UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended October 1, 2010
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-24923

CONEXANT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State of incorporation)		25-1799439 (I.R.S. Employer Identification No.)
Delaware		25-1799439
4000 MacArthur Boulevard Newport Beach, California (Address of principal executive offices)		92660-3095 (Zip code)
(State of incorporation)		(I.R.S. Employer Identification No.)

Registrant’s telephone number, including area code:

4000 MacArthur Boulevard

Newport Beach, California

92660-3095

(Address of principal executive offices)

(Zip code)

Securities registered pursuant to Section 12(~~949~~b) ~~483-4600~~ of the Act: None

Securities registered pursuant to Section 12(bg) of the Act: None

Title of Each Class:		Name of Each Exchange on Which Registered:
Common Stock, $0.01 Par Value Per Share		The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

~~Securities~~Indicate ~~registered~~by check mark if the registrant is not required to file reports pursuant to Section 1213 or Section 15(gd) of the Act: . Yes x No ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of ~~None~~the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Explanatory Note: While the registrant is not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act, it has filed all reports pursuant to Section 13 or 15(d) of the Exchange Act during the preceding 12 months.

Indicate by check mark ifwhether the registrant ishas asubmitted ~~well-known seasoned~~electronically ~~issuer~~and posted on its corporate Web site, asif ~~defined~~any, inevery Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the ~~Securities~~preceding 12 months (or for such shorter period that the registrant was required to ~~Act~~submit and post such files). Yes o x No þ ¨

Indicate by check mark if ~~the~~disclosure ~~registrant~~of delinquent filers pursuant to Item 405 of Regulation S-K is not ~~required~~contained toherein, ~~file~~and ~~reports~~will ~~pursuant~~not be contained, to ~~Section 13~~the best of registrant’s knowledge, in definitive proxy or ~~Section~~information statements incorporated by reference in Part ~~15(d)~~III of ~~the Act. Yes~~this Form ~~o No~~10-K or any amendment to this Form þ 10-K. x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o¨ Accelerated filer þ¨ Non-accelerated filer ox (Do not check if a smaller reporting company) Smaller reporting company o¨

~~(Do~~Indicate ~~not~~by check ifmark awhether ~~smaller~~the ~~reporting~~registrant is a shell company) (as defined in Rule 12b-2 of the Act). Yes ¨ No x

~~Indicate~~The byaggregate ~~check~~market ~~mark~~value ~~whether~~of the registrant’s voting and non-voting common equity held by non-affiliates is azero. ~~shell~~There ~~company~~is ~~(as~~currently ~~defined~~no ~~in Rule~~established public trading market for the registrant’s equity securities. As of November ~~12b-2~~ 23, 2011, an aggregate of 100,000,000 shares of the ~~Act)~~ registrant’s common stock was outstanding. ~~Yes o No þ~~

~~The~~DOCUMENTS ~~aggregate~~INCORPORATED ~~market~~BY ~~value~~REFERENCE of the registrant’s voting stock held by non-affiliates of the registrant (based on the closing price as reported on the NASDAQ Global Select Market on April 2, 2010) was approximately $287 million. Shares of voting stock held by each officer and director and by each shareowner affiliated with a director have been excluded from this calculation because such persons may be deemed to be affiliates. This determination of officer or affiliate status is not necessarily a conclusive determination for other purposes. The number of outstanding shares of the registrant’s Common Stock as of November 5, 2010 was 82,063,068.

~~Documents Incorporated~~In accordance with Instruction G(3) to Form 10-K, certain information required by ~~Reference~~Part III of Form 10-K is incorporated into this Annual Report on Form 10-K by reference to an amendment to this Annual Report on Form 10-K, which will be filed within 120 days after the end of the registrant’s fiscal year, which ended on September 30, 2011.

Portions of the registrant’s Proxy Statement for the 2011 Annual Meeting of Shareholders to be held on January 20, 2011 are incorporated by reference into Part III of the Form 10-K.

~~FORWARD-LOOKING STATEMENTS~~ CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

~~This~~ANNUAL ~~document~~REPORT ~~contains~~ON ~~forward-looking~~FORM ~~statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward~~10-~~looking~~K ~~statements.~~FOR ~~You~~THE ~~can~~FISCAL ~~identify~~YEAR ~~some~~ENDED ofSEPTEMBER ~~the forward-looking statements by the use of forward-looking words~~30, ~~such~~ as2011 “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecasts,” and the like, the negatives of such expressions, or the use of future tense. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Examples of forward-looking statements include, but are not limited to, statements concerning:

• our expectations regarding the market share of our products, growth in the markets we serve and our market opportunities; • our expectations regarding price and product competition; • our expectations regarding continued demand and future growth in demand for our products in the communications, PC and consumer markets we serve; • our expectations regarding the declines in our legacy products; • our plans and expectations regarding the transition of our semiconductor products to smaller line width geometries; • our expectation that we will be able to sustain the recoverability of our goodwill, intangible and tangible long-term assets; • our product development plans; • our expectations regarding the sale of our real property in Newport Beach; • our expectation that our largest customers will continue to account for a substantial portion of our revenue; • our expectations regarding our contractual obligations and commitments; • our expectation that we will be able to protect our products and services with proprietary technology and intellectual property protection; • our expectation that we will be able to meet our lease obligations (and other financial commitments); • our expectations, subject to the qualifications expressed, regarding the sufficiency of our existing sources of liquidity, together with cash expected to be generated from operations, to fund our operations, research and development, anticipated capital expenditures, and working capital for at least the next twelve months; • our expectation that we will be able to continue to rely on third party manufacturers to manufacture, assemble and test our products to meet our customers’ demands; and • our expectations that we will be able to use our net operating losses and other tax attributes to offset future taxable income.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including, but not limited to, those made in Part I, Item 1A of this Annual Report on Form 10-K, and any of those made in our other reports filed with the Securities and Exchange Commission (SEC). Please consider our forward-looking statements in light of those risks as you read this Annual Report on Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

CONEXANT SYSTEMS, INC.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		34
Item 1A.	Risk Factors		910
Item 1B.	Unresolved Staff Comments		2122
Item 2.	Properties		2122
Item 3.	Legal Proceedings		2223
Item 4.	Removed and Reserved		2223
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		2224
Item 6.	Selected Financial Data		24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2627
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		39
Item 8.	Financial Statements and Supplementary Data		41
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		7478
Item 9A.	Controls and Procedures		7478
Item 9B.	Other Information		7679
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		7780
Item 11.	Executive Compensation		7780
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		7780
Item 13.	Certain Relationships and Related Transactions, and Director Independence		7780
Item 14.	Principal Accountant Fees and Services		7780
PART IV
Item 15.	Exhibits and Financial Statement Schedules		7880
EX-10.23
Signatures			84
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32

PART I

Explanatory Notes

On April 19, 2011, Conexant Systems, Inc., a Delaware corporation (“Conexant”), completed a merger with Gold Acquisition Corp., a Delaware corporation (“Merger Sub”), and a wholly owned subsidiary of Gold Holdings, Inc., a Delaware corporation, which was subsequently renamed Conexant Holdings, Inc. (“Conexant Holdings”). Pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 20, 2011, by and among the Company, Gold Holdings, Inc. and Merger Sub, Merger Sub was merged with and into the Company with the Company surviving as a wholly owned subsidiary of Conexant Holdings (the “Merger”). In connection with the Merger, shares of our common stock ceased to be traded on the NASDAQ Stock Market after the close of market on April 19, 2011. For the purposes of presentation and disclosure, all references to “Predecessor” relate to Conexant and its consolidated subsidiaries for periods prior to the Merger. All references to “Successor” relate to Conexant and its consolidated subsidiaries merged with Merger Sub for periods subsequent to the Merger. References to “we”, “us”, “our” and the “Company” relate to the Predecessor for the periods prior to the Merger and to the Successor for periods subsequent to the Merger.

Our fiscal year is the 52- or 53-week period ending on the Friday closest to September 30 each year. In a 52-week year, each fiscal quarter consists of 13 weeks. The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks. References made to our fiscal year ended September 30, 2011, or fiscal 2011, refer to the combined results of the Predecessor for the period from October 2, 2010 through April 19, 2011, and the Successor for the period from April 20, 2011 through September 30, 2011. References made to our fiscal year ended October 1, 2010, or fiscal 2010, refer to the results of the Predecessor for the period from October 3, 2009 through October 1, 2010. References made to our fiscal year ended October 2, 2009, or fiscal 2009, refer to the results of the Predecessor for the period from October 4, 2008 through October 2, 2009. Fiscal years 2011, 2010 and 2009 were each fiscal years that consisted of 52-weeks.

All dollar amounts presented in this Annual Report on Form 10-K (the “Annual Report”) are in thousands, except per share amounts, unless otherwise noted.

An amendment to this Annual Report to include the information required by Part III of Form 10-K will be filed with the Securities and Exchange Commission (the “SEC”) no later than 120 days after the end of fiscal 2011.

Forward-Looking Statements

This Annual Report includes “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecasts,” and the like, the negatives of such expressions, or the use of future tense. Examples of forward-looking statements include, but are not limited to, our expectations concerning:

•

the conversion of our design opportunities into revenue;

•

the markets we serve, our market opportunities and industry trends;

•

our revenue levels, including the commercial success of our product development efforts;

•

the effects of the slow recovery from the worldwide economic downturn;

•

our liquidity, including the impact of our long term debt and our ability to refinance this debt;

•

our gross profit and factors that affect gross profit and the breakeven revenue level;

•

our level of operating expenses;

•

our research and development efforts, including the commercial success of the products we develop;

•

our employees;

•

our expectations that we will be able to use our net operating losses and other tax attributes to offset future taxable income;

•

our spending for real estate and environmental remediation and;

•

our partners and suppliers.

You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Annual Report. We undertake no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Item 1.

Business

General

We design, develop and sell semiconductor system solutions, comprised of semiconductor devices, software and reference designs, for imaging, audio, embedded-modem, and video applications. These solutions include a comprehensive portfolio of imaging solutions for multifunction printers (MFPs), fax platforms, and interactive display frame market segments. Our audio solutions include high-definition (HD) audio integrated circuits, HD audio codecs, and speakers-on-a-chip solutions for personal computers, PC peripheral sound systems, audio subsystems, speakers, notebook docking stations, voice-over-IP speakerphones, USB headsets supporting Microsoft Office Communicator and Skype, and audio-enabled surveillance applications. We also offer a full suite of embedded-modem solutions for set-top boxes, point-of-sale systems, home automation and security systems, and desktop and notebook PCs. Additional products include decoders and media bridges for video surveillance, security and monitoring applications, and system solutions for analog video-based multimedia applications.

