
    
    139,031Cash and cash equivalents at end of year
    
    $
    235,605
    
    
    $
    225,626
    
    
    $
    202,704
  47




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE LOSS
(in thousands)
 Accumulated
    
    
    NotesAdditional
    
    
    
    
    
    
    Other
    
    
    Receivable
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    From
    
    
    Treasury
    
    
    Unearned
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Stock Sales
    
    
    Stock
    
    
    Compensation
    
    
    EquityBalance at October 1, 2004
    
    
    469,441
    
    
    $
    4,694
    
    
    $
    4,648,325
    
    
    $
    (3,877,176
    )
    
    $
    82,551
    
    
    $
    (576
    )
    
    $
    (5,584
    )
    
    $
    (23,847
    )
    
    $
    828,387Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,990
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,990
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214
    )Reclassification adjustment for realized
gains on available-for-sale securities
included in net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,290
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,290
    )Change in unrealized losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,886
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,886
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,173
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,173
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (280,553
    )Purchase acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (692
    )
    
    
    (692
    )Issuance of common stock
    
    
    5,242
    
    
    
    53
    
    
    
    6,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,015Interest earned on notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Settlement of notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    292Stock option modifications
    
    
    
    
    
    
    
    
    
    
    2,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,614Employee stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,050
    
    
    
    12,050Balance at September 30, 2005
    
    
    474,683
    
    
    
    4,747
    
    
    
    4,657,901
    
    
    
    (4,053,166
    )
    
    
    (22,012
    )
    
    
    (304
    )
    
    
    (5,584
    )
    
    
    (12,489
    )
    
    
    569,093Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,591
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,591
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376
    )Change in unrealized gain on foreign
currency forward hedge contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180Impairment of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,870
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,870Change in unrealized losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,007
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,007
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,249Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112,675
    )Cumulative effect of change in
accounting principle (Note 1)
    
    
    
    
    
    
    
    
    
    
    (20,691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,489
    
    
    
    (8,202
    )Issuance of common stock
    
    
    11,799
    
    
    
    119
    
    
    
    21,505
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,624Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (239
    )
    
    
    
    
    
    
    (239
    )Interest earned on notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    (9
    )Settlement of notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    192Payment of acquisition-related share price guarantee
    
    
    
    
    
    
    
    
    
    
    (4,631
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,631
    )Employee stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    44,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,945Balance at September 29, 2006
    
    
    486,482
    
    
    
    4,866
    
    
    
    4,699,029
    
    
    
    (4,175,757
    )
    
    
    (12,096
    )
    
    
    (121
    )
    
    
    (5,823
    )
    
    
    
    
    
    
    510,098Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,462
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,790
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,790Change in unrealized gain on foreign
currency forward hedge contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200Change in unrealized losses on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,855Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,866
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,866Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391,751
    )Issuance of common stock
    
    
    7,162
    
    
    
    71
    
    
    
    9,866
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,937Cancellation of treasury stock
    
    
    (1,282
    )
    
    
    (13
    )
    
    
    (5,810
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,823
    
    
    
    
    
    
    
    Interest earned on notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Settlement of notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Employee stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    18,213
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,213Balance at September 28, 2007
    
    
    492,362
    
    
    $
    4,924
    
    
    $
    4,721,298
    
    
    $
    (4,578,219
    )
    
    $
    (1,385
    )
    
    $
    (103
    )
    
    $
    
    
    
    $
    
    
    
    $
    146,515
  48




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 1. Basis of Presentation and Significant Accounting Policies
  Basis of Presentation
 Fiscal Year
 Use of Estimates
 Revenue Recognition
  Shipping and Handling
 49




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Cash and Cash Equivalents
 Marketable Securities
  Restricted Cash
 Inventories
 Property, Plant and Equipment
 Investments
 Long-Lived Assets
 50




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Foreign Currency Translation and Remeasurement
 51




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Derivative Financial Instruments
    Net Loss Per Share
  Fiscal Year Ended2007
    
    2006
    
    2005Stock options and warrants
    
    
    2,585
    
    
    
    8,880
    
    
    
    2,0995.25% convertible subordinated notes due May 2006
    
    
    
    
    
    
    3,626
    
    
    
    5,8404.25% convertible subordinated notes due May 2006
    
    
    
    
    
    
    4,289
    
    
    
    7,3644.00% convertible subordinated notes due February 2007
    
    
    4,887
    
    
    
    11,362
    
    
    
    12,1374.00% convertible subordinated notes due March 2026
    
    
    50,813
    
    
    
    27,109
    
    
    
    58,285
    
    
    
    55,266
    
    
    
    27,440
 Stock-Based Compensation
 52




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Fiscal Year Ended2005Net loss, as reported
    
    $
    (175,990
    )Add: stock-based compensation expense included in reported net loss,
net of tax
    
    
    12,050Deduct: stock-based compensation expense determined under fair
value method, net of tax
    
    
    (61,805
    )Net loss, pro forma
    
    $
    (225,745
    )Net loss per share:Basic  as reported
    
    $
    (0.37
    )Basic  pro forma
    
    $
    (0.48
    )Diluted  as reported
    
    $
    (0.37
    )Diluted  pro forma
    
    $
    (0.48
    )
   53




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
     Fiscal Year Ended2007
    
    2006
    
    2005Stock option plans:Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    68
    %
    
    
    76
    %
    
    
    85
    %Risk-free interest rate
    
    
    4.6
    %
    
    
    4.5
    %
    
    
    3.8
    %Average expected life (in years)
    
    
    4.93
    
    
    
    5.25
    
    
    
    4.90Stock purchase plan:Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    60
    %
    
    
    76
    %
    
    
    89
    %Risk-free interest rate
    
    
    4.8
    %
    
    
    4.4
    %
    
    
    4.1
    %Average expected life (in years)
    
    
    0.50
    
    
    
    0.50
    
    
    
    0.50Performance Share Plans:Expected dividend yield
    
    
    0
    %
    
    
    n/a
    
    
    
    n/aExpected stock price volatility
    
    
    60
    %
    
    
    n/a
    
    
    
    n/aRisk-free interest rate
    
    
    4.8
    %
    
    
    n/a
    
    
    
    n/aAverage expected life (in years)
    
    
    2.30
    
    
    
    n/a
    
    
    
    n/a
  Income Taxes
 54




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Concentrations
  Supplemental Cash Flow Information
  Accumulated Other Comprehensive Income (Loss)
 September 28,
    
    
    September 29,2007
    
    
    2006Foreign currency translation adjustments
    
    $
    1,994
    
    
    $
    (3,796
    )Unrealized losses on marketable securities
    
    
    
    
    
    
    (1,855
    )Unrealized gains on foreign currency forward exchange contracts
    
    
    380
    
    
    
    180Minimum pension liability adjustments
    
    
    (3,759
    )
    
    
    (6,625
    )Accumulated other comprehensive loss
    
    $
    (1,385
    )
    
    $
    (12,096
    )
 Business Enterprise Segments
  
    
    the nature of products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services; and
    
    the methods used to distribute their products or provide their services.
 55




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  
    
    the sale of semiconductor products is the only material source of revenue for each
of the Companys four operating segments;
    
    the products sold by each of the Companys operating segments use the same standard
manufacturing process;
    
    the products marketed by each of the Companys operating segments are sold to
similar customers; and
    
    all of the Companys products are sold through its internal sales force and common
distributors.
  Recent Accounting Pronouncements
     Reclassification
 56




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  2006
    
    
    2005Special charges before reclassification
    
    $
    73,244
    
    
    $
    45,977Asset impairments
    
    
    (85
    )
    
    
    (3,761
    )Special charges after reclassification
    
    $
    73,159
    
    
    $
    42,216Other income (expense), net, before reclassification
    
    $
    (22,636
    )
    
    $
    95,413Losses on equity method investments
    
    
    8,164
    
    
    
    10,642Other income (expense), net, after reclassification
    
    $
    (14,472
    )
    
    $
    106,055
 2. Business Combinations
 Fiscal 2007
   Fiscal 2005
    3. Sales of Assets
 Fiscal 2007
  57




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Fiscal 2005
     4. Marketable Securities
  Gross
    
    
    GrossCost or
    
    
    Unrealized
    
    
    UnrealizedAmortized
    
    
    Holding
    
    
    Holding
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueSeptember 29, 2006:Corporate debt securities
    
    $
    22,719
    
    
    $
    30
    
    
    $
    (29
    )
    
    $
    22,720U.S. government agency securities
    
    
    60,777
    
    
    
    134
    
    
    
    (11
    )
    
    
    60,900Equity securities
    
    
    34,068
    
    
    
    
    
    
    
    (1,979
    )
    
    
    32,089$
    117,564
    
    
    $
    164
    
    
    $
    (2,019
    )
    
    $
    115,709
  58




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  5. Supplemental Balance Sheet Data
 Inventories
  September 28,
    
    
    September 29,2007
    
    
    2006Work-in-process
    
    $
    24,219
    
    
    $
    53,884Finished goods
    
    
    38,955
    
    
    
    43,576$
    63,174
    
    
    $
    97,460
  Property, Plant and Equipment
  September 28,
    
    
    September 29,2007
    
    
    2006Land
    
    $
    2,007
    
    
    $
    1,960Land and leasehold improvements
    
    
    14,132
    
    
    
    9,683Buildings
    
    
    22,144
    
    
    
    34,613Machinery and equipment
    
    
    166,657
    
    
    
    151,100Construction in progress
    
    
    2,197
    
    
    
    6,273207,137
    
    
    
    203,629Accumulated depreciation and amortization
    
    
    (139,170
    )
    
    
    (138,224
    )$
    67,967
    
    
    $
    65,405
  Goodwill
  Fiscal Year Ended2007
    
    
    2006Goodwill at beginning of period
    
    $
    710,790
    
    
    $
    717,013Additions
    
    
    2,675
    
    
    
    3,000Impairments
    
    
    (309,500
    )
    
    
    Other Adjustments
    
    
    2,358
    
    
    
    (9,223
    )Goodwill at end of period
    
    $
    406,323
    
    
    $
    710,790
 Impairments
  59




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Additions
   Intangible Assets
  September 28, 2007
    
    
    September 29, 2006Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Book
    
    
    Carrying
    
    
    Accumulated
    
    
    BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueDeveloped technology
    
    $
    75,865
    
    
    $
    (54,605
    )
    
    $
    21,260
    
    
    $
    139,483
    
    
    $
    (74,477
    )
    
