The notes will be redeemed at a cash redemption price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to the redemption date.

Management plans to use the cash balance on the balance sheet to fund the redemption of debt and strengthen its capital structure. The company had earlier raised $21.2 million by offering 8,050,000 shares to the public.

As a result of this retirement of debt, Conexant will reduce its annual interest burden by more than $5 million. As of July 3, 2009, Conexant had a total debt of $422.1 million and cash and equivalents of $123.4 million.

While Conexant continues to face challenges with eroding sales in WLAN, a flattening ADSL market and declining revenue in its modem business, new management is making drastic changes to overhaul the company’s strategic positioning and return to profitability.

Management undertook significant restructuring activities to transform the business into a smaller but profitable enterprise. In August 2009, the company divested its Broadaband Access Product lines. The company also terminated new investments in wireless networking and divested its Broadband Media Processing business. Management will now target acquisitions to strengthen its product portfolio.

Conexant will now apply its capabilities in analog and mixed-signal design and firmware and software development to capitalize on new opportunities in adjacent markets.

Last month, the company reported revenues of $56.2 million in the fourth quarter of fiscal 2009, up 10% sequentially but down 31% year over year. Profitability improved due to cost cutting activities undertaken by the management.

The company also provided an upbeat outlook for the coming quarter. Revenues are expected to increase 7% sequentially.

Headquartered in Newport Beach, California, Conexant Systems designs and develops semiconductor solutions that enable consumers to access the digital world. It operates in an intensely competitive market with many rivals in and outside the United States, including Analog Devices (ADI), Broadcom Corp. (BRCM) and Texas Instruments (TXN).

With the sale of its broadband access business, the company completed a major part of its restructuring and now plans to concentrate solely on providing solutions for imaging, audio, video and various embedded-modem applications.

Management said that the company will use all proceeds to strengthen its balance sheet by retiring debt. Conexant had already announced plans to retire $80 million aggregate principal amount of floating rate senior secured notes due in November 2010. It will commence a tender offer for $73 million notes and intends to buy an additional $7 million of the notes. As a result of this retirement of debt, Conexant will reduce its annual interest burden by more than $5 million. Management also plans to reduce its workforce by 100 employees to lower operating expenses by approximately $3 million per quarter.

Headquartered in Newport Beach, California, Conexant Systems designs and develops semiconductor solutions that enable consumers to access the digital world. It operates in an intensely competitive market with many rivals in and outside the United States, including Analog Devices (ADI) Broadcom Corp. (BRCM) and Texas Instruments (TXN).

While Conexant continues to face challenges with eroding sales in WLAN, a flattening ADSL market and declining revenue in its modem business, the new management is making drastic changes to overhaul the company’s strategic positioning and return to profitability.

Management continues to evolve the new Conexant and believe they are getting to the final stages. However, we would like to get more comfortable with the direction of the company and further confidence in the sustainability of recent results.

BT Group’s aim is to become the leading provider of networked IT services to mid and large-sized businesses and the public sector in general in Ireland. Vodafone will become the number-two player in the fixed broadband market and enjoy a 15% market share of the fixed broadband market. The value of the gross assets that are the subject of this transaction was 4.8 million euros at the end of March 2009.

In all its business segments, BT Group has been transforming itself from being a traditional telecom operator to a innovative provider of telecom solutions, and it is now taking advantage of future growth prospects, as it moves away from traditional businesses and into what it calls “New-Wave" businesses, such as broadband, Voice over Internet Protocol (VoIP), Wireless Internet Access, Networked IT services and IPTV. We believe BT Group’s New-Wave businesses are the drivers behind any growth the company will experience in the coming years, and BT Group understands that it has to constantly evolve with technology in order to stay ahead in the telecommunications business.

BT Group is an incumbent phone company providing fixed-line and data services to the United Kingdom. It owns or has stakes in operations in North America, the Asia/Pacific region, and Western Europe. BT Retail is the largest communications service provider by market share to consumers and businesses in the United Kingdom. It supplies a wide range of communication products, including voice, data, Internet, and multimedia services. The BT Wholesale segment provides network services and solutions within the United Kingdom, including its Asymmetric Digital Subscriber Line (ADSL) and Integrated Services Digital Network (ISDN) to BT Retail and BT Global Services, as well as to other communication companies, fixed and mobile network operators, and service providers.

Openreach was established in January of 2006 in response to OFCOM (UK Office of Communications) strategic review of the communications industry in the UK, and operates the physical assets of the local access and backhaul networks and provides the services which use those networks to communications providers, both internally and externally, and was spun out of BT Wholesale to become a completely independent entity from BT, although it remains wholly-owned by the BT Group. BT Global Services is BT Group’s managed services and solutions arm, serving multi-site organizations. 

We continue to maintain our Hold rating on BT Group.

Conexant designs and develops semiconductor solutions that enable consumers to access the digital world. The company intends to use the net proceeds from the sale of securities for repaying, redeeming, or repurchasing existing debt. Conexant can also use these proceeds for working capital, capital expenditures and acquisitions.

The balance sheet of the company is highly leveraged. Conexant ended the second quarter with a total debt of $421.1 million against cash balance of $110.3 million. The company operates in an intensely competitive market with big players like Analog Devices (ADI), Broadcom (BRCM) and Texas Instruments (TXN). Conexant is quite small compared to its rivals.

While Conexant’s business continues to face challenges in its eroding business segments (WLAN, a flattening ADSL market and declining revenues in its modem business), we expect the new management to make drastic changes to overhaul the company’s strategic positioning and hasten the return to profitability. The company sold off its Broadband business in April 2009 and plans to use the cash for repaying debt.

FY2008 appeared to be a period of consolidation and recovery for Conexant, which may extend all the way into fiscal 2009. Meanwhile, OEM inventory levels have normalized and there is evidence of inventory replenishments, which combined with a seasonal build-up ahead of the second-half, has led to a re-acceleration in revenue trends for semiconductor companies in Q3/Q4.

However, we would look for more comfort in the direction of the company and confidence in the sustainability of recent results. We maintain a Hold on the stock ahead of the third quarter results, expected on July 30, 2009.