Our principal corporate office is located at 4000 MacArthur Boulevard, Newport Beach, CA 92660, and our main telephone number at that location is 949-483-4600. Our ~~common~~website ~~stock~~address ~~trades~~is ~~on the NASDAQ Global Select Market under the symbol CNXT~~www. conexant.com.

We were incorporated in Delaware in September 1996 and have been operating in the communications semiconductor business~~, including~~ assince ~~part~~that oftime. ~~the~~Following ~~semiconductor~~our ~~systems~~spin-off ~~business~~from of Rockwell International Corporation (now Rockwell Automation, Inc.) ~~since~~in ~~that~~January ~~time.~~1999, Wewe were ~~have been~~ an independent public company ~~since~~until ~~January~~April ~~1999~~2011, ~~following~~when ~~our~~we ~~spin-off~~entered ~~from Rockwell~~into the Merger Agreement. ~~Since~~In ~~then,~~that time we ~~have~~ transformed our company from a broad-based communications semiconductor supplier into a fabless communications semiconductor supplier focused on delivering the technology and products for imaging, audio, embedded-modem, and video applications.

Divestitures

In August 2009, we completed the sale of certain assets related to our Broadband Access (“BBA”) business to Ikanos Communications, Inc. (“Ikanos”) for an aggregate consideration of approximately $54 million. Assets sold pursuant to the agreement with Ikanos include specified intellectual property, inventory, contracts, and tangible assets. Ikanos assumed certain liabilities, including obligations under transferred contracts and certain employee-related liabilities. We also granted to Ikanos a license to use certain of our retained technology assets in connection with Ikanos’ current and future products in certain fields of use, along with a patent license covering certain of our retained patents to make, use, and sell such products (or, in some cases, components of such products).

In August 2008, we completed the sale of certain assets related to our Broadband Media Processing (“BMP”) business to NXP B.V. (“NXP”) for an aggregate consideration of approximately $110 million. Assets sold pursuant to the agreement with NXP include, among other things, specified patents, inventory, contracts and intangible assets. NXP assumed certain liabilities, including obligations under transferred contracts and certain employee-related liabilities. We also granted NXP a license to use certain of our retained technology assets in connection with NXP’s current and future products in certain fields of use, along with a patent license covering certain of our retained patents to make, use and sell such products (or, in some cases, components of such products).

Strategy

Our objective is to become a leading supplier of ~~semiconductor solutions~~analog and ~~Application~~mixed ~~Specific~~signal ~~Standard~~semiconductor ~~Products~~solutions ~~(ASSPs)~~ to leading global original equipment manufacturer (OEM) and original design manufacturer (ODM) customers in ~~consumer~~audio, ~~communications~~ video, security, imaging, ~~security~~consumer, communications and computer markets. To achieve our objectives, we are pursuing the following strategies:

•

Focus our product portfolio on targeted markets and growth opportunities where we can leverage our core expertise in analog and mixed-signal design, digital signal processing (DSP), firmware and software development, and our extensive applications knowledge to strengthen our market positions and expand market share.

3 4

• Capitalize on the depth of our global engineering talent and strength of our sales and marketing channels to expand into adjacent markets and provide innovative solutions to capture additional semiconductor content. ~~• Leverage our strong customer base and expand strategic relationships with industry-leading OEMs/ODMs to maximize design wins.~~

•

Leverage our strong customer base and expand strategic relationships with industry-leading OEMs/ODMs to define new products and maximize design wins.

Business Segments

Products and Markets

Our expertise in analog and mixed-signal processing, DSP, firmware and software, and applications ~~knowledge~~ allows us to deliver semiconductor devices and integrated systems for consumer electronics products. We organize our products to address opportunities in ~~imaging,~~ audio, embedded-modem, ~~and~~ video and imaging applications as more fully described below. We expect that our future products will focus on leveraging our ~~imaging,~~ audio, ~~and~~ video and imaging solutions to address technology convergence opportunities within the markets we address, and adjacent high-growth markets. We consider all products to fall into one class of products-semiconductor devices. We position our devices to address the following applications:

~~Imaging~~Audio Applications. ~~Our~~ ~~imaging~~Over ~~product~~the last decade we have created an extensive intellectual property portfolio ~~includes~~by ~~highly~~developing ~~integrated~~advanced ~~multifunction~~voice ~~printers (MFPs) system-~~and audio algorithms running on~~-chip (SoC)~~ ~~solutions~~a ~~for~~DSP. ~~inkjet,~~Our ~~laser~~innovative technical algorithms including acoustic echo cancelling, ~~and~~noise ~~photo~~reduction, ~~printers~~beamforming, dynamic range compression and ~~high-performance~~equalization ~~system~~improve ~~solutions~~the ~~for~~consumer ~~interactive~~audio ~~display appliances~~experience ~~with~~in ~~Internet~~small ~~connectivity.~~speakers Wethat ~~also~~are ~~provide~~used ~~SoCs~~in products such as mobile Internet devices, portable media players, and ~~datapumps~~ ~~for~~smartphone ~~facsimile~~docking ~~applications~~stations. WeOur ~~believe~~solutions ~~that~~include ~~our combined~~HD ~~imaging~~audio ~~intellectual~~integrated ~~property~~circuits, ~~MFP~~HD ~~systems~~audio codecs ~~knowledge~~with an integrated Class-D amplifier, ~~and~~ ~~extensive~~which ~~firmware~~enables ~~and~~higher ~~software~~audio ~~stacks~~performance ~~uniquely~~at ~~position~~lower ~~us to~~power ~~successfully~~consumption ~~address~~and ~~the~~audio ~~increasing~~playback ~~demand~~devices. ~~for~~With ~~printers~~the ~~that feature~~convergence ~~higher~~of ~~print~~entertainment ~~speed,~~and ~~copy~~communications ~~speed~~applications, ~~and~~we ~~quality.~~expect ~~Our~~the ~~current~~demand for audio ~~architecture~~solutions ~~also~~with ~~enables~~integrated usvoice and audio functionality to ~~support~~grow ~~the~~significantly. ~~trend~~To toaddress ~~PC independent~~this ~~printing~~opportunity, ~~which~~ we ~~believe~~offer ~~will~~“speakers-on-a-chip” ~~allow~~solutions usfor toapplications ~~capture additional~~including ~~market~~PC ~~share~~speakers, asaudio ~~cloud~~subsystems, ~~computing~~notebook ~~printing~~docking ~~and~~stations, ~~mobile~~VoIP ~~printing~~speakerphones, ~~spur~~USB ~~future~~headsets ~~demand.~~supporting WeMicrosoft ~~also~~Office ~~expect~~Communicator toand ~~benefit~~Skype, ~~from~~and ~~the trend~~surveillance atapplications, ~~major~~as ~~OEM~~well ~~printer~~as ~~companies~~for ~~who~~interactive ~~currently~~display ~~design~~appliances ~~their own~~and ~~silicon~~tablet toPCs. ~~outsource~~We ~~MFP~~also ~~designs~~provide audio solutions for notebook computers to ~~merchant~~OEMs ~~semiconductor~~and ODMs ~~providers~~globally.

Audio Applications. Over the last decade we have created an extensive intellectual property portfolio by developing advanced voice and audio algorithms running on a DSP. Our innovative technical algorithms include 3D expansion (phantom speaker), dynamic range compression, and stage enhancement (BrightSoundtm) that improve the consumer audio experience in small speakers that are used in products such as mobile Internet devices, portable media players, and smartphone docking stations. Our solutions include HD audio integrated circuits, and HD audio codecs with an integrated Class-D amplifier, which enables higher audio performance at lower power consumption. With the convergence of entertainment and communications applications, we expect the demand for audio solutions with integrated voice and audio functionality to grow significantly. To address this opportunity, we offer “speakers-on-a-chip” solutions for applications including PC speakers, audio subsystems, notebook docking stations, VoIP speakerphones, USB headsets supporting Microsoft Office Communicator and Skype, and surveillance applications, as well as for interactive display appliances and tablet PCs. We also provide audio solutions for notebook computers to OEMs and ODMs globally. In the first quarter of fiscal 2009, we strengthened our product portfolio by entering into an exclusive agreement with Analog Devices Inc. (ADI) to manufacture, distribute and support ADI’s complementary PC audio codec product family.

Embedded-Modem Applications. We have a long history of technological innovation and leadership in modem technology, including the development of the world’s first analog modem chip. Our analog modem solutions have connected hundreds of millions of users worldwide to the Internet through their desktop and notebook PCs. Today, the majority of our analog modem solutions are used in embedded applications, including television set-top boxes for back channel applications, point-of-sale (POS) terminals, home automation and security systems and various industrial applications.

Video Applications. We offer video encoders, decoders and media bridges for video surveillance/security and consumer ~~video~~ video applications. Our highly integrated multi-port video decoders can be used in PC-based or standalone embedded digital video recording (DVR) applications. These products enable multi-channel, bi-directional uncompressed digital audio and ~~video~~ video transfers to a host computer for preview, processing, or compression via an integrated PCI Express (PCIe) interface. Additional video products include system solutions for analog video-based multimedia applications including PCTV. Our video encoders provide the video processing for wireless cameras targeted at home security and monitoring. These products, with their low power and ease of use, are ideally suited for motion sensors with visual verification, intercoms, baby monitors, and various remote monitoring products. We will continue to evolve enhanced video capabilities and low power consumption, which will broaden our reach into the growing home security and monitoring markets and allow us to cover a broad range of applications from the very low-end monitoring and do-it-yourself security systems to commercial multi-channel DVRs.

Imaging Applications. Our imaging product portfolio includes highly integrated MFPs system-on-chip (SoC) solutions for inkjet, laser and photo printers, and high-performance system solutions for interactive display appliances with Internet connectivity. 4We also provide SoCs and datapumps for facsimile applications. We believe that our combined imaging intellectual property, MFP systems knowledge, and extensive firmware and software stacks uniquely position us to successfully address the increasing demand for printers that feature higher print speed, copy speed, and quality. Our current architecture also enables us to support the trend to PC independent printing, which we believe will allow us to capture additional market share as cloud computing printing and mobile printing spur future demand. We also expect to benefit from the trend at major OEM printer companies who currently design their own silicon to outsource MFP designs to merchant semiconductor providers.

WePlease ~~introduced~~refer ~~a new ASSP designed~~ to ~~provide~~our ~~the~~Selected ~~video processing~~Financial ~~for~~Data ~~wireless~~in ~~cameras~~Part ~~targeted~~I atItem 6 ~~home security and monitoring. This product, with its low power and ease~~ of ~~use,~~this ~~is ideally~~Annual ~~suited~~Report for ~~motion sensors with visual verification,~~ ~~intercoms,~~a ~~baby~~disclosure ~~monitors,~~of ~~and~~revenues ~~various~~from ~~remote~~external ~~monitoring products. We will continue to evolve this line focused on enhanced video capabilities and low power~~customers, ~~which~~net ~~will~~loss ~~broaden our~~(income) ~~reach into the growing home security~~ and ~~monitoring~~total ~~markets and~~assets ~~allow~~for ~~us to cover a broad range of applications from~~ the ~~very~~ ~~low-end~~last ~~monitoring~~five ~~and~~fiscal ~~do-it-yourself security systems to commercial multi-channel DVRs~~years.

