Rockwell-Spins off Conexant (CNXT) Message Board

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Technology Stocks : Rockwell-Spins off Conexant (CNXT)

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To: David W. Taylor who wrote (1766)	11/29/2000 4:16:56 PM
From: FACTUAL	Read Replies (1) of 2013

The value of Conexant is easy to determine. Post split the Internet Appliance group may have net returns of 6-8%, its historical range for unstable cash flow coming from short product cycle business'. This net return of say 80 million dollars at a PE of say 20 ( they will have a hard time growing earnings; free cash flow might even be negative as they plough the cash back into the fabs) gives a mkt cap of 1.6 Billion. At over 200 million shares these shares will be worth about $8 at best. I would say buy at $4 and sell at $8. The remaining business could generate a net return of $110 million ( 15% net return ) but with much slower growth compared to PMCS, BRCM etc. It appears that NAD gross margin is also lower by about 20 points. With a PE of say 35 this is worth best case $4 billion. With the same number of shares it is worth best case $20. I would say buy at $12 and sell at $20. In this case CNXT is a buy at $16 and a sell at $28. In the middle it is a hold. Always keep in mind that if we did a free cash flow based valuation rather than an earning based one, the values would be much lower.

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