Conexant Reports Fourth Quarter and Fiscal Year 2001 Results

Performance Exceeds Expectations Driven by 24% Sequential Growth in Wireless Communications

Newport Beach, CA. Conexant Systems, Inc. (Nasdaq: CNXT) today announced revenues of $201 million for the fourth fiscal quarter ended Sept. 30, 2001, compared with prior quarter revenues of $200.1 million.

Revenues for fiscal year 2001 were $1.1 billion, compared with fiscal 2000 revenues of $2.1 billion. The pro forma net loss for the fourth fiscal quarter was $136.6 million, or $0.54 per share, compared with a pro forma net loss of $220.4 million, or $0.89 per share, in the prior quarter. The pro forma net loss for fiscal 2001 totaled $601.9 million, or $2.46 per share, compared with pro forma net income of $195.5 million, or $0.84 per share, in fiscal 2000. Pro forma results exclude amortization of intangible assets and special charges.

During fiscal 2001, we focused on strengthening strategic product portfolios, reducing operating expenses and capital expenditures, realigning manufacturing operations, and divesting non-core businesses as we managed through the fastest, steepest decline in the history of the semiconductor industry, said Dwight W. Decker, Conexant chairman and chief executive officer.

Revenues for our fourth fiscal quarter were approximately five percent higher than expectations set at the beginning of the quarter. We also exceeded our targets for operating cost reductions. Fourth quarter revenues in our personal networking business increased nine percent sequentially, led by a strong sequential revenue growth of 24 percent in wireless communications and supported by a revenue stabilization in our PC-related businesses, said Decker.

Mindspeed Technologies™ continued to confront a very weak Internet infrastructure environment, but we remain encouraged by the market acceptance of key leadership products announced over the past year. In fact, Mindspeed design wins more than doubled from the prior quarter, and we expanded our product portfolio with the introduction of significant new products.

During the quarter, expense reduction programs resulted in a further sequential decline of 10 percent in operating expenses, and a total decline of 20 percent from the expense level of two quarters ago. Working capital management resulted in a 21 percent reduction in total account receivables and inventories, following the 36 percent decline in this metric achieved in the prior quarter.

The company reduced its cash consumption for the quarter to $39 million, down nearly 40 percent from the prior quarter, and down approximately 80 percent from the level of two quarters ago. As a result, the company maintains a cash and other liquid assets balance of approximately $500 million.

Quarterly Business Overview

In personal networking, the company s wireless communications business reached a key milestone with the shipment of its 100 millionth power amplifier (PA) module. Volume ramps of GPRS and CDMA 1X-based PA modules commenced, with shipments to several customers including Nokia, Motorola, Ericsson and Samsung.
Building on its technology roadmap leadership position, the company began sampling a new gallium arsenide PA module based on indium gallium phosphide (InGaP) technology that is packaged in a 4mm x 4mm module, the industry s smallest form factor. In RF subsystems, volume shipments of the company s direct conversion transceiver began, and design wins climbed to more than a dozen. Wireless communications also continued to gain traction in cellular systems, shipping a record 1 million cellular system chipset solutions during the quarter.

In broadband access, the company introduced a complete asynchronous digital subscriber line (ADSL) router-on-a-chip that replaces up to four competitor devices from multiple semiconductor and software vendors. Additionally, Conexant earned key industry certifications from national laboratories in China, becoming the only semiconductor company in the world that is currently shipping certified ADSL chipsets for peripheral component interconnect (PCI), universal serial bus (USB), and Ethernet solutions to China.
Conexant also announced the industry s first single-chip, dual-stream demodulator for the personal video recording market. On the cable modem front, the company received its first Euro-DOCSIS™ certifications with two customers, while the number of DOCSIS™-certified platforms based on the InfoSurge™ solution rose to nearly 30.

Mindspeed continued to expand its product portfolio. In its SkyRail™ product family, Mindspeed launched the industry s fastest and lowest power CMOS-based eight-port serializer/deserializer (SerDes), and commenced shipments of its 10-gigabit per second SerDes transceivers.

It also introduced a next-generation RingMaker™ ring processing chipset based on resilient packet ring (RPR) technology, enabling ring-based metro and intra-point-of-presence networks to deliver carrier-class packet data services over the existing optical Internet infrastructure. Mindspeed also announced a complete family of low power, single-chip inverse multiplexing over ATM (IMA) devices designed for a wide range of T/E and DSL applications that allows networking equipment to support scalable bandwidth requirements up to 45 megabits per second while significantly reducing systems costs.

First Quarter Fiscal 2002 Outlook Clearly, this is a particularly difficult time in which to offer even a one-quarter outlook. While we have not yet seen any impact from the September 11 tragedy, there is obvious uncertainty surrounding the macroeconomic environment and its potential effect on consumer purchasing patterns, said Decker.
Setting these uncertainties aside, we remain encouraged by both the strong growth in our wireless communications business and the revenue stabilization within our PC-related segments.