Research and Development

We have significant research, development, engineering and product design capabilities. As of ~~October~~ September 130, ~~2010~~2011, we had ~~319~~ 300 employees engaged in research and development activities at multiple design centers worldwide as compared to ~~308~~ 319 employees as of October 21, ~~2009~~2010 and ~~814~~ 308 employees as of October 32, ~~2008. The significant decrease in employees reflects the reduction of approximately 355 employees in connection with our sale in August~~ 2009 ~~of our BBA business, as well as continued right-sizing efforts made throughout the fiscal year 2009~~.

Our design centers provide design engineering and product application support as well as ~~after-sales~~ customer service. The design centers are strategically located around the world to be in close proximity to our OEM and ODM customers and to take advantage of key technical and engineering talent. Our major design centers are located in the United States. Additionally, we have integrated circuit design development activities in India and integrated circuit design, product and test engineering, and software support teams in China.

Our continuing operations incurred research and development expenses of $5525.7 8 million during the Successor period in fiscal 2011, $5130.4 9 million for the Predecessor period in fiscal 2011, and $55.7 million and $5851.4 million, ~~during~~for the Predecessor fiscal ~~2010~~years ended October 1, ~~2009~~2010 and ~~2008~~2009, respectively.

Manufacturing

We are a fabless semiconductor company, which means that we do not own or operate ~~any~~ wafer fabrication or assembly and test sites. We use several leading-edge wafer fabrication subcontractors, such as Silterra Malaysia Sdn.Bhd., Taiwan Semiconductor Manufacturing Corporation (TSMC), United Microelectronics Corporation (UMC), and TowerJazz to meet our typical planned production requirements. We have ~~also~~ qualified additional suppliers to ~~meet~~ ~~short-term~~expand ~~upside~~our ~~requirements~~manufacturing ascapabilities ~~necessary~~and to provide manufacturing alternatives during periods of tight capacity. We primarily use complementary metal-oxide semiconductor (CMOS) process technologies. Our products are manufactured in a variety of process technologies ranging from 0.8 micron technology, which is our most mature technology, to 90 ~~nanometers~~nanometer technology, which is the most advanced production technology. We currently have product development efforts underway at the 65 nanometer process technology node, and are assessing the 40 nanometer technology node for certain applications.

Our wafer probe testing is conducted by either our wafer fabrication subcontractors or other independent wafer probe test subcontractors. Following completion of the wafer probe tests, the die are assembled into packages and the finished products are tested by subcontractors. Our primary wafer assembly and test subcontractors include ~~Amkor~~STATSChipPAC Ltd., Powertech Technology, ~~and~~Inc. ~~STATSChipPAC~~(PTI), Advanced Semiconductor Engineering, Inc. (ASE), and ~~Ltd~~Sigurd Microelectronics Corporation. These vendors are located in Taiwan, Korea, Singapore, China, the Philippines and Malaysia. We use several different package types, tester platforms and handler configurations to fulfill our product needs at the key supplier sites.

Capacity is primarily obtained using a process of short- and long-term forecasting for suppliers to assess our demand, and committing supply to meet the forecasts. We maintain a strong presence at supplier sites to ensure our capacity needs are fulfilled adequately.

Quality and Reliability

Our quality and reliability assurance systems ensure that our products meet our customers’ and our internal product performance goals. Our quality management system maintains ISO 9001-~~2000~~ 2008 certification at our Newport Beach, California, facility. Our key suppliers are either already certified to ISO 9001 or have provided us with plans to achieve certification.

Our quality and reliability assurance department performs extensive environmental tests to demonstrate that our products meet our reliability performance goals. We use industry accepted environmental tests and test methods wherever practical during product qualification.

In addition, our engineering and marketing organizations exercise extensive control during the definition, development and release to production of new products. We have a comprehensive set of design control procedures that:

• determine the quality, reliability and performance objectives for new products; • provide program/project management, resource identification and facilities; • ensure verification and validation activities; • provide criteria for acceptability; and • clearly define records that are necessary to provide confidence of conformity of the processes and resulting product to our quality system requirements.

We• ~~qualify~~provide ~~all~~program/project ~~key suppliers (wafer foundries and assembly subcontractors) and their manufacturing processes. Our key suppliers must agree to our quality system requirements, pass a quality~~ management ~~system audit~~, ~~and~~resource ~~successfully~~identification ~~complete a rigorous reliability test plan. We design these qualification requirements as preventive actions to eliminate the causes~~ and ~~occurrence~~ ~~of potential nonconformities. These qualification requirements, reliability test plans, and quality system audits are appropriate to minimize the impact of potential problems.~~ facilities;

We6 developed a Social and Environmental Management System (SEMS) that is used as a framework to develop and manage programs that prevent pollution, minimize the company’s overall environmental impact, reduce health and safety risks, promote integrity and fair labor practice, and continually improve business practices and performance. Conexant’s SEMS is certified to ISO 14001:2004 (International Organization for Standardization — Environmental Management Systems) and conforms to the requirements of OHSAS 18001:2007 (Occupational Health and Safety Administration Standard — Health and Safety Management Systems), and the EICC (Electronic Industry Citizenship Coalition — Electronic Industry Code of Conduct).

•

ensure verification and validation activities;

•

provide criteria for acceptability; and

•

clearly define records that are necessary to provide confidence of conformity of the processes and resulting product to our quality system requirements.

We qualify all key suppliers (wafer foundries and assembly subcontractors) and their manufacturing processes. Our key suppliers must agree to our quality system requirements, pass a quality management system audit, and successfully complete a rigorous reliability test plan. We design these qualification requirements as preventive action with the goal of eliminating the causes and occurrence of potential nonconformities. We believe that these qualification requirements, reliability test plans, and quality system audits are appropriate to minimize the impact of potential problems.

We have developed a Social and Environmental Management System (SEMS) that is used as a framework to develop and manage programs that prevent pollution, minimize our overall environmental impact, reduce health and safety risks, promote integrity and fair labor practice, and continually improve business practices and performance. Conexant’s SEMS is certified to ISO 14001:2004 (International Organization for Standardization — Environmental Management Systems) and conforms to the requirements of OHSAS 18001:2007 (Occupational Health and Safety Administration Standard — Health and Safety Management Systems), and the EICC (Electronic Industry Citizenship Coalition — Electronic Industry Code of Conduct).

Customers, Marketing and Sales

We market and sell our semiconductor products and system solutions directly to leading OEMs of ~~communication~~ electronics products and indirectly through electronic components distributors, channel partners, and resellers.

Sales to distributors and resellers accounted for approximately 24 41% of our net revenues in the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011, 36and 30% and 3438% of our net revenues in the Predecessor fiscal ~~2010~~years ended October 1, ~~2009~~2010 and ~~2008~~ 2009, respectively. In ~~fiscal~~the ~~2010,~~Successor ~~2009~~period in fiscal 2011 and ~~2008~~the Predecessor period in fiscal 2011, there was one distributor, Sertek Incorporated, ~~that~~which accounted for 1314% of our net revenues. In the Predecessor fiscal years ended October 1, 232010 and 2009, the same distributor accounted for 13% and 23% of our net revenues, respectively. Sales to our twenty largest customers in the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011 accounted for approximately 8283% of our net revenues, 87and 82% and 8387% of our net revenues in Predecessor fiscal years ~~2010~~ended October 1, ~~2009~~2010 and ~~2008~~2009, respectively. There is no consistent seasonal pattern to our revenue.

Revenues derived from customers located in the Americas, the Asia-Pacific region and in Europe, the Middle East and Africa, as a percentage of total net revenues, were as follows:

	Fiscal Year Ended
	Successor			Predecessor
	2010			2009			2008
	Period fromApril 20, 2011throughSeptember 30,2011			Period fromOctober 2,2010 throughApril 19,2011			Fiscal YearEndedOctober 1,2010			Fiscal YearEndedOctober 2,2009
United States		62	%		36	%		36	%		3	%
Other Americas		21	%		1	%		32	%		1	%
China		6069	%		6458	%		6460	%		64	%
Taiwan		105	%		710	%		610	%		7	%
Other Asia-Pacific		2122	%		24	%		2221	%		24	%
Europe, Middle East and Africa		1	%		1	%		21	%		1	%
Total foreign		9498	%		9794	%		9794	%		97	%
		100	%		100	%		100	%		100	%

A portion of the products we sell to OEMs and third-party manufacturing service providers in China and the Asia-Pacific region are ultimately shipped to end markets in the Americas and Europe.

6 7

We have a worldwide sales and marketing organization comprised of ~~129~~ 102 employees as of ~~October~~ September 130, ~~2010~~2011 in various domestic and international locations. To complement our direct sales and customer support efforts, we also sell our products through ~~independent manufacturers’ representatives,~~ distributors, resellers, and dealers, as well as enlist the assistance of independent manufacturers’ representatives in some regions. In addition, our design and applications engineering staff is actively involved with customers during all phases of design and production and provides customer support through our worldwide sales offices, which are generally in close proximity to customers’ facilities.

See Item 1A, Risk Factors, in this ~~report~~Annual Report for a discussion of risks and uncertainties related to our international operations.

Backlog

Our sales are made primarily pursuant to standard purchase orders for delivery of products, with such purchase orders officially acknowledged by us according to our own terms and conditions. Because industry practice allows customers to cancel orders with limited advance notice to us prior to shipment, we believe that backlog as of any particular date may not be indicative of our future revenue levels.

Competition

The ~~communications~~ semiconductor industry in general, and the markets in which we operate in particular, are intensely competitive. We compete worldwide with a number of U.S. and international suppliers that are both larger and smaller than us in terms of resources and market share. We anticipate that additional competitors will enter our markets and expect intense price and product competition to continue.

We compete primarily with Integrated Device Technology, Inc., LSI Corporation, Marvell Technology Group Ltd., ~~Realtek~~Texas Instruments, Maxim Integrated Products, Realtek Semiconductor Corporation, Silicon Laboratories, Inc., Intersil Corporation, Wolfson Microelectronics plc, and Zoran Corporation.

We believe that we compete in various markets based primarily on the following factors:

•

time-to-market;

•

product quality, reliability and performance;

•

power consumption;

•

level of circuit elements integrated in a device;

•

price and total system cost;

•

compliance with industry standards;

•

effective software algorithms;

•

design and engineering capabilities;

•

strategic relationships with customers;

•

customer support capabilities;

•

new product innovation; and

•

access to manufacturing capacity.