    $
    65,006Product licenses
    
    
    9,327
    
    
    
    (6,547
    )
    
    
    2,780
    
    
    
    12,769
    
    
    
    (5,263
    )
    
    
    7,506Other intangible assets
    
    
    6,015
    
    
    
    (3,988
    )
    
    
    2,027
    
    
    
    7,015
    
    
    
    (3,519
    )
    
    
    3,496$
    91,207
    
    
    $
    (65,140
    )
    
    $
    26,067
    
    
    $
    159,267
    
    
    $
    (83,259
    )
    
    $
    76,008
  Fiscal Year Ending2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    ThereafterAmortization expense
    
    $
    15,429
    
    
    $
    7,699
    
    
    $
    1,214
    
    
    $
    680
    
    
    $
    402
    
    
    $
    643
  Mindspeed Warrant
  60




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Other Assets
  Other Current Liabilities
  September 28,
    
    
    September 29,2007
    
    
    2006Accrued legal settlements
    
    $
    20,047
    
    
    $
    Restructuring and reorganization liabilities
    
    
    13,835
    
    
    
    5,481Other
    
    
    36,749
    
    
    
    46,485$
    70,631
    
    
    $
    51,966
 6. Income Taxes
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Current:United States
    
    $
    
    
    
    $
    
    
    
    $
    Foreign
    
    
    4,015
    
    
    
    3,555
    
    
    
    1,842State and local
    
    
    131
    
    
    
    129
    
    
    
    480Total current
    
    
    4,146
    
    
    
    3,684
    
    
    
    2,322Deferred:United States
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    231
    
    
    
    (792
    )
    
    
    Total deferred
    
    
    231
    
    
    
    (792
    )
    
    
    $
    4,377
    
    
    $
    2,892
    
    
    $
    2,322
  September 28,
    
    
    September 29,2007
    
    
    2006Deferred tax assets:Investments
    
    $
    
    
    
    $
    78,137Intangible assets
    
    
    151,377
    
    
    
    150,349Capitalized research and development
    
    
    312,314
    
    
    
    307,666Net operating losses
    
    
    484,304
    
    
    
    453,237Research and development and investment credits
    
    
    153,976
    
    
    
    154,870Other, net
    
    
    203,150
    
    
    
    158,774Valuation allowance
    
    
    (1,246,553
    )
    
    
    (1,240,546
    )Total deferred tax assets
    
    
    58,568
    
    
    
    62,487Deferred tax liabilities:Deferred state taxes
    
    
    (58,007
    )
    
    
    (61,695
    )Total deferred tax liabilities
    
    
    (58,007
    )
    
    
    (61,695
    )$
    561
    
    
    $
    792
 61




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
        Fiscal Year Ended2007
    
    
    2006
    
    
    2005U.S. Federal statutory tax at 35%
    
    $
    (139,330
    )
    
    $
    (41,895
    )
    
    $
    (60,784
    )State taxes, net of federal effect
    
    
    5,473
    
    
    
    4,533
    
    
    
    (7,102
    )U.S. and foreign income taxes on foreign earnings
    
    
    2,245
    
    
    
    2,411
    
    
    
    5,834Research and development credits
    
    
    (5,229
    )
    
    
    (1,715
    )
    
    
    (8,014
    )Valuation allowance
    
    
    26,587
    
    
    
    36,914
    
    
    
    74,287Asset impairments
    
    
    110,029
    
    
    
    
    
    
    
    Stock options
    
    
    2,743
    
    
    
    3,386
    
    
    
    Other
    
    
    1,859
    
    
    
    (742
    )
    
    
    (1,899
    )Provision for income taxes
    
    $
    4,377
    
    
    $
    2,892
    
    
    $
    2,322
  62




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005United States
    
    $
    (406,503
    )
    
    $
    (128,982
    )
    
    $
    (174,229
    )Foreign
    
    
    8,418
    
    
    
    9,283
    
    
    
    561$
    (398,085
    )
    
    $
    (119,699
    )
    
    $
    (173,668
    )
   7. Debt
 Short-Term Debt
    63




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Long-Term Debt
  September 28,
    
    
    September 29,2007
    
    
    2006Floating rate senior secured notes due November 2010
    
    $
    275,000
    
    
    $
    4.00% convertible subordinated notes due February 2007
    
    
    
    
    
    
    456,5004.00% convertible subordinated notes due March 2026
    
    
    250,000
    
    
    
    250,000Total
    
    
    525,000
    
    
    
    706,500Less: current portion of long-term debt
    
    
    (58,000
    )
    
    
    (188,375
    )Long-term debt
    
    $
    467,000
    
    
    $
    518,125
 Floating rate senior secured notes due November 2010
   64




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  4.00% convertible subordinated notes due March 2026
  4.00% convertible subordinated notes due February 2007
 8. Commitments and Contingencies
 Lease Commitments
   Fiscal Year Ending
    
    Lease Payments
    
    
    Sublease Income
    
    
    Net Obligation2008
    
    $
    27,737
    
    
    
    (7,841
    )
    
    $
    19,8962009
    
    
    22,384
    
    
    
    (6,994
    )
    
    
    15,3902010
    
    
    19,923
    
    
    
    (6,029
    )
    
    
    13,8942011
    
    
    14,174
    
    
    
    (1,885
    )
    
    
    12,2892012
    
    
    11,594
    
    
    
    (1,184
    )
    
    
    10,410Thereafter
    
    
    48,311
    
    
    
    (3,222
    )
    
    
    45,089Total future minimum lease payments
    
    $
    144,123
    
    
    $
    (27,155
    )
    
    $
    116,968
  65




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Legal Matters
  IPO Litigation
 Class Action Suit Graden v. Conexant,
et al.
 66




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Orckit
 Guarantees and Indemnifications
   Other
 Tax Matter
 Capital Investments
 Litigation Charges
  9. Shareholders Equity
  th th
 67




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Stock Option Plans
     68




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Fiscal Year Ended2007
    
    2006
    
    2005Weighted-
    
    
    
    
    
    Weighted-
    
    
    
    
    
    Weighted-Number
    
    Average
    
    Number
    
    Average
    
    Number
    
    Averageof
    
    Exercise
    
    of
    
    Exercise
    
    of
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of year
    
    
    103,782
    
    
    $
    2.65
    
    
    
    111,195
    
    
    $
    2.81
    
    
    
    127,120
    
    
    $
    4.78Granted
    
    
    19,266
    
    
    
    1.48
    
    
    
    15,692
    
    
    
    2.66
    
    
    
    35,342
    
    
    
    1.51Assumed/exchanged in business combinations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    590
    
    
    
    0.87Exercised
    
    
    (3,366
    )
    
    
    1.41
    
    
    
    (7,886
    )
    
    
    1.95
    
    
    
    (831
    )
    
    
    1.23Forfeited or expired
    
    
    (18,870
    )
    
    
    3.05
    
    
    
    (15,219
    )
    
    
    4.17
    
    
    
    (51,026
    )
    
    
    5.65Outstanding at end of year
    
    
    100,812
    
    
    
    2.39
    
    
    
    103,782
    
    
    
    2.65
    
    
    
    111,195
    
    
    
    2.81Exercisable at end of year
    
    
    67,530
    
    
    
    2.68
    
    
    
    72,513
    
    
    
    2.88
    
    
    
    72,235
    
    
    
    3.34
  Outstanding
    
    ExercisableAverage
    
    Weighted-
    
    
    
    Weighted-Remaining
    
    Average
    
    
    
    AverageRange of
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    ExerciseExercise Prices
    
    of Shares
    
    Life (Years)
    
    Price
    
    of Shares
    
    Price$   0.20  0.86
    
    285
    
    2.74
    
    $  0.72
    
    257
    
    $  0.761.03  1.49
    
    40,466
    
    5.55
    
    1.45
    
    21,586
    
    1.471.50  1.99
    
    6,395
    
    6.81
    
    1.64
    
    1,684
    
    1.722.00  2.49
    
    3,921
    
    3.82
    
    2.27
    
    2,370
    
    2.342.50  2.99
    
    33,241
    
    3.23
    
    2.68
    
    25,596
    
    2.693.00  3.49
    
    11,747
    
    3.22
    
    3.42
    
    11,544
    
    3.423.51  4.96
    
    2,771
    
    4.60
    
    3.98
    
    2,595
    
    3.995.02  9.93
    
    1,662
    
    2.75
    
    6.41
    
    1,575
    
    6.3710.06  96.93
    
    324
    
    2.61
    
    36.77
    
    323
    
    36.80100,812
    
    
    
    
    
    67,530
    69




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Directors Stock Plan
  Employee Stock Purchase Plan
  2001 Performance Share Plan and 2004 New Hire Equity Incentive Plan
  Performance Plan
    70




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 2004 New Hire Plan
     2007
    
    2006
    
    2005Outstanding at beginning of year
    
    
    275
    
    
    
    275
    
    
    
    Granted
    
    
    4,010
    
    
    
    275
    
    
    
    275Vested
    
    
    (149
    )
    
    
    (155
    )
    
    
    Forfeited or expired
    
    
    (126
    )
    
    
    (120
    )
    
    
    Outstanding at end of year
    
    
    4,010
    
    
    
    275
    
    
    
    275
 10. Employee Benefit Plans
 Retirement Savings Plans
  Retirement Medical Plan
  71




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Fiscal Year Ended2007
    
    
    2006Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    375
    
    
    $
    1,624Interest cost
    
    
    14
    
    
    
    35Plan participants contributions
    
    
    709
    
    
    
    972Actuarial gain
    
    
    (234
    )
    
    
    (546
    )Benefits paid
    
    
    (778
    )
    
    
    (1,710
    )Benefit obligation at end of year
    
    $
    86
    
    
    $
    375Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    
    
    
    $
    Employer contributions
    
    
    69
    
    
    
    738Plan participants contributions
    
    
    709
    
    
    
    972Benefits paid, including expenses
    
    
    (778
    )
    
    
    (1,710
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    Reconciliation of funded status to accrued benefit cost:Funded status
    
    $
    (86
    )
    
    $
    (375
    )Net actuarial loss
    
    
    245
    
    
    
    2,251Net prior service credit
    
    
    (1,393
    )
    
    
    (6,967
    )Adjustment for fourth quarter contributions
    
    
    43
    
    
    
    76Accrued benefit cost
    
    $
    (1,191
    )
    
