Conexant Turns Eye to Small Tech Targets

Conexant Systems Inc. is expected to acquire small technology companies in coming months in an effort to boost its position in communications chips, the Newport Beach-based company’s chief executive said Wednesday.

Dwight Decker, chairman and chief executive, said Conexant is in “serious, near-term discussions” with a number of acquisition targets, mostly small companies with revenue less than $50 million.

Although Conexant hasn’t been active to date, rivals Intel Corp. in Santa Clara and Irvine-based Broadcom Corp. have been acquiring communication-technology companies as Internet demand has exploded.

The presence of such acquisition-minded competitors has raised prices for targets to a degree, Decker said.

It has also forced Conexant, which spun off from Rockwell International Corp. in January, to join the fray in an effort to make sure it stays current in all the right technologies, he added.

The company had planned on making acquisitions in mid-2000, but Decker said the increased pace of the industry has forced Conexant to move more quickly.

Decker said he expects information appliances, which connect to the Internet and are simpler than computers, to catch on slowly over time. He believes high-speed Internet technologies must be adopted first to make the appliances more useful.

As a result, he says, more attractive markets include chips for home-networking devices and for the asynchronous digital subscriber lines that allow users to connect to the Internet at high speeds over phone lines.

“I still see the PC as being the main connection to the Internet for a very long time,” he said.

Conexant posted earnings of $38 million for the fourth quarter ended Sept. 30 on revenue of $452.2 million.

About 38% of the business is PC modem chips, in contrast to 55% about a year ago.

Decker said he expects operating income to grow 20% in the fiscal first quarter.

The company makes a variety of communications chips, including networking chips, wireless communications chips for cellular phones, cable-modem chips and chips for digital satellite set-top boxes.