Intellectual Property and Proprietary Rights

We currently own over 800 United States and foreign patents and patent applications ~~related~~covering toa ~~our~~variety of products, processes and technologies relating to Conexant’s current and historical business. We also cross-license portions of our intellectual property and are licensed or cross-licensed under a number of intellectual property portfolios in the industry that are relevant to our technologies and products. We have filed and received federal and international trademark registrations of our Conexant trademarks. We believe that our intellectual property, including patents, patent applications, licenses and trademarks are of material importance to our business. We believe the duration of our intellectual property rights is adequate relative to the expected lives of our products. Due to the fast pace of innovation and product development, in certain cases our products may become obsolete before the patents, and other intellectual property rights, related to them expire. In addition to protecting our proprietary technologies and processes, we constantly strive to strengthen and enhance our intellectual property portfolio. We use the portfolio to seek licensing opportunities, to negotiate cross-licenses with other ~~intellectual~~ intellectual property portfolios, to gain access to intellectual property of others and to avoid, defend against, or settle litigation. While in the aggregate our patents, patent applications, licenses and trademarks are considered important to our operations, they are not considered of such importance that the loss or termination of any one of them would materially affect our business or financial condition.

Environmental Regulation

Federal, state and local requirements relating to the discharge of substances into the environment, the disposal of hazardous wastes, and other activities affecting the environment have had, and will continue to have, an impact on our former manufacturing operations. To date, compliance with environmental requirements and resolution of environmental claims have been accomplished without material effect on our liquidity and capital resources, competitive position or financial condition. We believe that any expenditure necessary for the resolution of environmental claims will not have a material adverse effect on our liquidity and capital resources, competitive position or financial condition. We cannot assess the possible effect of compliance with future requirements.

7 Divestitures

~~Table~~On December 22, 2010, we sold certain real property adjacent to our Newport Beach, California headquarters to Uptown Newport L.P. for $23.5 million, which consisted of ~~Contents~~$21.5 million in cash and a limited partnership interest in the property, which we have valued at $0.4 million.

In August 2009, we completed the sale of certain assets related to our Broadband Access (“BBA”) business to Ikanos Communications, Inc. (“Ikanos”) for aggregate consideration of approximately $54 million. Assets sold pursuant to the agreement with Ikanos included specified intellectual property, inventory, contracts, and tangible assets. Ikanos assumed certain liabilities, including obligations under transferred contracts and employee-related liabilities. We also granted to Ikanos a license to use certain of our retained technology assets in connection with Ikanos’ current and future products in certain fields of use, along with a patent license covering certain of our retained patents to make, use, and sell such products (or, in some cases, components of such products).

Employees

As of ~~October~~September 130, ~~2010~~2011, we had ~~596~~504 employees. None of our employees are covered by collective bargaining agreements. We We believe our future success will depend in large part upon our continued ability to attract, motivate, develop and retain highly-skilled and dedicated employees.

Available Information

WeOur ~~maintain an Internet~~ website ataddress is www.conexant.com. ~~Our annual reports on Form 10-K, quarterly reports on Form~~ ~~10-Q,~~While ~~current~~we ~~reports~~are ~~on Form 8-K and~~not ~~amendments~~currently subject to ~~such~~the ~~reports~~filing ~~filed~~requirements orof ~~furnished pursuant to~~ Section 13~~(a)~~ or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), ~~along~~to the extent that we file any reports with ~~our~~the ~~annual~~SEC, ~~report~~including toannual ~~stockholders~~reports on ~~and~~Form 10-K, ~~other~~quarterly ~~information~~reports ~~related~~on Form 10-Q or current reports on Form 8-K, or any amendments or exhibits to ~~our~~any ~~company~~of those reports, ~~are~~such reports will be available free of charge onby ~~this~~visiting ~~site~~the “Investors” section of www.conexant.com. These reports will be posted to the website as soon as reasonably practicable after we they are electronically ~~file~~filed orwith ~~furnish~~the ~~these~~SEC. ~~reports~~In ~~with~~addition, ~~the Securities~~you may read and ~~Exchange~~copy ~~Commission.~~any ~~Our~~materials ~~Internet~~we ~~website~~file ~~and~~with the SEC by visiting www.sec.gov. ~~information~~Information contained ~~therein~~in orour ~~connected~~website ~~thereto~~is ~~are~~ not ~~intended~~ deemed to be ~~incorporated~~a ~~into~~part of this Annual Report ~~on Form 10-K~~.

8 9

Item 1A.

Risk Factors

Our business, financial condition and results of operations can be impacted by a number of risk factors, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. Any of these risks could materially and adversely affect our business, financial condition and results of operations, which in turn could materially and adversely affect the price of our common stock or other securities. In addition, other factors that we do not anticipate, or that we do not consider significant based on currently available information, may also materially adversely affect our business, financial condition and results of operations.

~~References~~We inhave ~~this~~recently ~~section~~experienced tosignificantly ~~our~~lower ~~fiscal year refer to the fiscal year ending on the Friday nearest September 30 of each year~~revenues.

WeOur ~~are~~revenue declined 31% in fiscal 2011 compared with the prior fiscal year, and our revenue was $35.9 million in the three months ending aSeptember 30, ~~much~~2011 ~~smaller~~compared ~~company~~to ~~than~~$56.3 million in the ~~recent~~three ~~past~~months ending October 1, 2010. While we believe our sales, marketing and ~~dependent~~solution ~~on fewer~~development ~~products~~activities ~~for~~may result in revenue growth, we cannot assure you that we will be able to achieve our ~~success~~revenue and other financial objectives. If we are not able to increase revenues, we may be required to reduce our operating expenses, which could have a negative impact on our ability to achieve our revenue, operating and cash flow objectives.

~~We are a much smaller company than in the recent past with a narrower, less diversified and more focused portfolio of products.~~ Our ~~smaller~~success ~~size~~depends ~~could~~on ~~cause~~ our ~~cash~~ability ~~flow and growth prospects~~ to betimely ~~more~~develop ~~volatile~~competitive ~~and~~new ~~make~~products ~~us more vulnerable~~ to ~~focused~~ ~~competition.~~offset Wedeclines will also have less capital available for research and development and for strategic investments and acquisitions. As a smaller company, we will be subject to greater revenue fluctuations if our older product lines sales were to decline faster than we anticipate. Moreover, we could also face greater challenges in ~~satisfying or refinancing~~ our ~~debt~~legacy ~~obligations~~products asand ~~they~~increase ~~become~~market ~~due. In addition~~share, weand ~~may~~reduce ~~not be able to appropriately restructure our supporting functions to fit the needs of a smaller company~~costs.

Our ~~success~~ ~~depends~~operating results depend largely on our ability to introduce ~~timely~~new ~~develop~~and ~~competitive~~enhanced ~~new~~ semiconductor products on a timely basis to ~~offset~~enable ~~declines~~us into increase revenue and replace decreasing revenue from our established legacy products, ~~increase market~~which ~~share~~include wireless networking solutions, computer modems and ~~reduce~~modems ~~costs.~~for digital television platforms in Japan. Successful product development and introduction depends on numerous factors, including, among others, our ability to:

~~Our~~• ~~operating~~anticipate ~~results~~customer ~~depend largely on our ability to introduce new~~ and ~~enhanced~~market ~~semiconductor~~requirements ~~products on a timely basis to enable us to grow~~ and tochanges ~~replace decreasing revenue from our established legacy products, which include wireless networking solutions, computer modems and modems for digital television platforms~~ in ~~Japan.~~technology ~~Successful product development~~ and ~~introduction~~ ~~depends~~industry ~~on numerous factors, including, among others, our ability to:~~ standards;

• ~~anticipate~~accurately ~~customer and market requirements and changes in technology and industry standards; •~~ define ~~accurately~~ new products; • complete development of new products and bring our products to market on a timely basis; • differentiate our products from offerings of our competitors; • achieve overall market acceptance of our products; and • coordinate product development efforts between and among our sites, particularly in India and China, to manage the development of products at remote geographic locations.

•

complete development of new products and bring our products to market on a timely basis;

•

differentiate our products from offerings of our competitors;

•

Achieve our product cost objectives;

•

achieve overall market acceptance of our products; and

•

coordinate product development efforts between and among our sites, particularly in India and China, to manage the development of products at remote geographic locations.

We may not have sufficient resources to make the substantial investment in research and development in order to develop and bring to market new and enhanced products. We cannot assure you that we will be able to develop and introduce new or enhanced products in a timely and cost-effective manner, that our products will satisfy customer requirements or achieve market acceptance, or that we will be able to anticipate new industry standards and technological changes. The complexity of our products may lead to errors, defects and bugs which could subject us to significant costs or damages and adversely affect market acceptance of our products. We also cannot assure you that we will be able to respond successfully to new product announcements and introductions by competitors.

The average selling prices of our ~~established legacy~~ products in our markets have historically decreased over the life of the products rapidly and will likely do so in the future, which could harm our revenue and gross profits.

Many of our products face significant competition and are subject to rapid declines in average selling prices over the life of the products. We have historically decreased the average selling prices of many of our products in order to meet market demand, and we expect that we will continue to reduce prices in the future. Reductions in our average selling prices to one customer could impact our average selling prices to all customers, which could further reduce revenues. A decline in average selling prices ~~could~~would harm ~~our~~ our gross margins. ~~Historically,~~unless we ~~have~~are ~~generally been~~ able to ~~substantially~~ ~~offset~~ decrease our product costs concurrently. Historically, we

reductions in our average selling prices with decreases in our product costs and increases in our unit volumes. Our financial results will suffer if we are unable to offset any future reductions in our average selling prices by increasing our unit volumes, reducing our costs or developing new or enhanced products on a timely basis with higher selling prices or gross profit. While gross profit may decline as a result of reductions in average selling prices, we may continue to incur research and development costs at higher or existing levels to develop future products. This continued spending would have an adverse impact on our immediate operating results if our revenue does not continue to grow or our gross margins decline.

We are subject to intense competition.

The communications semiconductor industry in general, and the markets in which we compete in particular, are intensely competitive. We compete worldwide with a number of U.S. and international semiconductor providers that are both larger and smaller than us in terms of resources and market share. We continually face significant competition in our markets. This competition results in declining average selling prices for our products. We also anticipate that additional competitors will enter our markets as a result of expected growth opportunities, technological and public policy changes and relatively low barriers to entry in certain markets of the industry. We believe that the principal competitive factors for semiconductor suppliers in our addressed markets are:

• time-to-market; • product quality, reliability and performance; • level of integration; • price and total system cost; • compliance with industry standards; • design and engineering capabilities; • strategic relationships with customers; • customer support; • new product innovation; and • access to manufacturing capacity.