    $
    (5,015
    )Weighted average assumptions for benefit obligations:Measurement date
    
    
    06/30/07
    
    
    
    06/30/06Discount rate
    
    
    
    
    
    
    6.25
    %Expected return on plan assets
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    N/A
    
    
    
    N/AWeighted average assumptions for net periodic benefit costs:Discount rate
    
    
    6.25
    %
    
    
    3.00
    %Expected return on plan assets
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    N/A
    
    
    
    N/AComponents of net periodic benefit cost:Interest cost
    
    $
    14
    
    
    $
    36Amortization of prior service costs
    
    
    (5,574
    )
    
    
    (5,574
    )Recognized net actuarial loss
    
    
    1,771
    
    
    
    2,108Net periodic benefit cost
    
    $
    (3,789
    )
    
    $
    (3,430
    )
 Pension Plans
   72




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
    Prior to Adopting
    
    Effective ofSFAS No. 158
    
    Adopting SFAS No. 158
    
    As ReportedCurrent liabilities
    
    $
    807
    
    
    $
    
    
    
    $
    807Accumulated other comprehensive income
    
    $
    4,906
    
    
    $
    
    
    
    $
    4,906
  Fiscal Year Ended2007
    
    
    2006Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    21,215
    
    
    $
    24,440Interest cost
    
    
    1,261
    
    
    
    1,178Actuarial gain
    
    
    (155
    )
    
    
    (2,491
    )Benefits paid
    
    
    (1,857
    )
    
    
    (1,912
    )Benefit obligation at end of year
    
    $
    20,464
    
    
    $
    21,215Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    16,533
    
    
    $
    15,627Actual return on plan assets
    
    
    2,478
    
    
    
    656Employer contributions
    
    
    1,968
    
    
    
    2,162Benefits paid, including expenses
    
    
    (1,857
    )
    
    
    (1,912
    )Fair value of plan assets at end of year
    
    $
    19,122
    
    
    $
    16,533Reconciliation of funded status to net amounts recognized:Funded status
    
    $
    (1,342
    )
    
    $
    (4,682
    )Unrecognized net actuarial loss
    
    
    
    
    
    
    6,730Adjustment for fourth quarter expenses
    
    
    
    
    
    
    (105
    )Adjustment for fourth quarter contributions
    
    
    535
    
    
    
    844Net amount recognized
    
    $
    (807
    )
    
    $
    2,827Amounts recognized in the statement of financial position:Accrued benefit liability
    
    $
    (807
    )
    
    $
    (3,798
    )Accumulated other comprehensive income
    
    
    4,906
    
    
    
    6,625Net amount recognized
    
    $
    4,099
    
    
    $
    2,827Information for plans with accumulated benefit obligation
in excess of plan assets:Projected benefit obligation
    
    $
    20,464
    
    
    $
    21,215Accumulated benefit obligation
    
    
    20,464
    
    
    
    21,215Fair value of plan assets at end of year
    
    
    19,122
    
    
    
    16,533Weighted average assumptions for benefit obligations:Measurement date
    
    
    06/30/07
    
    
    
    06/30/06Discount rate
    
    
    6.20
    %
    
    
    6.23
    %Expected long-term return on plan assets
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    N/A
    
    
    
    N/A
 73




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Fiscal Year Ended2007
    
    
    2006Weighted average assumptions for net periodic benefit costs:Discount rate
    
    
    6.23
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    N/A
    
    
    
    N/AComponents of net periodic benefit cost recognized in other
comprehensive income:Interest cost
    
    $
    1,261
    
    
    $
    1,178Expected return on plan assets
    
    
    (1,121
    )
    
    
    (1,082
    )Recognized net actuarial loss
    
    
    221
    
    
    
    323Net periodic benefit cost recognized in other comprehensive income
    
    $
    361
    
    
    $
    419Estimated amortization from accumulated other comprehensive income
into net periodic pension cost during fiscal 2008:Interest cost
    
    $
    148
    
    
    $
    Weighted average asset allocation:Equity securities
    
    
    75.0
    %
    
    
    69.0
    %Debt securities
    
    
    20.0
    %
    
    
    21.0
    %Other
    
    
    5.0
    %
    
    
    10.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %Expected benefit payouts during fiscal years ending:2008
    
    $
    1,7832009
    
    
    1,7382010
    
    
    1,7102011
    
    
    1,6802012
    
    
    1,662Thereafter
    
    
    7,987
  11. Asset Impairments
   74




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 12. Special Charges
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Litigation charges
    
    $
    20,047
    
    
    $
    70,000
    
    
    $
    3,255Restructuring charges
    
    
    12,131
    
    
    
    3,259
    
    
    
    28,049Other special charges
    
    
    3,856
    
    
    
    (100
    )
    
    
    10,912$
    36,034
    
    
    $
    73,159
    
    
    $
    42,216
 Litigation Charges
  Restructuring Charges
  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
    
    
    $
    10,276
 Fiscal 2006 Restructuring Action
 75




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalCharged to costs and expenses
    
    $
    4,396
    
    
    $
    468
    
    
    $
    4,864Cash payments
    
    
    (3,180
    )
    
    
    (76
    )
    
    
    (3,256
    )Restructuring balance, September 29, 2006
    
    
    1,216
    
    
    
    392
    
    
    
    1,608Charged to costs and expenses
    
    
    55
    
    
    
    119
    
    
    
    174Cash payments
    
    
    (1,171
    )
    
    
    (258
    )
    
    
    (1,429
    )Restructuring balance, September 28, 2007
    
    $
    100
    
    
    $
    253
    
    
    $
    353
 Fiscal 2005 and Prior Years Restructuring Actions
   Workforce
    
    
    FacilityReductions
    
    
    and Other
    
    
    TotalRestructuring balance, October 1, 2004
    
    $
    5,672
    
    
    $
    16,755
    
    
    $
    22,427Adjusted to purchase price allocation
    
    
    12
    
    
    
    (4,967
    )
    
    
    (4,955
    )Non-cash items
    
    
    (46
    )
    
    
    13,629
    
    
    
    13,583Charged to costs and expenses
    
    
    21,212
    
    
    
    6,837
    
    
    
    28,049Cash payments
    
    
    (23,241
    )
    
    
    (7,034
    )
    
    
    (30,275
    )Restructuring balance, September 30, 2005
    
    
    3,609
    
    
    
    25,220
    
    
    
    28,829Charged (credited) to costs and expenses
    
    
    (2,544
    )
    
    
    939
    
    
    
    (1,605
    )Reclassification to accrued compensation and benefits and other
    
    
    1,844
    
    
    
    55
    
    
    
    1,899Cash payments
    
    
    (2,713
    )
    
    
    (7,955
    )
    
    
    (10,668
    )Restructuring balance, September 29, 2006
    
    
    196
    
    
    
    18,259
    
    
    
    18,455Reclassification to other current liabilities and other liabilities
    
    
    
    
    
    
    (2,687
    )
    
    
    (2,687
    )Charged to costs and expenses
    
    
    
    
    
    
    440
    
    
    
    440Cash payments
    
    
    (165
    )
    
    
    (3,749
    )
    
    
    (3,914
    )Restructuring balance, September 28, 2007
    
    $
    31
    
    
    $
    12,263
    
    
    $
    12,294
  76




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Other Special Charges
   13. Other Income (Expense), Net
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Investment and interest income
    
    $
    13,833
    
    
    $
    17,921
    
    
    $
    6,457(Decrease) increase in the fair value of derivative instruments
    
    
    (952
    )
    
    
    (16,666
    )
    
    
    7,147Impairment of equity securities
    
    
    
    
    
    
    (19,872
    )
    
    
    Realized gains on sales of equity securities
    
    
    17,016
    
    
    
    4,414
    
    
    
    91,285Other, net
    
    
    6,251
    
    
    
    (269
    )
    
    
    1,166$
    36,148
    
    
    $
    (14,472
    )
    
    $
    106,055
    14. Related Party Transactions
 Jazz Semiconductor, Inc. (Jazz)
  77




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Wafer and Probe Services Purchases
  Lease Agreement 
 Royalty Agreement
 Services Agreements
 Mindspeed Technologies, Inc.
  Lease Agreement
 78




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Skyworks Solutions, Inc. (Skyworks)
  Inventory and Assembly and Test Services Purchases
 Sublease Rent Share Agreement
 15. Segment Information
 Geographic Regions:
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005United States
    
    $
    55,972
    
    
    $
    75,851
    
    
    $
    70,192Other Americas
    
    
    35,671
    
    
    
    23,871
    
    
    
    14,988Total Americas
    
    
    91,643
    
    
    
    99,722
    
    
    
    85,180China
    
    
    444,849
    
    
    
    486,100
    
    
    
    332,441South Korea
    
    
    71,592
    
    
    
    105,541
    
    
    
    48,825Taiwan
    
    
    42,911
    
    
    
    62,985
    
    
    
    96,026Other Asia-Pacific
    
    
    109,392
    
    
    
    144,206
    
    
    
    103,065Total Asia-Pacific
    
    
    668,744
    
    
    
    798,832
    
    
    
    580,357Europe, Middle East and Africa
    
    
    48,482
    
    
    
    72,233
    
    
    
    57,202$
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
   September 28,
    
    
    September 29,2007
    
    
    2006United States
    
    $
    84,267
    
    
    $
    90,095India
    
    
    17,377
    
    
    
    10,826Other Asia-Pacific
    
    
    10,934
    
    
    
    7,117Europe, Middle East and Africa
    
    
    1,831
    
    
    
    2,201$
    114,409
    
    
    $
    110,239
 Product Lines
  79




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
   Fiscal Year Ended2007
    
    
    2006
    
    
    2005Imaging and PC Media
    
    $
    311,275
    
    
    $
    397,635
    
    
    $
    332,141Broadband Access Products
    
    
    212,953
    
    
    
    267,847
    
    
    
    192,038Broadband Media Processing Products
    
    
    235,284
    
    
    
    217,565
    
    
    
    102,413Embedded Wireless Networking Products
    
    
    49,357
    
    
    
    87,740
    
    
    
    96,147$
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Imaging and PC Media
    
    $
    311,275
    
    
    $
    397,635
    
    
    $
    332,141Broadband Access Products
    
    
    262,310
    
    
    
    355,587
    
    
    
    288,185Broadband Media
Processing Products
    
    
    235,284
    
    
    
    217,565
    
    
    
