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Friday, August 18, 2006

Conexant's Mystery Run

Stocks: (CNXT)

Conexant's results for Q2 06 numbers were fairly good. Revenue was $252 million.That was up from $197 million the year before. Gross margins were excellent at 52% up from 38%. The company had large legal fees for litigation with Texas Instruments.

But, all of that happended weeks ago.

On August 15, Conexant's stock traded at $1.70. Yesterday, it moved over $2.10. It is a little late for the maker of semiconductors for broadband applications to be caught in the wake of Cisco's positive earnings which pushed up a number of tech stocks.

Conexant has been raising money to fund operations, which is obviously not good.

But, there is an emerging consensus the the company may do well in the first half of 2007. On one side of the opinion scale, Credit Suisse downgraded the stock on concerns that the company can maintain margin and revenue growth. Investment bank Baird, on the other hand, believes that new products will make the chance of profitability better next year.

It is also possible that the company is being looked at as a takeover targer. The $600 million of long-term debt would make this difficult. $456 million of this is due in the next year. The company has $365 million in cash and marketable securities. But, with the company moving closer to breakeven, and a market cap of only $1 billion, which is one time sales according to Yahoo!Finance, Conexant might be on someone's radar.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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