In addition, the financial stability of suppliers is an important consideration in our customers’ purchasing decisions. Many of our competitors have certain advantages over us, such as significantly greater sales and marketing, manufacturing, distribution, technical, financial and other resources. In addition, many of our current and potential competitors have a stronger financial position, less indebtedness and greater financial resources than we do. These competitors may be able to devote greater financial resources to the development, promotion and sale of their products than we can. Our relationship with existing and potential customers could be adversely affected if our customers perceive that we lack an appropriate level of financial liquidity or stability or if they think we are too small to do business with.

Current and potential competitors also have established or may establish financial or strategic relationships among themselves or with our existing or potential customers, resellers or other third parties. These relationships may affect customers’ purchasing decisions. Accordingly, it is possible that new competitors or alliances could emerge and rapidly acquire significant market share. We cannot assure you that we will be able to compete successfully against current and potential competitors.

We operate in the highly cyclical semiconductor industry, which is subject to significant downturns that may negatively impact our business, financial condition, cash flow and results of operations.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving technical standards, short product life cycles (for semiconductors and for the end-user products in which they are used) and wide fluctuations in product supply and demand. Recent domestic and global economic weakness and uncertainty have presented unprecedented and

~~challenging~~have ~~conditions~~generally ~~reflecting~~been ~~continued~~able ~~concerns~~to ~~about~~substantially ~~the availability~~offset ~~and~~reductions ~~cost~~in ofour ~~credit,~~average ~~the~~selling ~~U.S. mortgage~~prices ~~market, declining~~with ~~real~~decreases ~~estate~~in ~~values,~~our ~~increased~~product ~~energy~~ costs, ~~decreased consumer~~but ~~confidence~~there ~~and~~can ~~spending~~be ~~and~~no ~~added~~assurance ~~concerns~~that ~~fueled~~we ~~by the~~will ~~U.S. federal~~continue ~~government’s~~to ~~interventions~~be inable ~~the U.S. financial and credit markets. These conditions have contributed~~ to ~~instability in both U.S. and international~~do ~~capital and credit markets and diminished expectations for the U~~so.~~S. and~~ ~~global~~Our ~~economy.~~financial Inresults ~~addition,~~will ~~these~~suffer ~~conditions~~if ~~make it~~we ~~extremely~~are ~~difficult~~unable ~~for our customers~~ to ~~accurately~~offset ~~forecast and~~any ~~plan~~ future ~~business~~reductions ~~activities~~in ~~and could cause U.S. and foreign businesses to slow spending on~~ our ~~products,~~ ~~which~~average ~~could~~selling ~~cause~~prices ~~our~~by ~~sales~~increasing ~~to decrease or result in an extension of~~ our ~~sales~~unit ~~cycles. Further~~volumes, ~~given~~reducing ~~uncertainty in the economic environment,~~ our ~~customers~~costs ~~may~~or ~~have~~developing ~~difficulties obtaining~~new ~~capital at adequate~~ or ~~historical~~enhanced ~~levels~~products toon ~~finance their~~a ~~ongoing business and operations, which could impair their ability to make~~ timely ~~payments~~basis towith ~~us.~~higher ~~If that were to occur, we~~selling ~~may~~prices ~~be required to increase our allowance for doubtful accounts and our days sales outstanding would be negatively impacted. We cannot predict the timing, strength~~ or ~~duration~~gross ~~of any economic slowdown or subsequent economic recovery, worldwide or within our industry~~profit. If the economy or markets in which we operate continue to be subject to these adverse economic conditions, our business, financial condition, cash flow and results of operations will be adversely affected.

~~Since we~~We ~~have~~may ~~limited~~not ~~visibility~~be asable to ~~the~~attract ~~volume~~and ofretain ~~sales~~qualified ofmanagement, ~~our products~~technical byand ~~our~~other ~~customers~~personnel necessary ~~and~~for ~~inventory~~the ~~levels~~design, ofdevelopment, ~~our~~manufacture ~~products held~~and bysale ~~our~~of ~~customers,~~ our ~~ability~~products. toOur ~~forecast~~success ~~accurately~~could ~~future demand~~be ~~for~~negatively ~~and~~affected ~~sales~~if ofkey ~~our~~personnel ~~products is limited~~leave.

WeOur ~~sell~~future success depends on our ~~chipsets~~ability to ~~OEMs,~~attract ~~who~~and ~~integrate~~to ~~our~~retain ~~chipsets~~the ~~into their~~continued ~~products,~~service orand toavailability ~~ODMs~~of ~~who~~skilled ~~include~~personnel at all levels of our ~~chipsets~~business. inWe ~~the~~assess our personnel resources based on our ~~products~~strategic ~~they~~direction ~~supply~~and tofinancial ~~OEMs~~capabilities; we have had significant turnover and hired key personnel since the Merger. WeWhile we have ~~limited~~recruited ~~visibility~~talented aspersonnel to contribute to our success, there is generally a period of time before such individuals contribute at the ~~volume~~levels anticipated. As the source of our ~~products~~technological ~~that~~and product innovations, our ~~OEM~~key ~~and~~technical ~~ODM~~personnel ~~customers~~represent ~~are selling~~a tosignificant ~~their~~asset. ~~customers~~The orcompetition ~~carrying~~for insuch ~~their~~personnel ~~inventory~~can be intense. ~~If our~~While ~~customers~~we have ~~excess~~entered ~~inventory~~into employment oragreements ~~experience~~with asome ~~slowing~~ of ~~products~~ ~~sold~~our ~~through~~key topersonnel, ~~their~~we ~~end~~cannot ~~customers,~~assure ityou ~~would~~that ~~likely result~~we inwill abe ~~slowdown~~able into ~~orders~~attract ~~from~~and ~~our~~retain ~~customers~~qualified management and ~~adversely impact~~other ~~our~~personnel ~~future~~necessary ~~sales~~for ~~and~~our ~~inventory~~future success.

~~Our products~~We ~~typically~~are ~~have~~subject ~~lengthy sales cycles. A customer may decide~~ to ~~cancel~~intense orcompetition ~~change its product plans,~~ which ~~could cause us to lose anticipated sales and we~~ may ~~incur~~negatively ~~significant expenses~~impact ~~before~~our wefinancial ~~generate~~results. ~~any revenues~~

~~After~~The wesemiconductor ~~have~~industry ~~developed~~in general, and ~~delivered~~the amarkets ~~product~~in towhich awe ~~customer, the~~compete ~~customer~~in ~~will~~particular, ~~usually~~are ~~evaluate~~intensely ~~our~~competitive. ~~product~~We ~~prior~~compete toworldwide ~~designing~~with ~~its~~a ~~own~~number ~~equipment~~of ~~to incorporate our product~~U.S. and ~~Our customers~~international ~~may~~semiconductor ~~need~~providers ~~several~~that ~~months~~are toboth ~~test,~~larger ~~evaluate~~ and ~~choose whether~~smaller tothan ~~adopt~~us ~~our~~in ~~product,~~terms ~~and to begin volume production~~ of ~~equipment~~ ~~that~~resources ~~incorporates~~and ~~our~~market ~~product~~share. ~~Due~~This tocompetition ~~these~~results ~~lengthy sales~~in ~~cycles,~~declining weaverage ~~may~~selling ~~experience~~prices ~~significant~~for ~~delays~~our ~~from the time we incur certain research and development costs~~products, ~~selling, general~~shorter ~~and~~product ~~administrative expenses~~life cycles, and ~~build~~changes ~~initial inventory,~~in ~~until~~market ~~the time we generate revenue from these products~~share. ItWe isalso ~~possible~~anticipate that weadditional ~~may~~competitors ~~never~~will ~~generate~~enter ~~any~~our ~~revenue from~~markets ~~these~~as ~~products after incurring such expenditures. Even if~~ a ~~customer~~ ~~selects~~result ~~our~~of ~~solution~~expected togrowth ~~incorporate into its product~~opportunities, we ~~have~~technological noand ~~assurances~~public ~~that~~policy ~~the~~changes ~~customer will ultimately market~~ and ~~sell~~relatively ~~its~~low ~~product~~barriers orto ~~that~~entry ~~such efforts by our customer will be successful. The delays inherent~~ in ~~our~~certain ~~lengthy sales cycle~~markets ~~also~~of ~~increase~~ the ~~risk~~industry. ~~that~~We abelieve ~~customer~~that ~~will~~the ~~decide~~principal tocompetitive ~~cancel~~factors ~~or curtail,~~for ~~reduce~~semiconductor orsuppliers ~~delay its product plans. Such a cancellation or change~~ in ~~plans~~our byaddressed amarkets ~~customer~~are: ~~could cause us to lose sales that we had anticipated.~~

~~We will~~• ~~continue~~ time-to expend substantial resources developing products for new applications or markets and may never achieve the sales volume that we anticipate for these products, which may limit our future growth and harm our results of operations. -market;

We• ~~have~~product ~~focused our R&D investments in Imaging~~quality, ~~Audio~~reliability and ~~Video~~ areas. Through the acquisition of the Sigmatel MFP business in 2008, and the purchase of assets and certain liabilities of the ADI audio business in 2009 and our internal development efforts, we have increased our sales in these application areas. Although we plan to continue to drive growth in these applications and other new areas, we still have a significant portion of revenue coming from our legacy modem businesses. Our future success will depend in part upon our ability to offer products outside of this legacy business, and we face a number of risks in connection with these products, including those described in other risk factors in this report. We have in the past, and will likely in the future, expend substantial resources in developing new and additional products for new applications and markets. We may experience unforeseen difficulties and delays in developing these products and defects upon volume production and broad performance;

•

power consumption;

•

the system features integrated in a device;

•

price and total system cost;

•

compliance with industry standards;

•

effective software algorithms;

•

design and engineering capabilities;

•

strategic relationships with customers;

•

customer support capabilities;

•

new product innovation; and

•

access to manufacturing capacity.

In addition, the financial stability of suppliers is an important consideration in our customers’ purchasing decisions. Many of our competitors have certain advantages over us, such as significantly greater sales and marketing, manufacturing, distribution, technical, financial and other resources. In addition, many of our current and potential competitors have a stronger financial position, less indebtedness and greater financial resources than we do. These competitors may be able to devote greater financial resources to the development, promotion and sale of their products than we can. In addition, our relationships with existing and potential customers could be adversely affected if our customers perceive that we lack an appropriate level of financial resources or liquidity.