    102,413$
    808,869
    
    
    $
    970,787
    
    
    $
    722,739
 16. Quarterly Results of Operations (Unaudited)
  Fiscal Quarter EndedFiscal 2007
    
    Sep. 28, 2007
    
    Jun. 29, 2007
    
    Mar. 30, 2007
    
    Dec. 29, 2006Net revenues
    
    $
    183,921
    
    
    $
    179,549
    
    
    $
    199,865
    
    
    $
    245,534Gross margin
    
    
    80,948
    
    
    
    78,046
    
    
    
    89,849
    
    
    
    109,489Net income (loss)
    
    
    (234,765
    )
    
    
    (35,227
    )
    
    
    (133,446
    )
    
    
    976Net income (loss) per share, basic and fully diluted
    
    
    (0.48
    )
    
    
    (0.07
    )
    
    
    (0.27
    )
    
    
    
 Fiscal Quarter EndedFiscal 2006
    
    Sep. 29, 2006
    
    Jun. 30, 2006
    
    Mar. 31, 2006
    
    Dec. 30, 2005Net revenues
    
    $
    245,863
    
    
    $
    251,635
    
    
    $
    242,583
    
    
    $
    230,706Gross margin
    
    
    112,478
    
    
    
    131,537
    
    
    
    106,210
    
    
    
    95,753Net loss
    
    
    (21,098
    )
    
    
    (67,090
    )
    
    
    (10,132
    )
    
    
    (24,271
    )Net loss per share, basic and fully diluted
    
    
    (0.04
    )
    
    
    (0.14
    )
    
    
    (0.02
    )
    
    
    (0.05
    )
 80




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 17. Supplemental Guarantor Financial Information
    September 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    199,263
    
    
    $
    
    
    
    $
    36,342
    
    
    $
    
    
    
    $
    235,605Restricted cash
    
    
    
    
    
    
    
    
    
    
    8,800
    
    
    
    
    
    
    
    8,800Receivables
    
    
    (10,071
    )
    
    
    
    
    
    
    90,977
    
    
    
    
    
    
    
    80,906Inventories
    
    
    63,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,174Other current assets
    
    
    13,028
    
    
    
    2
    
    
    
    7,331
    
    
    
    
    
    
    
    20,361Total current assets
    
    
    265,934
    
    
    
    2
    
    
    
    143,450
    
    
    
    
    
    
    
    408,846Property and equipment, net
    
    
    39,543
    
    
    
    
    
    
    
    28,424
    
    
    
    
    
    
    
    67,967Goodwill
    
    
    68,834
    
    
    
    307,051
    
    
    
    30,438
    
    
    
    
    
    
    
    406,323Intangible assets, net
    
    
    5,764
    
    
    
    18,244
    
    
    
    2,059
    
    
    
    
    
    
    
    26,067Other assets
    
    
    73,635
    
    
    
    
    
    
    
    3,131
    
    
    
    
    
    
    
    76,766Investments in subsidiaries
    
    
    513,340
    
    
    
    11,563
    
    
    
    
    
    
    
    (524,903
    )
    
    
    Total assets
    
    $
    966,510
    
    
    $
    336,860
    
    
    $
    207,502
    
    
    $
    (524,903
    )
    
    $
    985,969Current liabilities:Current portion of long-term debt
    
    $
    58,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    58,000Short-term debt
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    
    
    
    
    80,000Accounts payable
    
    
    77,581
    
    
    
    
    
    
    
    3,086
    
    
    
    
    
    
    
    80,667Accrued compensation and benefits
    
    
    18,478
    
    
    
    
    
    
    
    7,676
    
    
    
    
    
    
    
    26,154Intercompany payable (receivable)
    
    
    96,258
    
    
    
    (169,158
    )
    
    
    72,900
    
    
    
    
    
    
    
    Other current liabilities
    
    
    66,035
    
    
    
    931
    
    
    
    3,665
    
    
    
    
    
    
    
    70,631Total current liabilities
    
    
    316,352
    
    
    
    (168,227
    )
    
    
    167,327
    
    
    
    
    
    
    
    315,452Long-term debt
    
    
    467,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467,000Other liabilities
    
    
    53,410
    
    
    
    
    
    
    
    3,592
    
    
    
    
    
    
    
    57,002Total liabilities
    
    
    836,762
    
    
    
    (168,227
    )
    
    
    170,919
    
    
    
    
    
    
    
    839,454Shareholders equity
    
    
    129,748
    
    
    
    505,087
    
    
    
    36,583
    
    
    
    (524,903
    )
    
    
    146,515Total liabilities and equity
    
    $
    966,510
    
    
    $
    336,860
    
    
    $
    207,502
    
    
    $
    (524,903
    )
    
    $
    985,969
 81




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 September 29, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    175,398
    
    
    $
    
    
    
    $
    50,228
    
    
    $
    
    
    
    $
    225,626Marketable securities
    
    
    115,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,709Restricted cash
    
    
    
    
    
    
    
    
    
    
    8,800
    
    
    
    
    
    
    
    8,800Receivables
    
    
    19,140
    
    
    
    
    
    
    
    103,885
    
    
    
    
    
    
    
    123,025Inventories
    
    
    97,460
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,460Other current assets
    
    
    13,480
    
    
    
    3
    
    
    
    5,870
    
    
    
    
    
    
    
    19,353Total current assets
    
    
    421,187
    
    
    
    3
    
    
    
    168,783
    
    
    
    
    
    
    
    589,973Property and equipment, net
    
    
    45,430
    
    
    
    
    
    
    
    19,975
    
    
    
    
    
    
    
    65,405Goodwill
    
    
    54,914
    
    
    
    616,659
    
    
    
    39,217
    
    
    
    
    
    
    
    710,790Intangible assets, net
    
    
    6,213
    
    
    
    66,751
    
    
    
    3,044
    
    
    
    
    
    
    
    76,008Other assets
    
    
    131,037
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    131,449Investments in subsidiaries
    
    
    862,726
    
    
    
    (37,902
    )
    
    
    
    
    
    
    (824,824
    )
    
    
    Total assets
    
    $
    1,521,507
    
    
    $
    645,511
    
    
    $
    231,431
    
    
    $
    (824,824
    )
    
    $
    1,573,625Current liabilities:Current portion of long-term debt
    
    $
    188,375
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    188,375Short-term debt
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    
    
    
    
    80,000Accounts payable
    
    
    111,516
    
    
    
    
    
    
    
    2,174
    
    
    
    
    
    
    
    113,690Accrued compensation and benefits
    
    
    22,824
    
    
    
    
    
    
    
    5,483
    
    
    
    
    
    
    
    28,307Intercompany payable (receivable)
    
    
    50,218
    
    
    
    (117,590
    )
    
    
    67,372
    
    
    
    
    
    
    
    Other current liabilities
    
    
    51,109
    
    
    
    
    
    
    
    857
    
    
    
    
    
    
    
    51,966Total current liabilities
    
    
    424,042
    
    
    
    (117,590
    )
    
    
    155,886
    
    
    
    
    
    
    
    462,338Long-term debt
    
    
    518,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    518,125Other liabilities
    
    
    81,823
    
    
    
    
    
    
    
    1,241
    
    
    
    
    
    
    
    83,064Total liabilities
    
    
    1,023,990
    
    
    
    (117,590
    )
    
    
    157,127
    
    
    
    
    
    
    
    1,063,527Shareholders equity
    
    
    497,517
    
    
    
    763,101
    
    
    
    74,304
    
    
    
    (824,824
    )
    
    
    510,098Total liabilities and equity
    
    $
    1,521,507
    
    
    $
    645,511
    
    
    $
    231,431
    
    
    $
    (824,824
    )
    
    $
    1,573,625
 82




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##### Table of Contents



CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Year Ended September 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    684,432
    
    
    $
    34,908
    
    
    $
    124,437
    
    
    $
    (34,908
    )
    
    $
    808,869Cost of goods sold
    
    
    379,098
    
    
    
    
    
    
    
    106,347
    
    
    
    (34,908
    )
    
    
    450,537Gross margin
    
    
    305,334
    
    
    
    34,908
    
    
    
    18,090
    
    
    
    
    
    
    
    358,332Operating expenses:Research and development
    
    
    276,495
    
    
    
    
    
    
    
    2,190
    
    
    
    
    
    
    
    278,685Selling, general and administrative
    
    
    94,109
    
    
    
    
    
    
    
    12,921
    
    
    
    
    
    
    
    107,030Amortization of intangible assets
    
    
    2,878
    
    
    
    18,234
    
    
    
    987
    
    
    
    
    
    
    
    22,099Asset impairments
    
    
    11,141
    
    
    
    339,772
    
    
    
    
    
    
    
    
    
    
    
    350,913Special charges
    
    
    32,903
    
    
    
    
    
    
    
    3,131
    
    
    
    
    
    
    
    36,034Total operating expenses
    
    
    417,526
    
    
    
    358,006
    
    
    
    19,229
    
    
    
    
    
    
    
    794,761Operating loss
    
    
    (112,192
    )
    
    
    (323,098
    )
    
    
    (1,139
    )
    
    
    
    
    
    
    (436,429
    )Equity in income (loss) of subsidiaries
    
    
    (57,599
    )
    
    
    334
    
    
    
    
    
    
    
    57,265
    
    
    
    Interest expense
    
    
    (42,396
    )
    
    
    
    
    
    
    (6,590
    )
    
    
    
    
    
    
    (48,986
    )Other income, net
    
    
    15,151
    
    
    
    
    
    
    
    20,997
    
    
    
    
    
    
    
    36,148Income (loss) before income taxes and
gain on equity method investments
    
    
    (197,036
    )
    
    
    (322,764
    )
    
    
    13,268
    
    
    
    57,265
    
    
    
    (449,267
    )Provision for income taxes
    
    
    2,020
    
    
    
    
    
    
    
    2,357
    
    
    
    
    
    
    
    4,377Income (loss) before gain on equity
method investments
    
    
    (199,056
    )
    
    
    (322,764
    )
    
    
    10,911
    
    
    
    57,265
    
    
    
    (453,644
    )Gain on equity method investments
    
    
    51,182
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,182Net income (loss)
    
    $
    (147,874
    )
    
    $
    (322,764
    )
    
    $
    10,911
    
    
    $
    57,265
    
    
    $
    (402,462
    )
 Year Ended September 29, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    817,949
    
    
    $
    275,666
    
    
    $
    152,838
    
    
    $
    (275,666
    )
    
