By Clint Boulton

November 03, 2003

The combined entity aims to be a leading provider of components to enable home networking vis-a-vis consumer electronics devices.

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Looking to become the leading provider of broadband-driven products for the home, Conexant Systems and GlobespanVirata Monday agreed to merge in a stock deal with about $969.5 million.

Under the terms of the deal, GlobespanVirata shareholders will receive 1.198 shares of Conexant common stock for each share of GlobespanVirata stock. Based on the share counts for the two companies as of market close on Friday, October 31, Conexant and GlobespanVirata shareholders will own 62.75 percent and 37.25 percent, respectively, of the combined entity.

Newport Beach, Calif., Conexant makes home network processors, ADSL modems multimedia decoders and encoders and wireless networking technologies. GlobespanVirata, formed through the merger of GlobeSpan and Virata and headquartered in Red Bank, N.J. creates integrated circuits, software and systems for digital subscriber-line applications.

The goal is to create a business that will infiltrate the lucrative market for consumer products that are powered by broadband in the home. Specifically, Conexant and GlobespanVirata envisions a “digital home” where a network pipes broadband Internet access and links devices such as personal computers, printers and game consoles using both wired and wireless technologies.

Conexant and Globespan are hardly alone in their theory. Companies such as Microsoft and Cisco are banking on the promise of home digital entertainment networks, where consumers rely on IT instead of traditional cable boxes to feed digital video and audio content through their PCs and, eventually, connect products such as personal digital assistants, digital cameras, MP3 players, and other handheld gadgets.

Microsoft would love to see its Windows-based PCs and corresponding media software and applications drive home networks. Cisco plucked Linksys, a a leading manufacturer of home networking products for consumers and small office/home office (SOHO) users, from the infrastructure patch for about $500 million earlier this year.

Research firms such as In-stat/MDR claim broadband digital home networks will eventually include stereos, set-top boxes, televisions, and home security and automation systems and garner a multi-billion dollar opportunity.

“With the addition of GlobespanVirata’s highly complementary product portfolio, we gain key end-to-end digital subscriber line connectivity with a leading position in central office applications worldwide,” said Dwight W. Decker, Conexant chairman and chief executive officer who will become the combined company’s chairman. “We also benefit by adding GlobespanVirata’s leadership position in wireless local area networking, a critical technology for the digital home.

The combined company will retain the Conexant name and its stock will continue to trade on the Nasdaq market under the ticker symbol “CNXT.” Current GlobespanVirata CEO Armando Geday will serve as chief executive officer of the company and his colleague Matt Rhodes will serve as president. The board of directors of the combined company will have 12 members, with Conexant designating seven directors, including Decker, and GlobespanVirata designating Geday and four others.

The combined organization would be valued at about $2.8 billion based on the market values of each company on October 31 and will employ some 2,400 people worldwide. The organization would remain headquartered at GlobespanVirata’s current headquarters in Red Bank.

The transaction is expected to close in the first quarter of calendar 2004.