~~deployment.~~Current Inand ~~addition,~~potential wecompetitors ~~will~~also have ~~limited~~established ~~experience~~or ~~in these~~may ~~new~~establish ~~markets,~~financial ~~and~~or strategic werelationships ~~may~~among bethemselves ~~unsuccessful~~or inwith ~~marketing~~our ~~and selling~~existing ~~any~~or ~~products~~potential wecustomers, ~~develop~~resellers ~~for these~~ or other ~~new~~third ~~markets~~parties. ~~The~~ ~~markets~~These werelationships ~~choose~~may toaffect ~~enter~~customers’ ~~will~~purchasing ~~likely~~decisions. beAccordingly, ~~highly~~it ~~competitive and~~is ~~many~~possible ofthat ~~our~~new competitors ~~will have substantially more~~or ~~experience~~alliances incould ~~these~~emerge ~~markets. Our success will depend on the growth of the markets we enter, the competitiveness of our products~~ and ~~our~~rapidly ~~ability~~acquire tosignificant ~~increase our~~ market share ~~in these markets~~. IfWe wecannot ~~choose~~assure toyou ~~enter markets~~ that ~~do not achieve or sustain the growth~~ we ~~anticipate,~~will orbe ifable ~~our~~to ~~products~~compete ~~are~~successfully ~~not competitive,~~against wecurrent ~~may not achieve volume sales, which may limit our future growth~~ and ~~would~~potential ~~harm our results of operations~~competitors.

~~The loss~~We ofoperate ain ~~key~~the ~~customer~~highly ~~could~~cyclical ~~seriously~~semiconductor ~~impact our revenue levels and harm our business. In addition~~industry, ifwhich weis ~~are~~subject ~~unable~~ to ~~continue to sell existing and new products to our key customers in~~ significant ~~quantities~~demand orfluctuations tothat ~~attract~~may ~~new significant customers,~~negatively impact our ~~future operating results could be adversely affected. In addition~~business, iffinancial ~~a second source supplier becomes available to a key customer for whom we are the sole supplier~~condition, ~~our~~cash ~~revenue~~flow ~~from that~~and ~~key~~results ~~customer~~of ~~could be adversely affected~~operations.

WeThe ~~have~~semiconductor ~~derived~~industry ais ~~substantial~~highly cyclical ~~portion~~and ofis ~~our~~characterized ~~past~~by ~~revenue~~constant ~~from sales~~technological tochange, arapid ~~relatively~~product ~~small~~obsolescence ~~number~~and ofprice ~~customers.~~erosion, Asevolving atechnical ~~result~~standards, short product life cycles (for semiconductors and for the ~~loss~~end-user ofproducts ~~any~~in ~~significant~~which ~~customer~~they ~~could~~are ~~materially~~used) and wide ~~adversely~~fluctuations ~~affect~~in ~~our~~product ~~financial~~supply ~~condition~~and demand. Recent and ~~results~~continuing ~~of operations.~~domestic ~~Sales~~and toglobal ~~our~~economic 20weakness ~~largest~~and ~~customers,~~uncertainty ~~including distributors,~~have ~~represented~~presented ~~approximately~~unprecedented ~~82%~~and challenging conditions, ~~87%~~which ~~and~~have ~~83%~~resulted ofin ~~our~~ongoing concerns about the availability and cost ~~net~~of ~~revenues~~credit, ininternational ~~fiscal~~financial ~~years~~markets, ~~ended~~high ~~October 1~~sovereign debt, ~~2010~~declining real estate values, ~~October 2~~ national deficits, ~~2009~~increased energy costs and ~~October 3,~~decreased ~~2008~~consumer confidence and spending, ~~respectively~~amongst other factors. ~~For~~These conditions have contributed to ~~fiscal~~instability ~~years~~in ~~ended~~both ~~October 1,~~U.S. ~~2010,~~and ~~October 2,~~international ~~2009~~ capital and ~~October 3,~~credit ~~2008,~~markets ~~one~~and ~~distributor~~diminished ~~accounted~~expectations for ~~13%,~~the ~~23%~~ U.S. and ~~23%~~global ofeconomy. In addition, these conditions make it extremely difficult for our ~~net~~customers ~~revenues,~~to ~~respectively~~accurately forecast and plan future business activities and could cause U.S. Weand ~~expect~~foreign ~~that~~businesses to reduce spending on our ~~largest~~ ~~customers~~products, ~~will~~which ~~continue~~could cause our sales to ~~account~~decrease ~~for~~or aresult ~~substantial portion~~in an extension of our ~~net~~sales ~~revenue~~cycles. Further, given uncertainty in ~~future~~the ~~periods.~~economic ~~The~~environment, ~~identities~~we ofor our ~~largest~~ customers ~~and~~may ~~their~~have ~~respective~~difficulties ~~contributions~~obtaining capital at adequate or historical levels to ~~our net~~finance ~~revenue~~their ~~have~~ongoing ~~varied~~business and ~~will~~operations, ~~likely~~which ~~continue~~could toimpact ~~vary~~our ~~from period~~liquidity toand ~~period~~raise our cost of capital. We ~~may~~cannot ~~not~~predict bethe ~~able~~timing, tostrength ~~maintain~~or duration of any economic slowdown or ~~increase sales~~subsequent toeconomic ~~certain~~recovery, ofworldwide or within our ~~key~~industry. ~~customers~~If ~~for~~the aeconomies ~~variety~~or ofmarkets ~~reasons~~in which we operate continue to be subject to these adverse economic conditions, ~~including~~ ~~the~~our ~~following:~~business, financial condition, cash flow and results of operations will be adversely affected.

•Since ~~most~~we ofhave ~~our customers can stop incorporating our products into their own products with~~ limited ~~notice~~visibility toas ~~us and suffer little or no penalty; • our agreements with our customers typically do not require them~~ to ~~purchase~~the avolume ~~minimum~~of ~~quantity~~ sales of our products; •by our customers’ ~~perceptions of our liquidity~~ and ~~viability~~inventory ~~may~~levels ~~have~~of ~~a negative impact on their decisions to incorporate~~ our products ~~into~~held ~~their~~by ~~own products; • many of~~ our customers, ~~have pre-existing or concurrent relationships with~~ our ~~current~~ability ~~or potential competitors that may affect the customers’ decisions~~ to ~~purchase~~accurately ~~our~~forecast ~~products;~~future •demand ~~our~~for ~~customers~~and ~~face~~sales ~~intense competition from other manufacturers that do not use our products; • some~~ of our ~~customers offer or may offer~~ products ~~that~~is compete with our products; • some of our customers’ liquidity may be negatively affected by continued uncertainty in global economic conditions; and • our small size, our cost-savings efforts and any future liquidity constraints may limit our ability to develop and deliver new products to customerslimited.

InWe ~~addition,~~sell our ~~longstanding~~chipsets ~~relationships~~to ~~with~~OEMs, ~~some~~who ~~larger customers~~integrate ~~may~~our ~~also~~chipsets ~~deter~~into ~~other~~their ~~potential~~products, ~~customers~~or to ODMs who ~~compete~~include our chipsets in the products they ~~with~~supply ~~these~~to ~~customers~~OEMs. ~~from~~We ~~buying~~have limited visibility as to the volume of our products. Tothat ~~attract~~our ~~new~~ OEM and ODM customers orare ~~retain~~selling ~~existing~~to their customers, weor ~~may~~carrying ~~offer~~in ~~certain~~ their inventory. If our customers ~~favorable~~have ~~prices~~excess oninventory ~~our~~or ~~products.~~experience ~~The~~a ~~loss~~slowing of aproducts ~~key~~sold ~~customer,~~through ato ~~reduction~~their inend ~~sales~~customers, toit ~~any~~would ~~key~~likely ~~customer~~result orin ~~our inability~~a toslowdown ~~attract~~in ~~new~~orders ~~significant~~from our customers ~~could~~and ~~seriously~~ adversely impact our ~~revenue~~future sales and ~~materially~~inventory and ~~adversely~~result ~~affect~~in ~~our results~~an extension of ~~operations~~our sales cycles.

~~Further,~~If ~~our~~we ~~product~~fail ~~portfolio~~to ~~consists~~adequately ~~predominantly~~forecast ~~of semiconductor~~demand ~~solutions~~ for ~~the~~our ~~communications~~products, ~~PC,~~we ~~and~~may ~~consumer markets.~~incur ~~Recently,~~product ~~unfavorable~~shortages ~~domestic and global economic conditions have had an adverse impact on demand in these end-user markets by reducing overall consumer spending~~ or ~~shifting~~ ~~consumer~~excess ~~spending~~product ~~to products other than those made by our customers~~inventories. ~~Any prolonged or significant decrease in consumer~~ ~~spending by customers in these end-markets will adversely impact demand by our customers for our products and could also~~

Our agreements with certain suppliers require us to provide forecasts of our anticipated manufacturing orders, and place binding manufacturing commitments in advance of receiving purchase orders from our customers. We may be limited in our ability to increase or decrease our forecasts under such agreements. Other manufacturers supply us with product on a purchase order basis. The allocation of product capacity is determined solely by our suppliers over which we have no direct control. Additionally, we may place orders with our suppliers in advance of receiving customer orders to allow us to quickly respond to changing customer demand or to obtain favorable product costs. These factors may result in product shortages or excess product inventories. Obtaining additional supply in the face of product, equipment or capacity shortages may be costly, or not possible, especially in the short term since many of our products are supplied by a single supplier. Our failure to adequately forecast demand for our products could materially harm our business.

Our approach to developing solutions for potential customers involves developing solutions for and aligning our product roadmap with leading audio, video and imaging customers. In keeping with this strategy, we have entered into informal partnerships with other parties that involve the development of solutions that interface with their devices or standards. These informal partnerships also may involve joint marketing campaigns and sales calls. If our solutions are not incorporated into customer products, if our partners discontinue production or fail to integrate our solution into their product offerings, or if the informal partnerships do not grow as expected or if they are significantly reduced or are terminated by acquisition or other means, our revenue and gross margin will be materially harmed and we may be required to write-off related inventories and long-lived assets.

The semiconductor manufacturing process is complex and we may experience difficulties that result in lower performance distribution and yield of our products.

Difficulties encountered during the complex semiconductor manufacturing process can render a substantial percentage of semiconductor devices nonfunctional. New manufacturing techniques or fluctuations in the manufacturing process may change the performance distribution and yield of our products. We have, in the past, experienced manufacturing runs that have

~~slow~~contained ~~new~~substantially ~~product~~reduced ~~introductions~~or byno ~~our~~functioning ~~customers~~devices, ~~and~~or bythat usgenerated devices with below normal performance characteristics. ~~Lower net~~Our ~~sales~~reliance on third party suppliers may extend the period of time ~~our~~required ~~products~~to ~~would~~analyze ~~have~~and ancorrect ~~adverse~~these ~~effect~~problems. onOnce corrected, our ~~revenue~~ customers may be required to redesign or re-qualify their products. As a result, ~~cash~~we ~~flow~~may ~~and~~incur ~~results~~substantially higher manufacturing costs, shortages of ~~operations.~~inventories or reduced customer demand.