    $
    970,787Cost of goods sold
    
    
    442,385
    
    
    
    219,310
    
    
    
    135,116
    
    
    
    (254,502
    )
    
    
    542,309Gain on cancellation of supply
agreement
    
    
    (17,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,500
    )Gross margin
    
    
    393,064
    
    
    
    56,356
    
    
    
    17,722
    
    
    
    (21,164
    )
    
    
    445,978Operating expenses:Research and development
    
    
    267,645
    
    
    
    18,992
    
    
    
    2,081
    
    
    
    (18,982
    )
    
    
    269,736Selling, general and administrative
    
    
    106,954
    
    
    
    13,424
    
    
    
    13,279
    
    
    
    (2,431
    )
    
    
    131,226Amortization of intangible assets
    
    
    2,701
    
    
    
    26,851
    
    
    
    1,153
    
    
    
    
    
    
    
    30,705Asset impairments
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Special charges
    
    
    3,159
    
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    
    73,159Total operating expenses
    
    
    380,544
    
    
    
    129,267
    
    
    
    16,513
    
    
    
    (21,413
    )
    
    
    504,911Operating income (loss)
    
    
    12,520
    
    
    
    (72,911
    )
    
    
    1,209
    
    
    
    249
    
    
    
    (58,933
    )Equity in income (loss) of subsidiaries
    
    
    (63,269
    )
    
    
    1,101
    
    
    
    
    
    
    
    62,168
    
    
    
    Interest expense
    
    
    (28,733
    )
    
    
    (4,254
    )
    
    
    (5,143
    )
    
    
    
    
    
    
    (38,130
    )Other income (expense), net
    
    
    (33,261
    )
    
    
    
    
    
    
    18,789
    
    
    
    
    
    
    
    (14,472
    )Income (loss) before income taxes and
loss on equity method investments
    
    
    (112,743
    )
    
    
    (76,064
    )
    
    
    14,855
    
    
    
    62,417
    
    
    
    (111,535
    )Provision for income taxes
    
    
    1,684
    
    
    
    
    
    
    
    1,208
    
    
    
    
    
    
    
    2,892Income (loss) before loss on equity
method investments
    
    
    (114,427
    )
    
    
    (76,064
    )
    
    
    13,647
    
    
    
    62,417
    
    
    
    (114,427
    )Loss on equity method investments
    
    
    (8,164
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,164
    )Net income (loss)
    
    $
    (122,591
    )
    
    $
    (76,064
    )
    
    $
    13,647
    
    
    $
    62,417
    
    
    $
    (122,591
    )
 83




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Year Ended September 30, 2005Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenues
    
    $
    607,072
    
    
    $
    250,671
    
    
    $
    115,667
    
    
    $
    (250,671
    )
    
    $
    722,739Cost of goods sold
    
    
    386,795
    
    
    
    117,310
    
    
    
    97,279
    
    
    
    (107,411
    )
    
    
    493,973Gross margin
    
    
    220,277
    
    
    
    133,361
    
    
    
    18,388
    
    
    
    (143,260
    )
    
    
    228,766Operating expenses:Research and development
    
    
    265,503
    
    
    
    92,728
    
    
    
    2,493
    
    
    
    (92,728
    )
    
    
    267,996Selling, general and administrative
    
    
    91,099
    
    
    
    24,675
    
    
    
    16,249
    
    
    
    (14,162
    )
    
    
    117,861Amortization of intangible assets
    
    
    3,397
    
    
    
    27,773
    
    
    
    1,152
    
    
    
    
    
    
    
    32,322Asset impairments
    
    
    3,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,761Special charges
    
    
    40,117
    
    
    
    
    
    
    
    2,099
    
    
    
    
    
    
    
    42,216Total operating expenses
    
    
    403,877
    
    
    
    145,176
    
    
    
    21,993
    
    
    
    (106,890
    )
    
    
    464,156Operating loss
    
    
    (183,600
    )
    
    
    (11,815
    )
    
    
    (3,605
    )
    
    
    (36,370
    )
    
    
    (235,390
    )Equity in income (loss) of subsidiaries
    
    
    25,548
    
    
    
    (1,384
    )
    
    
    
    
    
    
    (24,164
    )
    
    
    Interest expense
    
    
    (29,980
    )
    
    
    (2,840
    )
    
    
    (871
    )
    
    
    
    
    
    
    (33,691
    )Other income, net
    
    
    101,404
    
    
    
    4,550
    
    
    
    4,651
    
    
    
    (4,550
    )
    
    
    106,055Income (loss) before income taxes and
loss on equity method investments
    
    
    (86,628
    )
    
    
    (11,489
    )
    
    
    175
    
    
    
    (65,084
    )
    
    
    (163,026
    )Provision for income taxes
    
    
    427
    
    
    
    
    
    
    
    1,895
    
    
    
    
    
    
    
    2,322Loss before loss on equity method
investments
    
    
    (87,055
    )
    
    
    (11,489
    )
    
    
    (1,720
    )
    
    
    (65,084
    )
    
    
    (165,348
    )Loss on equity method investments
    
    
    (10,642
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,642
    )Net loss
    
    $
    (97,697
    )
    
    $
    (11,489
    )
    
    $
    (1,720
    )
    
    $
    (65,084
    )
    
    $
    (175,990
    )
 84




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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
  Year Ended September 28, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by
operating activities
    
    $
    (13,515
    )
    
    $
    
    
    
    $
    22,350
    
    
    $
    (20,686
    )
    
    $
    (11,851
    )Cash flows from investing activities:Proceeds from sale of equity
securities and other assets
    
    
    168,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168,186Proceeds from sales and maturities
of marketable debt securities
    
    
    100,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,573Purchases of marketable securities
    
    
    (27,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,029
    )Purchases of property and equipment
    
    
    (15,970
    )
    
    
    
    
    
    
    (14,352
    )
    
    
    
    
    
    
    (30,322
    )Payments for acquisitions
    
    
    (5,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,029
    )Purchases of equity securities
    
    
    (1,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,200
    )Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (606,122
    )
    
    
    606,122
    
    
    
    Collections of accounts receivable
    
    
    
    
    
    
    
    
    
    
    601,131
    
    
    
    (601,131
    )
    
    
    Net cash provided by (used in)
investing activities
    
    
    219,531
    
    
    
    
    
    
    
    (19,343
    )
    
    
    4,991
    
    
    
    205,179Cash flows from financing activities:Proceeds from short-term debt, net
    
    
    
    
    
    
    
    
    
    
    (1,198
    )
    
    
    
    
    
    
    (1,198
    )Proceeds from long-term debt, net
    
    
    264,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    264,760Repurchases and retirements of
long-term debt
    
    
    (456,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (456,500
    )Proceeds from issuance of common
stock
    
    
    9,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,568Repayment of shareholder notes
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Dividends paid
    
    
    
    
    
    
    
    
    
    
    (15,695
    )
    
    
    15,695
    
    
    
    Net cash used in financing activities
    
    
    (182,151
    )
    
    
    
    
    
    
    (16,893
    )
    
    
    15,695
    
    
    
    (183,349
    )Net increase
(decrease) in cash and cash
equivalents
    
    
    23,865
    
    
    
    
    
    
    
    (13,886
    )
    
    
    
    
    
    
    9,979Cash and cash equivalents at
beginning of year
    
    
    175,398
    
    
    
    
    
    
    
    50,228
    
    
    
    
    
    
    
    225,626Cash and cash equivalents at end of
year
    
    $
    199,263
    
    
    $
    
    
    
    $
    36,342
    
    
    $
    
    
    
    $
    235,605
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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Year Ended September 29, 2006Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in)
operating activities
    
    $
    (30,848
    )
    
    $
    
    
    
    $
    34,027
    
    
    $
    (71,504
    )
    
    $
    (68,325
    )Cash flows from investing activities:Proceeds from equity securities and
other assets
    
    
    6,870
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,870Proceeds from sales and maturities
of marketable securities
    
    
    146,219
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,219Purchases of marketable securities
    
    
    (93,646
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93,646
    )Purchases of property and equipment
    
    
    (20,146
    )
    
    
    
    
    
    
    (13,865
    )
    
    
    
    
    
    
    (34,011
    )Payments for acquisitions
    
    
    (11,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,531
    )Purchases of equity securities
    
    
    (2,454
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,454
    )Restricted cash
    
    
    
    
    
    
    
    
    
    
    (8,800
    )
    
    
    
    
    
    
    (8,800
    )Purchases of accounts receivable
    
    
    
    
    
    
    
    
    
    
    (574,572
    )
    
    
    574,572
    
    
    
    Collections of accounts receivable
    
    
    
    
    
    
    
    
    
    
    503,068
    
    
    
    (503,068
    )
    
    
    Net cash provided by (used in)
investing activities
    
    
    25,312
    
    
    
    
    
    
    
    (94,169
    )
    
    
    71,504
    
    
    
    2,647Cash flows from financing activities:Proceeds from short-term debt, net
    
    
    
    
    
    
    
    
    
    
    78,459
    
    
    
    
    
    
    
    78,459Proceeds from long-term debt, net
    
    
    243,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,583Repurchases and retirements of
long-term debt
    
    
    (254,684
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (254,684
    )Proceeds from issuance of common
stock
    
    
    21,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,050Repayment of shareholder notes
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192Net cash provided by financing
activities
    
    
    10,141
    
    
    
    
    
    
    
    78,459
    
    
    
    
    
    
    
    88,600Net increase in cash and cash
equivalents
    
    
    4,605
    
    
    
    
    
    
    
    18,317
    
    
    
    
    
    
    
    22,922Cash and cash equivalents at
beginning of year
    
    
    170,793
    
    
    
    
    
    
    
    31,911
    
    
    
    
    
    
    
    202,704Cash and cash equivalents at end of
year
    
    $
    175,398
    
    
    $
    
    
    
    $
    50,228
    
    
    $
    
    
    
    $
    225,626
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CONEXANT SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 Year Ended September 30, 2005Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by
operating activities
    
    $
    (62,091
    )
    
    $
    
    
    
    $
    2,333
    
    
    $
    
    
    
    $
    (59,758
    )Cash flows from investing activities:Proceeds from sales of equity
securities and other assets
    
    
    97,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,244Proceeds from sales and maturities
of marketable securities
    
    
    68,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,985Purchases of marketable securities
    
    
    (49,628
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,628
    )Purchases of property and equipment
    
    
    (17,415
    )
    