Ninety days ago we communicated that we believed we were at a revenue bottom within personal networking; our performance last quarter, coupled with improvements in order visibility to date, reinforces our belief that the bottom in this business is now behind us. Accordingly, we expect our personal networking business to again deliver sequential revenue growth.

In our Mindspeed business, we continue to face weak Internet infrastructure market fundamentals and as a result, we anticipate a revenue decline in the current quarter. In total, we expect Conexant s revenues for our first fiscal quarter to grow modestly on a sequential basis.

We also anticipate further operating performance improvements, driven by higher manufacturing utilization and continued progress in our many cost-reduction initiatives. As a result, we expect to deliver a further 15 percent sequential improvement in the level of our pro forma operating loss, Decker concluded.
Additional Fourth Quarter Product Highlights

Wireless Communications announced a new PA module for wideband code division multiple access (WCDMA) handsets. Customer announcements included Acer Communications and Multimedia s selection of Conexant s GSM dual-band PA module, and Samsung s selection of Conexant s GSM/GPRS system solution. The company s Bluetooth™ radio, link manager and complete Bluetooth system solution achieved compliance certification with the Bluetooth Special Interest Group specification 1.1.

Digital Infotainment announced that UEC Technologies incorporated the CN9414 InfoSurge cable modem into its next-generation digital set-top boxes. Pace Micro Technology integrated Conexant s CX22490 interactive TV MPEG decoder chipset in home gateways for European operators. The chipset enables cable operators to provide interactive TV services such as e-mail, Internet access, home shopping and banking, as well as high-speed data to external PCs.

Personal Computing announced that Compaq Computer commenced shipments of Conexant s V.92 modems with NetWaiting(TM), a new software application for V.92-based dial-up modems that supports Call Waiting and Caller ID, and ModemXpert™, Conexant s user-friendly modem diagnostic program. Compaq also chose Conexant s modem technology for both its iPAQ™ music center and Presario™ 1200 notebooks.
Mindspeed announced a protocol-agnostic OC-48 network processor and firmware solution for packet- and cell-based traffic management. Mindspeed successfully demonstrated 10-gigabit Attachment Unit Interface (XAUI) technology interoperability between its SkyRail SerDes transceiver and multiple optical module vendors.
XAUI is designed to the IEEE 802.3ae 10 Gigabit Ethernet specification to support enterprise backbone and metropolitan area networks.

Note to Editors, Analysts and Investors The Conexant Q4 FY01 conference call will take place on Thursday, Oct. 18, 2001, at 2 p.m. (PDT)/5 p.m. (EDT). To listen to the conference call via telephone, call 800/680-9685 (domestic) or 334/323-9854 (international); security code: Conexant. To listen via the Internet, visit either www.conexant.com or www.streetfusion.com.

Playback of the conference call will begin at 5 p.m. (PDT) on Thursday, Oct. 18, and end at 5 p.m. (PDT) on Friday, Oct. 19, 2001. The replay will be available on Conexant s Web site at www.conexant.com or by calling 800/858-5309 (domestic) or 334/260-0890 (international); access code: 40313; pass code: 16809.
About Conexant Conexant Systems, Inc. is a worldwide leader in semiconductor system solutions for communications applications. Conexant leverages its expertise in mixed-signal processing to deliver integrated systems and semiconductor products through two separate businesses: Conexant and Mindspeed Technologies.

Conexant s personal networking business is focused on wireless communications, digital infotainment and personal computing products that are used in mobile communications and the broadband digital home. Mindspeed Technologies designs, develops and sells a complete portfolio of semiconductor networking solutions that facilitate the aggregation, transmission and switching of data, video and voice from the edge of the Internet to linked metropolitan area networks and long-haul networks.

Conexant, headquartered in Newport Beach, Calif., delivered revenues of $1.1 billion for fiscal 2001 and has approximately 6,500 employee worldwide. The company is a member of the S&P 500 and NASDAQ-100 indices. To learn more, visit us at www.conexant.com or www.mindspeed.com.

Safe Harbor Statement This news release contains statements relating to future results of Conexant (including certain projections and business trends) that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to: maintaining a consistent and reliable source of energy; global economic and market conditions, such as the cyclical nature of the semiconductor industry and the markets addressed by the company s and its customers products; demand for and market acceptance of new and existing products; successful development of new products; the timing of new product introductions; the availability and extent of utilization of manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; fluctuations in manufacturing yields; product obsolescence; the ability to develop and implement new technologies and to obtain protection for the related intellectual property; the successful planned disposition of certain assets; the successful separation of the company s Internet infrastructure and personal networking businesses; the ability to attract and retain qualified personnel; labor relations of the company, its customers and suppliers; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to the security and safety risks of our employees and of Company facilities and those risks and uncertainties detailed from time to time in the company s Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Contact: Conexant Systems, Inc., Newport Beach Gwen Carlson (editorial) Tel: 949 483-7363 or Thomas Schiller (investor relations) Tel: 949 483-4707