Yield fluctuations frequently occur in connection with the manufacture of newly introduced products, with changes in product architecture, with manufacturing at new facilities, on new fabrication processes or in conjunction with new backend manufacturing processes. Newly introduced solutions and products are often more complex and more difficult to produce, increasing the risk of manufacturing related defects. New manufacturing facilities or processes are often more complex and take a period of time to achieve expected quality levels and manufacturing efficiencies. While we test our products, including our software development tools, they may still contain errors or defects that are found after we have commenced commercial production. Undetected errors or defects may also result from new manufacturing processes or when new intellectual property is incorporated into our products. If our products or software development tools contain undetected or unresolved defects, we may lose market share, experience delays in or loss of market acceptance, reserve or scrap inventories or be required to issue a product recall. In addition, we would be at risk of product liability litigation if defects in our products were discovered. Although we attempt to limit our liability to end users through disclaimers of special, consequential and indirect damages and similar provisions, we cannot assure you that such limitations of liability will be legally enforceable.

Our products typically have lengthy sales cycles. A customer may decide to cancel or change its product plans, which could cause us to lose anticipated sales and we may incur significant expenses before we generate any revenues.

After we have developed and delivered a product to a customer, the customer will usually evaluate our product prior to designing its own equipment to incorporate our product. Our customers may need several months to test, evaluate and choose whether to adopt our product, and to begin volume production of equipment that incorporates our product. This process results in long sales cycles for many of our products. Due to these lengthy sales cycles, we may experience significant delays from the time we incur certain research and development costs, selling, general and administrative expenses, and build initial inventory, until the time we generate revenue from these products. It is possible that we may never generate any revenue from these products after incurring such expenditures or that the revenues or gross profit we generate are lower than we anticipate. Even if a customer selects our solution to incorporate into its product, we have no assurances that the customer will ultimately market and sell its product or that such efforts by our customer will be successful. The delays inherent in our lengthy sales cycle also increase the risk that a customer will decide to cancel or curtail, reduce or delay its product plans. Such a cancellation or change in plans by a customer could cause us to lose sales that we had anticipated or delay the realization of revenue and gross profit.

We will continue to expend substantial resources developing products for new applications or markets that may not achieve the sales volume that we anticipate for these products, which may limit our future revenue growth.

We have focused our R&D investments in products for imaging, audio and video customers. Although we plan to continue to drive growth in these applications and other new areas, we still have a significant portion of revenue coming from our legacy modem businesses. Our future success will depend in part upon our ability to offer products outside of this legacy business, and we face a number of risks in connection with the development, manufacturing, marketing and sale of these products, including those described in other risk factors in this Annual Report. We have in the past, and will likely in the future, expend substantial resources in developing new products for new applications and markets. We may experience unforeseen difficulties and delays in developing these products and defects upon volume production and broad deployment. In addition, we will have limited experience in these new markets, and we may be unsuccessful in marketing and selling any products we develop for these new markets. The markets we choose to enter will likely be highly competitive and many of our competitors will have substantially more experience in these markets. Our success will depend in part on the growth of the markets we enter, the competitiveness of our products and our ability to increase our market share in these markets. If we choose to enter markets that do not achieve or sustain the growth we anticipate, or if our products are not competitive, we may not achieve volume sales or pricing objectives, which may limit our future revenue and gross profit growth.

The loss of a key customer could seriously impact our revenue levels and harm our business. In addition, if we are unable to continue to sell existing and new products to our key customers in significant quantities or to attract new significant customers, our future operating results could be adversely affected.

Historically, we have derived a substantial portion of our revenue from sales to a relatively small number of customers. As a result, the loss or financial difficulty of any significant customer could materially and adversely affect our financial condition and results of operations. Sales to our 20 largest customers, including distributors, represented approximately 83% of our net revenues in the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011, and 82% and 87% of our net revenues in the Predecessor fiscal years ended October 1, 2010 and October 2, 2009, respectively. For the Successor period from in fiscal 2011 and the Predecessor period in fiscal 2011, one distributor accounted for 14% of our net revenues. For the Predecessor fiscal years ended October 1, 2010 and October 2, 2009, one distributor accounted for 13% and 23% of our net revenues,

respectively. We expect that our largest customers will continue to account for a substantial portion of our net revenue in future periods. The identities of our largest customers and their respective contributions to our net revenue have varied and will likely continue to vary from period to period. We may not be able to maintain or increase sales to certain of our key customers for a variety of reasons, including the following:

•

most of our customers can stop incorporating our products into their own products with limited notice to us and suffer little or no penalty;

•

our agreements with customers typically do not require them to purchase a minimum quantity of our products;

•

our customers’ perceptions of our liquidity and financial viability may have a negative impact on their decisions to incorporate our products into their own products;

•

many of our customers have pre-existing or concurrent relationships with our current or potential competitors that may affect the customers’ decisions to purchase our products;

•

our customers face intense competition from other manufacturers that do not use our products;

•

some of our customers offer or may offer products that compete with our products;

•

some of our customers’ may experience lower market share or pursue pricing reductions due to declining financial health or be negatively affected by continued uncertainty in global economic conditions;

•

our customers may decide to reduce their supply risk by developing additional sources of supply for a product; and

•

our small size, our cost-savings efforts and any future liquidity constraints may limit our ability to develop and deliver new products to customers.

In addition, our longstanding relationships with some larger customers may also deter other potential customers who compete with these customers from buying our products. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers could materially and adversely impact our revenue and our results of operations.

Further, our product portfolio consists predominantly of semiconductor solutions for the communications, PC, imaging and consumer markets. Unfavorable domestic and global economic conditions have had an adverse impact on demand in these end-user markets by reducing overall consumer spending or shifting consumer spending to products not made by our customers. Any prolonged or significant decrease in consumer spending by customers in these end-markets will adversely impact demand by our customers for our products and could also slow new product introductions by our customers and by us. Lower net sales of our products would have an adverse effect on our revenue, cash flow and results of operations.

We may not be able to keep abreast of the rapid technological changes in our markets.

The demand for our products can change quickly and in ways we may not anticipate because the markets we operate in generally exhibit the following characteristics:

• rapid technological developments; • rapid changes in customer requirements; • frequent new product introductions and enhancements; • short product life cycles with declining prices over the life cycle of the products; • evolving industry standards; and • constant transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries, increased expenses and loss of design wins to our competitors.

•

rapid changes in customer requirements;

•

frequent new product introductions and enhancements;

•

short product life cycles with declining prices over the life cycle of the products;

•

evolving industry standards; and

•

constant transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries, increased expenses and loss of design wins to our competitors.

Our products could become obsolete sooner than anticipated because of a faster than anticipated change in one or more of the technologies related to our products or in market demand for products based on a particular technology, particularly due to the introduction of new technology that represents a substantial advance over current technology. Currently accepted industry standards are also subject to change, which may contribute to the obsolescence of our products.

If OEMs of electronics products do not design our products into their equipment, we will be unable to sell those products. Moreover, a design win from a customer does not guarantee future sales to that customer.

Our products are components of other products. As a result, we rely on OEMs of electronics products to select our products from among alternative offerings to be designed into their equipment. We may be unable to achieve these “design wins.” Without design wins from OEMs, we would be unable to sell our products. Once an OEM designs another supplier’s semiconductors into one of its product platforms, it will be more difficult for us to achieve future design wins with that OEM’s product platform because changing suppliers involves significant cost, time, effort and risk. ~~Achieving~~In addition, achieving a design win with a customer does not ensure that we will receive significant revenues from that customer and we may be unable to convert design wins into actual sales. Even after a design win, the customer is not obligated to purchase our products and can choose at any time to stop using our products if, for example, it or its own products are not commercially successful.

Our operating and financial flexibility is limited by the terms of ~~the~~ ~~agreement governing our accounts receivable financing facility and~~ the ~~terms of the~~ indenture governing our senior secured notes due 2015.

~~The~~Our ~~agreement~~long ~~governing~~term ~~our~~debt ~~accounts~~due ~~receivable~~in ~~financing~~March 2015, with a principal amount of $175 million, bears interest at 11.25%, with semi-annual interest ~~facility~~payments due in March and ~~the~~September. The indenture governing our senior secured notes due 2015 ~~contain~~contains financial and other covenants that may limit our ability to take, or prevent us from taking, certain actions that we believe are in the best interests of our business and our stockholders. For example, the indenture governing our senior secured notes contains covenants that restrict, subject to certain exceptions, our ability and the ability of our subsidiaries who are guarantors of our senior secured notes to incur or guarantee additional indebtedness or issue certain redeemable or preferred stock; repurchase capital stock; pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; make certain investments; create liens; redeem junior debt; sell certain assets; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into certain types of transactions with affiliates; and enter into sale-leaseback transactions. In addition, we are required to use the proceeds of certain asset dispositions to offer to repurchase our senior secured notes if we do not use the proceeds within 360 days to invest in assets (other than current assets) to be used in our business; and this requirement limits our ability to use asset sale proceeds to fund our operations. The restrictions imposed by the ~~agreement~~indenture governing our ~~accounts~~senior ~~receivable~~secured notes may prevent us from taking actions ~~financing~~that ~~facility~~could ~~and~~help to grow our business or increase the ~~indenture~~ value of our securities.

governing our senior secured notes may prevent us from taking actions that could help to grow our business or increase the value of our securities.

We are subject to the risks of doing business internationally.

For the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011, net revenue from customers located outside of the United States (“U.S.”), which were earned primarily in the Asia-Pacific region, represented approximately 96% of our total net revenues. For the Predecessor fiscal years ended October 1, 2010, ~~October 2, 2009~~ and October 32, ~~2008~~2009, net revenues from customers located outside of the ~~United States (“~~U.S.”), which are primarily located in the Asia-Pacific region, represented approximately 94%, ~~97%~~ and 97%, respectively, of our total net revenues. In addition, many of our key suppliers are located outside of the U.S. Our international operations consist of research and development, sales offices, and other general and administrative functions. Our international operations are subject to a number of risks inherent in operating abroad. These include, but are not limited to, risks regarding:

• difficulty in obtaining distribution and support; • local economic and political conditions; • limitations on our ability under local laws to protect our intellectual property; • currency exchange rate fluctuations; • disruptions of commerce and capital or trading markets due to or related to terrorist activity, armed conflict, or natural disasters; • restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and trade protection measures, including export duties and quotas and customs duties and tariffs; • the laws and policies of the U.S. and other countries affecting trade, foreign investment and loans, and import or export licensing requirements; and • tax laws, including the cost of services ~~provided and products sold between us and our subsidiaries which are subject to review by taxing authorities.~~;

~~Further,~~• ~~because~~local ~~most~~economic of our international sales are currently denominated in U.S. dollars, our products could become less competitive in international markets if the value of the U.S. dollar increases relative to foreign currencies. From time to time, we may enter into foreign currency forward exchange contracts to minimize risk of loss from currency exchange rate fluctuations for foreign currency commitments entered into during the ordinary course of business. We have not entered into foreign currency forward exchange contracts for other purposes. As of October 1, 2010, we did not have any outstanding foreign currency exchange contracts. Our financial condition and ~~results~~political ~~of operations could be affected (adversely or favorably) by currency fluctuations.~~ conditions;