    
    
    
    
    
    (4,376
    )
    
    
    
    
    
    
    (21,791
    )Payments for acquisitions
    
    
    (18,817
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,817
    )Purchases of equity securities
    
    
    (2,817
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,817
    )Net proceeds from purchase and
sale-leaseback of facility
    
    
    49,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,014Net cash provided by (used in)
investing activities
    
    
    126,566
    
    
    
    
    
    
    
    (4,376
    )
    
    
    
    
    
    
    122,190Cash flows from financing activities:Proceeds from issuance of common
stock
    
    
    1,045
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,045Repayment of shareholder notes
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196Net cash provided by financing
activities
    
    
    1,241
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241Net increase (decrease) in cash and
cash equivalents
    
    
    65,716
    
    
    
    
    
    
    
    (2,043
    )
    
    
    
    
    
    
    63,673Cash and cash equivalents at
beginning of year
    
    
    105,077
    
    
    
    
    
    
    
    33,954
    
    
    
    
    
    
    
    139,031Cash and cash equivalents at end of
year
    
    $
    170,793
    
    
    $
    
    
    
    $
    31,911
    
    
    $
    
    
    
    $
    202,704
 18. Subsequent Events
  87




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal Control  Integrated
Framework
  
 88




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
 Internal Control  Integrated Framework Internal Control  Integrated Framework
 89




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated Framework
   
 90




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  91




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##### Table of Contents



PART III
  
 Item 10. Directors, Executive Officers and Corporate Governance
 (a)
    
    Executive Officers  The information required by this Item is incorporated herein by
reference to the section entitled Executive Officers in the Proxy Statement.(b)
    
    Directors  The information required by this Item is incorporated herein by reference to the
section entitled Election of Directors in the Proxy Statement.(c)
    
    Audit Committee and Audit Committee Financial Expert  Certain information required by this
Item is incorporated herein by reference to the section entitled Report of the Audit
Committee in the Proxy Statement. The board of directors has determined that D. Scott
Mercer, Chairman of the Audit Committee, is an audit committee financial expert and
independent as defined under applicable SEC and Nasdaq rules. The boards affirmative
determination was based, among other things, upon his extensive experience as Chief Financial
Officer of Western Digital Corporation and, prior to that, as Vice President, Finance,
European Operations of Dell Inc.(d)
    
    We adopted our Standards of Business Conduct, a code of ethics that applies to all
employees, including our executive officers. A copy of the Standards of Business Conduct is
posted on our Internet site at www.conexant.com. In the event that we make any amendment to,
or grant any waivers of, a provision of the Standards of Business Conduct that applies to the
principal executive officer, principal financial officer, or principal accounting officer that
requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver
and the reasons therefor on our Internet site.(e)
    
    Section 16(a) Beneficial Ownership Reporting Compliance  The information required by this
Item is incorporated herein by reference to the section entitled Other Matters  Section
16(a) Beneficial Ownership Reporting Compliance in the Proxy Statement.
 
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transaction, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  92




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Financial Statements
  PageConsolidated Balance Sheets
    
    45Consolidated Statements of Operations
    
    46Consolidated Statements of Cash Flows
    
    47Consolidated Statements of Shareholders Equity and Comprehensive Loss
    
    48
 Supplemental Schedules
 PageSchedule II  Valuation and Qualifying Accounts
    
    101
  Exhibits
 Exhibits
    
    Description3-a-1
    
    Amended and Restated Certificate of Incorporation of the Company,
as amended, filed as Exhibit 3.a.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 2004, is
incorporated herein by reference.3-a-2
    
    Amended By-Laws of the Company, filed as Exhibit 3.(ii) to the
Companys Current Report on Form 8-K dated February 28, 2005, is
incorporated herein by reference.4-a-1
    
    Rights Agreement dated as of November 30, 1998 by and between the
Company and Mellon Investor Services, L.L.C. (formerly
ChaseMellon Shareholder Services, L.L.C.), as rights agent, filed
as Exhibit 4.4 to the Companys Registration Statement on Form
S-8 (Registration No. 333-68755), is incorporated herein by
reference.4-a-2
    
    First Amendment to Rights Agreement dated as of December 9, 1999,
filed as Exhibit 4.1 to the Companys Quarterly Report on Form
10-Q for the quarter ended December 31, 1999, is incorporated
herein by reference.4-b-1
    
    Indenture dated as of March 7, 2006 by and between the Company
and The Bank of New York Trust Company, N.A., as successor to
J.P. Morgan Trust Company, National Association, as trustee,
including the form of the Companys 4% Convertible Subordinated
Notes due March 1, 2026 attached as Exhibit A thereto, filed as
Exhibit 4.1 to the Companys Current Report on Form 8-K dated
March 8, 2006, is incorporated herein by reference.4-b-2
    
    Indenture dated as of November 13, 2006 among the Company, the
subsidiary guarantors party thereto and The Bank of New York
Trust Company, N.A., as trustee, including the form of the
Companys Floating Rate Senior Secured Note due 2010 attached as
Exhibit A thereto, filed as Exhibit 4.1 to the Companys Current
Report on Form 8-K dated November 16, 2006, is incorporated
herein by reference.*10-a-1
    
    Conexant Systems, Inc. 1998 Stock Option Plan, filed as Exhibit
10.6 to the Companys Registration Statement on Form 10 (File No.
000-24923), is incorporated herein by reference.*10-a-2
    
    Copy of resolution of the Board of Directors of the Company,
adopted March 1, 1999, amending the Companys 1998 Stock Option
Plan, filed as Exhibit 10-b-2 to the Companys Annual Report on
Form 10-K for the year ended September 30, 1999, is incorporated
herein by reference.
 93




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##### Table of Contents



Exhibits
    
    Description*10-a-3
    
    Forms of Stock Option Agreements under Rockwells 1995 Long-Term
Incentives Plan for options granted prior to December 3, 1997,
filed as Exhibit 10-e-2 to Rockwells Annual Report on Form 10-K
for the year ended September 30, 1994 (File No. 1-1035), are
incorporated herein by reference.*10-a-4
    
    Forms of Stock Option Agreements under Rockwells 1995 Long-Term
Incentives Plan for options granted between December 3, 1997 and
August 31, 1998, filed as Exhibit 10-b-3 to Rockwells Annual
Report on Form 10-K for the year ended September 30, 1998 (File
No. 1-12383), are incorporated herein by reference.*10-a-5
    
    Form of Stock Option Agreement under Rockwells 1995 Long-Term
Incentives Plan for options granted on April 23, 1998, filed as
Exhibit 10-b-4 to Rockwells Annual Report on Form 10-K for the
year ended September 30, 1998 (File No. 1-12383), is incorporated
herein by reference.*10-a-6
    
    Form of Stock Option Agreement under Rockwells 1995 Long-Term
Incentives Plan for options granted on August 31, 1998, filed as
Exhibit 10-b-5 to Rockwells Annual Report on Form 10-K for the
year ended September 30, 1998 (File No. 1-12383), is incorporated
herein by reference.*10-a-7
    
    Form of Stock Option Agreement under Rockwells Directors Stock
Plan, filed as Exhibit 10-d to Rockwells Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996 (File No. 1-1035),
is incorporated herein by reference.*10-a-8
    
    Copy of resolution of the Board of Directors of Rockwell, adopted
November 6, 1996, adjusting outstanding awards under Rockwells
(i) 1988 Long-Term Incentives Plan, (ii) 1995 Long-Term
Incentives Plan and (iii) Directors Stock Plan, filed as Exhibit
4-g-2 to Rockwells Registration Statement on Form S-8
(Registration No. 333-17055), is incorporated herein by
reference.*10-a-9
    
    Copy of resolution of the Board of Directors of Rockwell, adopted
September 3, 1997, adjusting outstanding awards under Rockwells
(i) 1988 Long-Term Incentives Plan, (ii) 1995 Long-Term
Incentives Plan and (iii) Directors Stock Plan, filed as Exhibit
10-e-3 to Rockwells Annual Report on Form 10-K for the year
ended September 30, 1997 (File No. 1-12383), is incorporated
herein by reference.*10-a-10
    
    Copy of resolution of the Board of Directors of Rockwell, adopted
December 2, 1998, assigning to the Company outstanding options to
purchase shares of Company Common Stock, filed as Exhibit 4.f.4
to the Companys Registration Statement on Form S-3 (Registration
No. 333-70085), is incorporated herein by reference.*10-a-11
    
    Copy of resolution of the Board of Directors of the Company,
adopted November 30, 1998, assuming outstanding options to
purchase shares of Company Common Stock, filed as Exhibit 4.f.5
to the Companys Registration Statement on Form S-3 (Registration
No. 333-70085), is incorporated herein by reference.*10-b-1
    
    Conexant Systems, Inc. 1999 Long-Term Incentives Plan, as
amended, filed as Exhibit 4.7 to the Companys Registration
Statement on Form S-8 (Registration No. 333-37918), is
incorporated herein by reference.*10-b-2
    
    Copy of resolution of the Board of Directors of the Company,
adopted April 20, 1999, amending the Companys 1999 Long-Term
Incentives Plan, filed as Exhibit 10-c-2 to the Companys Annual
Report on Form 10-K for the year ended September 30, 1999, is
incorporated herein by reference.*10-b-3
    
    Form of Stock Option Agreement under the Companys 1999 Long-Term
Incentives Plan, filed as Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999, is
incorporated herein by reference.*10-b-4
    
    Form of Restricted Stock Agreement (Performance Vesting) under
the Companys 1999 Long-Term Incentives Plan, filed as Exhibit
10.2 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, is incorporated herein by
reference.*10-b-5
    
    Form of Restricted Stock Agreement (Time Vesting) under the
Companys 1999 Long-Term Incentives Plan, filed as Exhibit 10.3
to the Companys Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference.
 94




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##### Table of Contents



Exhibits
    
    Description*10-b-6
    
    Memorandum of Adjustments to Outstanding Options Under the
Conexant Stock Plans approved and adopted by the Board of
Directors of the Company on May 9, 2002, as amended June 13,
2002, in connection with the Skyworks transaction, filed as
Exhibit 10-b-9 to the Companys Annual Report on Form 10-K for
the year ended September 30, 2002, is incorporated herein by
reference.*10-b-7
    
