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To: drsvelte who wrote (13957)	10/4/2000 9:26:17 AM
From: LiamCK	Respond to of 14427

I'm thinking CNXT is filling the gap and should we worth a shot at $33. Not that sell side analysts are right, or that Briefing.com is good at picking stocks: 14-Sep-00 12:00 -- 13:00 ET Conexant (CNXT) 51 +13 15/16: -- Update -- Goldman Sachs reiterates MARKET OUTPERFORM following yesterday's announcement that it will separate its company into two separate entities; firm states that they are highly positive on the transaction and expect significant price appreciation from current levels; with a growth rate and margin profile that is comparable to the other wireless IC vendors, the spin-off could potentially command a 15-20x 2001 revenue multiple. 14-Sep-00 09:30 -- 10:00 ET Conexant (CNXT) 47 5/8 +10 9/16: -- Update -- CE Unterberg Towbin upgrades to STRONG BUY from BUY rating with a price target of $96; Chase H&Q upgrades to BUY from MARKET PERFORM. 14-Sep-00 BEFORE THE OPEN Conexant (CNXT) 37 1/16: SG Cowen upgrades to STRONG BUY from BUY after the company announces plans to spin-off its Net infrastructure business through an initial public offering. 18-Sep-00 14:43 ET Conexant (CNXT) 45 7/8 -4: Last week, Conexant announced intentions to spin-off its Network Access Division, or NAD. The announcement drove a 48% spike in CNXT shares before settling just under $50 per share Friday afternoon. A note from Frost Securities attempts to valuate a reorganized Conexant using P/S/G (Price/Sales/Growth rate) comparables, and the results are somewhat startling. Starting with the NAD, Frost estimates FY00 sales of $550 mln and a 3-5 yr growth rate of 45%. Using comparables such as AMCC, ADI, PMCS, VTSS and others, CNXT's NAD should command a market cap between $18.7 and $20.1 bln ($79-86/share) -- CNXT as a whole now carries a market cap of $11.4 bln -- a strong case is made for the spin-off. Onto the other divisions, Frost estimates the Wireless division will have $423 mln in FY00 sales and $580 mln in FY01 and uses comparables of ANAD, TQNT and RFMD to derive an average P/S of 9.32x for FY00, when adding a 45% annual growth rate to the equation, CNXT's wireless division should be valued around $3.87 to $3.94 bln ($15.50-15.90/share). The Infotainment division competes with BRCM, CUBE and TUNE which have an average 2000 P/S/G of 1.05, valuing the division at $5.5 to $6.1 bln ($50-54/share). PC Access division comps include ESST, PCTL and SLAB. CNXT's PC Access division's 2000 estimated sales are approximately $740 mln with a conservative growth rate estimate of 15%. Applying the average 2000 P/S/G of 0.27, CNXT's PC Access division is worth $5.7 to $6.8 bln ($10-12/share). Add these numbers up and you get a potential market cap of $33.8-36.9 bln and a share price of $154-167 per share versus CNXT's current valuation of $11.4 bln and $46 per share. In fact, as recently as February, CNXT shares traded as high as $132 per share, making that valuation seem not-so-ridiculous. Frost contends that CNXT receives their mulitple discount from the market because investors favor pure plays in high growth markets such as Internet infrastructure and wireless. We would add that diversity is a good thing and can insulate overall results from sector downturns in the volatile chip industry. Of course on the flipside, diversity limits benefits from upturns in specific chip sectors, but with increasing uncertainty regarding the current chip cycle's maturity and industry-wide problems from wireless communications companies, we would argue that now is a good time to look for diversity in your semiconductor investments. - Matt Gould, Briefing.com 14-Sep-00 09:23 ET Conexant (CNXT) 37 1/16: Nothing like spinning off a division to get your stock moving. Conexant Systems is trading up $8 in the pre-market after making the smart decision to spin-off its Internet infrastructure business. The announcement is jump starting the shares which have been languishing since their Feb high of $132 (chart)....SG Cowen raised its rating on the stock to Strong Buy from Buy...The company will be spinning-off its crown jewel - its Network Access Division (NAD) which focuses on providing chip and software solutions for Internet infrastructure equipment makers. The remaining company will focus on personal networking applications including Conexant's four other product divisions: wireless communications, digital infotainment, personal imaging and personal computing....They expect the IPO for 20% of the company will happen in January 2001 with the remaining 80% to be spun-off in the summer of 2001....NAD is posting some solid numbers growing sales roughly 100% per year vs 30% for the four remaining divisions. Granted, as the size grows, maintaining those growth rates will become difficult, but it's impressive. The company expects to hit $1 bln in sales next year....So what's NAD worth as a separate company? Let's look at a couple of competitors in that space: Applied Micro Circuits (AMCC 179 7/8) and Vitesse Semiconductor (VTSS 83 1/2) are trading at LTM p/s ratios of 105x and 39x, respectively. Using the 1:1 ratio the company expects to spin the company off to shareholders, NAD would be worth about 35% more than the whole company is worth now assuming a p/s ratio half that of VTSS. At a p/s of just 19.5x with NAD representing 29% of CNXT sales (which computes to $578 mln), the market cap of the spin-off would be worth roughly $11.3 bln vs CNXT's current mkt value of $8.4 bln. We believe this is a conservative estimate and should give investors some insight as to the value being unlocked. -- Robert J. Reid, Briefing.com