    Memorandum of Proposed Amendments to the Conexant Systems, Inc.
Stock Option Plans adopted by the Board of Directors of the
Company on June 13, 2002 in connection with the Skyworks
transaction, filed as Exhibit 10-b-10 to the Companys Annual
Report on Form 10-K for the year ended September 30, 2002, is
incorporated herein by reference.*10-b-8
    
    Memorandum of Adjustments to Outstanding Options Under the
Conexant Stock Plans approved and adopted by the Board of
Directors of the Company on June 5, 2003 in connection with the
Mindspeed spin-off, filed as Exhibit 10-b-11 to the Companys
Annual Report on Form 10-K for the year ended September 30, 2003,
is incorporated herein by reference.*10-b-9
    
    Memorandum of Proposed Amendments to the Conexant Systems, Inc.
Stock Option Plans adopted by the Board of Directors of the
Company on June 5, 2003 in connection with the Mindspeed
spin-off, filed as Exhibit 10-b-12 to the Companys Annual Report
on Form 10-K for the year ended September 30, 2003, is
incorporated herein by reference.*10-c-1
    
    Conexant Systems, Inc. Retirement
Savings Plan, as amended, filed as Exhibit 4.5 to the Company's
Registration Statement on Form S-8 (Registration No 333-139547), is
incorporated herein by reference.*10-d-1
    
    Copy of resolutions of the Board of Directors of the Company,
adopted August 13, 1999 amending, among other things, the
Companys 1999 Long-Term Incentives Plan, filed as Exhibit 10-e-1
to the Companys Annual Report on Form 10-K for the year ended
September 30, 1999, is incorporated herein by reference.*10-e-1
    
    Conexant Systems, Inc. Directors Stock Plan, as amended.*10-f-1
    
    Conexant Systems, Inc. 2000 Non-Qualified Stock Plan, as amended,
filed as Exhibit (D) (2) to the Companys Amendment No. 2 to
Schedule TO dated December 1, 2004, is incorporated herein by
reference.*10-f-2
    
    Resolutions adopted by the Board of Directors of the Company on
February 25, 2004 with respect to the use of shares available
under certain GlobespanVirata, Inc. stock plans for future grants
under the Conexant Systems, Inc. 2000 Non-Qualified Stock Plan,
filed as Exhibit 4.5.2 to the Companys Registration Statement on
Form S-8 (Registration No. 333-113595), is incorporated herein by
reference.*10-f-3
    
    Form of Stock Option Agreement under the Conexant Systems, Inc.
2000 Non-Qualified Stock Plan, as amended, filed as Exhibit
10-f-3 to the Companys Annual Report on Form 10-K for the year
ended September 30, 2004, is incorporated herein by reference.*10-g-1
    
    Conexant Systems, Inc. GlobespanVirata, Inc. 1999 Equity
Incentive Plan, as amended, filed as Exhibit 4.5.1 to the
Companys Registration Statement on Form S-8 (Registration No.
333-113399), is incorporated herein by reference.*10-h-1
    
    Conexant Systems, Inc. GlobespanVirata, Inc. 1999 Supplemental
Stock Option Plan, as amended, filed as Exhibit 4.5.2 to the
Companys Registration Statement on Form S-8 (Registration No.
333-113399), is incorporated herein by reference.*10-i-1
    
    Conexant Systems, Inc. Amended and Restated GlobespanVirata, Inc.
1999 Stock Incentive Plan, as amended, filed as Exhibit 4.5.3 to
the Companys Registration Statement on Form S-8 (Registration
No. 333-113399), is incorporated herein by reference.*10-j-1
    
    Conexant Systems, Inc. 2004 New-Hire Equity Incentive Plan, filed
as Exhibit 99.1 to the Companys Registration Statement on Form
S-8 (Registration No. 333-115983), is incorporated herein by
reference.*10-j-2
    
    Form of Stock Option Agreement under the Conexant Systems, Inc.
2004 New-Hire Equity
 95




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##### Table of Contents



Exhibits
    
    DescriptionIncentive Plan, filed as Exhibit 10-j-2 to
the Companys Annual Report on Form 10-K for the year ended
September 30, 2004, is incorporated herein by reference.*10-j-3
    
    Form of Restricted Stock Unit Award Agreement under the Conexant
Systems, Inc. 2004 New-Hire Equity Incentive Plan, filed as
Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for
the quarter ended June 29, 2007, is incorporated herein by
reference.*10-k-1
    
    Employment Agreement dated December 15, 1998 filed as Exhibit
10.5 to the Companys Quarterly Report on Form 10-Q for the
quarter ended December 31, 1998, is incorporated herein by
reference.*10-k-2
    
    Schedule identifying agreements substantially identical to the
Employment Agreement constituting Exhibit 10-k-1 hereto entered
into by the Company and certain executives of the Company.*10-k-3
    
    Employment Agreement dated December 15, 1998 between the Company
and D.W. Decker, filed as Exhibit 10.7 to the Companys Quarterly
Report on Form 10-Q for the quarter ended December 31, 1998, is
incorporated herein by reference.*10-k-4
    
    Employment Agreement dated as of December 18, 2002 by and between
the Company and J.S. Blouin, filed as Exhibit 10-f-5 to the
Companys Annual Report on Form 10-K for the year ended September
30, 2003, is incorporated herein by reference.*10-k-5
    
    General Agreement dated as of September 30, 2003 by and between
the Company and D.E. OReilly, filed as Exhibit 10-f-6 to the
Companys Annual Report on Form 10-K for the year ended September
30, 2003, is incorporated herein by reference.*10-k-6
    
    Employment Agreement between the Company and D.E. OReilly dated
as of January 15, 2004, filed as Exhibit 10.e to the Companys
Registration Statement on Form S-4 (Registration No. 333-111179),
is incorporated herein by reference.*10-k-7
    
    Amendment dated as of February 27, 2004 to Employment Agreement
between the Company and J.S. Blouin, filed as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004, is incorporated herein by reference.*10-k-8
    
    Employment Agreement between the Company and L.C. Brewster dated
as of February 27, 2004, filed as Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31,
2004, is incorporated herein by reference.*10-k-9
    
    Amended and Restated Employment Agreement by and between the
Company and D.W. Decker, filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K dated March 14, 2005, is incorporated
herein by reference.*10-k-10
    
    D.W. Decker Performance Share Award Grant Letter and Terms and
Conditions, filed as Exhibit 10.2 to the Companys Current Report
on Form 8-K dated May 9, 2005, is incorporated herein by
reference.*10-k-11
    
    Employment Agreement dated as of June 21, 2007 between the
Company and Daniel A. Artusi, filed as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
June 29, 2007, is incorporated herein by reference.*10-k-12
    
    Employment agreement dated as of August 24, 2007 between the
Company and Karen Roscher.*10-k-13
    
    Amendment to Employment Agreement and Separation and Release
Agreement dated as of September 4, 2007 between the Company and
J. Scott Blouin.*10-k-14
    
    Amendment to Employment Agreement and Separation and Release
Agreement dated as of October 2, 2007 between the Company and
Dennis E. OReilly*10-l-1
    
    Conexant Systems, Inc. 2001 Performance Share Plan and related
Performance Share Award Terms and Conditions, filed as Exhibit
99.1 to the Companys Registration Statement on Form S-8
(Registration Statement No. 333-73858), is incorporated herein by
reference.10-m-1
    
    Contribution and Distribution Agreement dated as of December 16,
2001, as amended as of June 25, 2002, by and between the Company
and Washington Sub, Inc. (excluding schedules) filed as Exhibit
2.2 to the Companys Current Report on Form 8-K dated July 1,
2002, is incorporated herein by reference.
 96




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##### Table of Contents



Exhibits
    
    Description10-m-2
    
    Employee Matters Agreement dated as of June 25, 2002 by and among
the Company, Washington Sub, Inc. and Alpha Industries, Inc.
(excluding schedules) filed as Exhibit 2.3 to the Companys
Current Report on Form 8-K dated July 1, 2002, is incorporated
herein by reference.10-m-3
    
    Tax Allocation Agreement dated as of June 25, 2002 by and among
the Company, Washington Sub, Inc. and Alpha Industries, Inc.
(excluding schedules) filed as Exhibit 2.4 to the Companys
Current Report on Form 8-K dated July 1, 2002, is incorporated
herein by reference.10-n-1
    
    Distribution Agreement dated as of June 25, 2003 by and between
the Company and Mindspeed Technologies, Inc. (excluding
schedules) filed as Exhibit 2.1 to the Companys Current Report
on Form 8-K dated July 1, 2003, is incorporated herein by
reference.10-n-2
    
    Employee Matters Agreement dated as of June 27, 2003 by and
between the Company and Mindspeed Technologies, Inc. (excluding
schedules) filed as Exhibit 2.2 to the Companys Current Report
on Form 8-K dated July 1, 2003, is incorporated herein by
reference.10-n-3
    
    Tax Allocation Agreement dated as of June 27, 2003 by and between
the Company and Mindspeed Technologies, Inc. (excluding
schedules) filed as Exhibit 2.3 to the Companys Current Report
on Form 8-K dated July 1, 2003, is incorporated herein by
reference.10-o-1
    
    Capacity & Reservation Deposit Agreement dated as of March 20,
2000 by and between the Company and UMC Group (USA), filed as
Exhibit 10-k-1 to the Companys Annual Report on Form 10-K for
the year ended September 30, 2002, is incorporated herein by
reference. **10-o-2
    
    Amendment No. 1 to Capacity & Reservation Deposit Agreement dated
as of March 24, 2000 between the Company and UMC Group (USA),
filed as Exhibit 10-k-2 to the Companys Annual Report on Form
10-K for the year ended September 30, 2002, is incorporated
herein by reference.10-o-3
    
    Amendment No. 2 to Capacity & Reservation Deposit Agreement dated
as of August 1, 2000 between the Company and UMC Group (USA),
filed as Exhibit 10-k-3 to the Companys Annual Report on Form
10-K for the year ended September 30, 2002, is incorporated
herein by reference. **10-o-4
    
    Amendment No. 3 to Capacity & Reservation Deposit Agreement dated
as of May 17, 2001 between the Company and UMC Group (USA), filed
as Exhibit 10-k-4 to the Companys Annual Report on Form 10-K for
the year ended September 30, 2002, is incorporated herein by
reference. **10-o-5
    
    Amendment No. 4 to Capacity & Reservation Deposit Agreement dated
as of August 24, 2001 between the Company and UMC Group (USA),
filed as Exhibit 10-k-5 to the Companys Annual Report on Form
10-K for the year ended September 30, 2002, is incorporated
herein by reference. **10-o-6
    
    Foundry Agreement dated as of July 27, 2000 by and between the
Company and UMC Group (USA), filed as Exhibit 10-k-6 to the
Companys Annual Report on Form 10-K for the year ended September
30, 2002, is incorporated herein by reference. ***10-p-1
    
    Form of Indemnity Agreement between the Company and the directors
and certain executives of the Company, filed as Exhibit 10-q-1 to
the Companys Annual Report on Form 10-K for the year ended
September 30, 2004, is incorporated herein by reference.*10-p-2
    
    Schedule identifying agreements substantially identical to the
Form of Indemnity Agreement constituting Exhibit 10-p-1 hereto
entered into by the Company and the directors and certain
executives of the Company.*10-q-1
    
    Summary of Non-Employee Director Compensation and Benefits.10-r-1
    
    Receivables Purchase Agreement dated as of November 29, 2005 by
and between Conexant USA, LLC and the Company, filed as Exhibit
99.1 to the Companys Current Report on Form 8-K dated December
1, 2005, is incorporated herein by reference.10-r-2
    
    Credit and Security Agreement dated as of November 29, 2005 by
and between Conexant USA, LLC and Wachovia Bank, National
Association, filed as Exhibit 99.2 to the Companys Current
Report on Form 8-K dated December 1, 2005, is incorporated herein
by reference.
 97




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##### Table of Contents



Exhibits
    
    Description10-r-3
    
    Servicing Agreement dated as of November 29, 2005 by and between
the Company and Conexant USA, LLC, filed as Exhibit 99.3 to the
Companys Current Report on Form 8-K dated December 1, 2005, is
incorporated herein by reference.10-r-4
    
    Extension Letter Agreement dated November 21, 2006 by and among
Wachovia Bank, National Association, the Company and Conexant
USA, LLC with respect to the Receivables Purchase Agreement
constituting Exhibit 10-r-1 hereto, the Credit and Security
Agreement constituting Exhibit 10-r-2 hereto and the Servicing
Agreement constituting Exhibit 10-r-3 hereto, filed as Exhibit
10-r-4 to the Companys Annual Report on Form 10-K for the year
ended September 29, 2006, is incorporated herein by reference.10-r-5
    
    Extension Letter Agreement dated
October 11, 2007 by and among
Wachovia Bank, National Association, the Company and Conexant
USA, LLC with respect to the Receivables Purchase Agreement
constituting Exhibit 10-r-1 hereto, the Credit and Security
Agreement constituting Exhibit 10-r-2 hereto and the Servicing
Agreement constituting Exhibit 10-r-3 hereto.*10-s-1
    
    Deferred Compensation Plan II effective January 1, 2005, filed as
Exhibit 99.1 to the Companys Current Report on Form 8-K dated
January 5, 2006, is incorporated herein by reference.10-t-1
    
    Agreement and Plan of Merger dated as of September 26, 2006 by
and among Acquicor Technology Inc., Joy Acquisition Corp., Jazz
Semiconductor, Inc. and T.C. Group, L.L.C., as the stockholders
representative, filed as Exhibit 10.1 to the Companys Current
Report on Form 8-K dated October 10, 2006, is incorporated herein
by reference.10-t-2
    
    Stockholder Support Agreement dated as of September 26, 2006 by
and among Acquicor Technology Inc., the Company, RF Micro
Devices, Inc., Carlyle Partners III, L.P., CP III Coinvestment,
L.P. and Carlyle High Yield Partners, L.P., filed as Exhibit 10.2
to the Companys Current Report on Form 8-K dated October 10,
2006, is incorporated herein by reference.*10-u-1
    
    The Companys 2007 Peak Performance Incentive Plan, filed as
Exhibit 99.1 to the Companys Current Report on Form 8-K dated
November 20, 2006, is incorporated herein by reference.*10-v-1
    
    The Companys 2008 Peak Performance
Incentive Plan, filed as Exhibit 10.1 to the Companys Current Report
on Form 8-K dated November 14, 2007, is incorporated herein by
reference.12
    
    Computation of Ratio of Earnings to Fixed Charges for each of the
five years ended September 28, 2007.21
    
    List of Subsidiaries of the Company.23
    
    Consent of Independent Registered Public Accounting Firm.24
    
    Power of Attorney authorizing certain persons to sign this Annual
Report on Form 10-K on behalf of certain directors and officers
of the Company.31.1
    
    Certification of Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-15(e) or Rule 15d-15(e).31.2
    
    Certification of Chief Financial Officer of Periodic Report
Pursuant to Rule 13a-15(e) or Rule 15d-15(e).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.**
    
    Certain confidential portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. Omitted portions have been filed separately with the Securities and
Exchange Commission. Exhibits
  Financial Statement Schedules
  98




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SIGNATURES
  CONEXANT SYSTEMS, INC.By:
    /s/ Daniel ArtusiDaniel ArtusiPresident and Chief Executive Officer 99




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##### Table of Contents



Signature
    
    TitleDwight W. Decker*

Dwight W. Decker
    
    Chairman of the Board/s/ Daniel Artusi

Daniel Artusi
    
    President and Chief Executive Officer
(Principal Executive Officer)Karen Roscher*

Karen Roscher
    
    Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)Steven J. Bilodeau*

Steven J. Bilodeau
    
    DirectorF. Craig Farrill*

F. Craig Farrill
    
    DirectorBalakrishnan S. Iyer*

Balakrishnan S. Iyer
    
    DirectorJohn W. Marren*

John W. Marren
    
    DirectorD. Scott Mercer*

D. Scott Mercer
    
    DirectorJerre L. Stead*

Jerre L. Stead
    
    Director
 
 *By:
    
    /s/ KAREN ROSCHERKaren Roscher, Attorney-in-fact****
    
    By authority of the power of attorney filed as Exhibit 24 hereto
 100




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##### Table of Contents



SCHEDULE II
 VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
 ChargedBalance at
    
    (Credited)
    
    Additions
    
    Balance atBeginning
    
    to Costs and
    
    (Deductions)
    
    End ofDescription
    
    of Year
    
    Expenses
    
    (1)
    
    YearFiscal year ended September 28, 2007:Allowance for doubtful accounts
    
    $
    842
    
    
    $
    20
    
    
    $
    797
    
    
    $
    1,659Reserve for sales returns
    
    
    3,248
    
    
    
    988
    
    
    
    (972
    )
    
    
    3,264Reserve for pricing allowances
    
    
    500
    
    
    
    (500
    )
    
    
    
    
    
    
    Allowance for excess and
obsolete inventories
    
    
    36,632
    
    
    
    565
    
    
    
    (15,016
    )
    
    
    22,181Allowance for lower of cost or
market inventories
    
    
    1,761
    
    
    
    (1,159
    )
    
    
    (223
    )
    
    
    379Fiscal year ended September 29, 2006:Allowance for doubtful accounts
    
    $
    3,803
    
    
    $
    (2,192
    )
    
    $
    (769
    )
    
    $
    842Reserve for sales returns
    
    
    5,789
    
    
    
    134
    
    
    
    (2,675
    )
    
    
    3,248Reserve for pricing allowances
    
    
    5,400
    
    
    
    (4,900
    )
    
    
    
    
    
    
    500Allowance for excess and
obsolete inventories
    
    
    44,833
    
    
    
    3,048
    
    
    
    (11,249
    )
    
    
    36,632Allowance for lower of cost or
market inventories
    
    
    6,739
    
    
    
    (4,932
    )
    
    
    (46
    )
    
    
    1,761Fiscal year ended September 30, 2005:Allowance for doubtful accounts
    
    $
    5,974
    
    
    $
    (1,587
    )
    
    $
    (584
    )
    
    $
    3,803Reserve for sales returns
    
    
    9,474
    
    
    
    24,179
    
    
    
    (27,864
    )
    
    
    5,789Reserve for pricing allowances
    
    
    2,500
    
    
    
    2,900
    
    
    
    
    
    
    
    5,400Allowance for excess and
obsolete inventories
    
    
    23,319
    
    
    
    30,080
    
    
    
    (8,566
    )
    
    
    44,833Allowance for lower of cost or
market inventories
    
    
    
    
    
    
    14,004
    
    
    
    (7,265
    )
    
    
    6,739
 
 (1)
    
    Deductions in the allowance for doubtful accounts reflect amounts written off. 101




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##### Table of Contents



EXHIBIT INDEX
 Exhibits
    
    Description*10-e-1
    
    Conexant Systems, Inc. Directors
Stock Plan, as amended.*10-k-2
    
    Schedule identifying agreements substantially identical to the
Employment Agreement constituting Exhibit 10-k-1 hereto entered
into by the Company and certain executives of the Company.*10-k-12
    
    Employment Agreement dated as of
August 24, 2007 between the Company and Karen Roscher.*10-k-13
    
    Amendment to Employment Agreement
and Separation and Release Agreement dated as of September 4, 2007
between the Company and J. Scott Blouin.*10-k-14
    
    Amendment to Employment Agreement and
Separation and Release Agreement dated as of October 2, 2007 between
the Company and Dennis E. O'Reilly.*10-p-2
    
    Schedule identifying agreements substantially identical to the
Form of Indemnity Agreement constituting Exhibit 10-p-1 hereto
entered into by the Company and the directors and certain
executives of the Company.*10-q-1
    
    Summary of Non-Employee Director Compensation and Benefits.10-r-5
    
    Extension Letter Agreement dated October 11, 2007 by and among
Wachovia Bank, National Association, the Company and Conexant USA,
LLC with respect to the Receivables Purchase Agreement
constituting Exhibit 10-r-1 hereto, the Credit and Security
Agreement constituting Exhibit 10-r-2 hereto and the Servicing
Agreement constituting Exhibit 10-r-3 hereto.12
    
    Computation of Ratio of Earnings to Fixed Charges for each of the
five years ended September 28, 200721
    
    List of Subsidiaries of the Company.23
    
    Consent of Independent Registered Public Accounting Firm.24
    
    Power of Attorney authorizing certain persons to sign this Annual
Report on Form 10-K on behalf of certain directors and officers of
the Company.31.1
    
    Certification of Chief Executive Officer of Periodic Report
Pursuant to Rule 13a-15(e) or Rule 15d-15(e).31.2
    
    Certification of Chief Financial Officer of Periodic Report
Pursuant to Rule 13a-15(e) or Rule 15d-15(e).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.