We• ~~also~~limitations ~~conduct~~on ~~a significant portion of~~ our ~~international~~ability ~~sales through~~under ~~distributors.~~local ~~Sales~~laws to ~~distributors~~protect ~~and other resellers accounted for approximately 24%, 36% and 34% of~~ our ~~net~~intellectual revenues for the fiscal years ended October 1, 2010, October 2, 2009 and October 3, 2008, respectively. Our arrangements with these distributors are terminable at any time, and the loss of these arrangements could have an adverse effect on our operating results. property;

~~Our success~~• ~~depends,~~disruptions inof ~~part,~~commerce onand ~~our~~capital ~~ability~~or trading markets due to ~~effect~~or ~~suitable investments,~~related ~~alliances,~~to ~~acquisitions~~terrorist ~~and~~activity, ~~where~~armed ~~appropriate~~conflict, ~~divestitures~~ ~~and~~or ~~restructurings.~~ natural disasters;

~~Although~~• werestrictive ~~invest~~governmental ~~significant~~actions, ~~resources~~such inas ~~research~~restrictions ~~and development~~on ~~activities,~~ the ~~complexity~~transfer ~~and~~or ~~speed~~repatriation of ~~technological~~ ~~changes~~funds ~~make~~and ittrade ~~impractical~~protection ~~for us to pursue development of all technological solutions on our own. On an ongoing basis~~measures, weincluding ~~review~~export ~~investment,~~duties ~~alliance~~ and ~~acquisition prospects~~quotas ~~that~~and ~~would~~customs ~~complement~~duties ~~our existing product offerings, augment our market coverage or enhance our technological capabilities. However, we cannot assure you that we will be able to identify~~ and ~~consummate suitable investment, alliance or acquisition transactions in the future.~~ tariffs;

~~Moreover,~~• ifthe welaws ~~consummate~~and ~~such~~policies ~~transactions~~of the U.S. and other countries affecting trade, ~~they~~foreign ~~could~~investment ~~result in:~~ and loans, and import or export licensing requirements; and

•15 ~~write-offs of in-process research and development; • the incurrence of substantial debt and assumption of unknown liabilities;~~

• ~~the~~tax ~~potential~~laws, ~~loss~~including ~~of key employees from~~ the ~~acquired~~cost ~~company;~~of •services ~~amortization~~provided ~~expenses~~and ~~related~~products tosold ~~intangible~~between ~~assets;~~us and •our ~~the~~subsidiaries ~~diversion~~which ofare ~~management’s~~subject ~~attention~~to ~~from~~review ~~other~~by ~~business~~taxing ~~concerns~~authorities.

~~Integrating~~Further, ~~acquired~~because ~~organizations~~most ~~and~~of ~~their~~our ~~products~~international ~~and services~~sales ~~may~~are becurrently ~~expensive~~denominated in U.S. dollars, ~~time-consuming~~our products ~~and~~could abecome ~~strain~~less oncompetitive ~~our resources~~in ~~and~~international ~~our~~markets ~~relationships~~if ~~with~~the ~~employees~~value ~~and~~of ~~customers, and~~the ~~ultimately~~U.S. dollar ~~may~~increases ~~not~~relative beto ~~successful~~foreign currencies. ~~The~~From ~~process~~time ofto ~~integrating operations~~time, ~~could~~we ~~cause~~may anenter ~~interruption~~into ~~of,~~foreign orcurrency ~~loss~~forward ofexchange ~~momentum in,~~contracts ~~the~~to ~~activities~~minimize risk of ~~one~~loss from orcurrency ~~more~~exchange ofrate ~~our~~fluctuations ~~products~~for ~~and~~foreign ~~the~~currency ~~loss of~~commitments ~~key~~entered ~~personnel.~~into ~~The~~during ~~diversion~~the ordinary course of ~~management’s~~business. ~~attention and~~We ~~any~~have ~~delays~~not orentered ~~difficulties~~into ~~encountered~~foreign incurrency ~~connection~~forward ~~with acquisitions~~exchange ~~and~~contracts ~~the~~for ~~integration~~other purposes. As of ~~multiple~~September 30, ~~operations~~2011, ~~could~~we did not have anany ~~adverse~~outstanding ~~effect~~foreign oncurrency ~~our~~exchange ~~business,~~contracts. Our financial condition and results of operations could be affected (adversely or ~~financial~~ ~~condition~~favorably) by currency fluctuations.

~~Moreover~~Our success depends, in ~~the event that we have unprofitable operations or products~~part, weon ~~may~~our beability ~~forced~~ to ~~restructure~~effect orsuitable ~~divest~~investments, ~~such operations~~alliances, oracquisitions ~~products.~~and ~~There is no guarantee that we will be~~where ~~able~~appropriate, todivestitures ~~restructure~~and or divest such operations or products on a timely basis or at a value that will avoid further losses or that will successfully mitigate the negative impact on our overall operations or financial resultsrestructurings.

Although we invest significant resources in research and development activities, the complexity and speed of technological changes in the industry in which we operate make it impractical for us to pursue development of all technological solutions on our own. On an ongoing basis, we review investment, alliance and acquisition prospects that would complement our existing product offerings, augment our market coverage or enhance our technological capabilities. However, we cannot make assurances that we will be able to identify and consummate suitable investment, alliance or acquisition transactions in the future, or that these investments will achieve their financial objectives.

Moreover, if we consummate such transactions, they could result in significant costs and risks, including those relating to:

•

integration of multiple companies, products or technologies;

•

write-offs of in-process research and development;

•

the incurrence of substantial debt and assumption of unknown liabilities;

•

the potential loss of key employees from the acquired company or from the Company as a result of the acquisition;

•

amortization expenses related to intangible assets; and

•

the diversion of management’s attention from other business concerns.

Integrating acquired organizations and their products, services and technologies may be expensive, time-consuming and a strain on our resources and our relationships with employees and customers, and ultimately may not be successful. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our products and the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with acquisitions and the integration of multiple operations could have an adverse effect on our business, results of operations or financial condition.

Moreover, in the event that we have unprofitable operations or products, we may be forced to restructure or divest such operations or products. There is no guarantee that we will be able to restructure or divest such operations or products on a timely basis or at a value that will avoid further losses or that will successfully mitigate the negative impact of such operations or products on our overall operations or financial results.

Uncertainties involving the ordering and shipment of our products could adversely affect our business.

Our sales are typically made pursuant to individual purchase orders and we generally do not have long-term supply arrangements with our customers. Generally, our customers may cancel orders until 30 days prior to shipment. In addition, we sell a portion of our products through distributors and other resellers, some of whom have a right to return unsold products to us. Sales to distributors and other resellers accounted for approximately 2441%, 36of our net revenues in the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011. Sales to distributors and other resellers accounted for approximately 30% and 3438% of our net revenues for the Predecessor fiscal years ended October 1, 2010, and October 2, 2009 ~~and October 3~~, ~~2008,~~ respectively. Our distributors ~~may~~ may offer products of several different suppliers, including products that may be competitive with ours. Accordingly, there is a risk that the distributors may give priority to other suppliers’ products and may not sell our products as ~~quickly~~ quickly as forecasted, which may impact the distributors’ future order levels. We routinely purchase inventory based on estimates of end-market demand for our customers’ products, which is difficult to predict. This difficulty may be compounded when we sell to OEMs indirectly through distributors and other resellers or contract manufacturers, or both, as our forecasts of demand are then based on estimates provided by multiple parties. In addition, our customers may change ~~their inventory~~ practices on short notice for any reason. The cancellation or deferral of product orders, the return of previously-sold products or overproduction due to the failure of anticipated orders to materialize could result in our holding excess or obsolete inventory, which could result in write-downs of inventory.

We16 ~~are dependent upon third parties for the manufacture, assembly and testing of our products.~~

We are entirely dependent upon outside wafer fabrication facilities (known as foundries or fabs). Therefore, our revenue growth is dependent on our ability to obtain sufficient external manufacturing capacity, including wafer fabrication capacity. If the semiconductor industry experiences a shortage of wafer fabrication capacity in the future, we risk experiencing delays in access to key process technologies, production or shipments and increased manufacturing costs. Moreover, our foundry partners often require significant amounts of financing in order to build or expand wafer fabrication facilities. However, current uncertain economic conditions have also resulted in a tightening in the credit markets, decreased the level of liquidity in many financial markets and resulted in significant volatility in the credit and equity markets. These conditions may make it difficult for foundries to obtain adequate or historical levels of capital to finance the building or expansion of their wafer fabrication facilities, which would have an adverse impact on their production capacity and could in turn negatively impact our wafer output. In addition, certain of our suppliers have required that we keep in place standby letters of credit for all or part of the products we order. Such requirement, or a requirement that we pre-pay for all or part of vendor invoices or that we shorten our payment cycle times in the future, may negatively impact our liquidity and cash position, or may not be available to us due to our then-current liquidity or cash position, and would have a negative impact on our ability to produce and deliver products to our customers on a timely basis.

~~months~~their toinventory ~~redesign~~practices ~~our~~on ~~products~~short notice for ~~the~~any ~~process~~reason. ~~technology~~The ~~and intellectual~~cancellation ~~property~~or ~~cores~~deferral of product orders, the ~~new~~return ~~foundry~~of ~~and~~previously-sold products or overproduction due to ~~complete~~ the ~~qualification~~failure ~~process~~of anticipated ~~before~~orders weto ~~can~~materialize ~~begin~~could ~~shipping~~result ~~products from~~in ~~the~~our ~~new~~holding ~~foundry~~excess or obsolete inventory, which could result in write-downs of inventory.

We are ~~also~~ dependent upon third parties for the manufacture, assembly and testing of our products. Our reliance on others to assemble and test our products subjects us to many of the same risks that we have with respect to our reliance on outside foundries. Wafer fabrication processes are subject to obsolescence, and foundries may discontinue a process used for certain of our products. In such event, we generally offer our customers a “last time buy” program to satisfy their anticipated requirements for that product. The unanticipated discontinuation of wafer fabrication processes on which we rely may adversely affect our revenues and our customer relationships.

We are entirely dependent upon outside wafer fabrication facilities (known as foundries or fabs). Therefore, our ability to sell our products is dependent on our ability to obtain sufficient external Inmanufacturing capacity, including wafer fabrication capacity. If the ~~event~~semiconductor ofindustry experiences a ~~disruption~~shortage of wafer fabrication capacity in the ~~operations~~future, ofwe ~~one~~risk orexperiencing ~~more~~delays ofin access to key process technologies, production or shipments, and increased manufacturing costs. Moreover, our ~~suppliers~~foundry partners often require significant amounts of financing in order to build or expand wafer fabrication facilities. However, weuncertain ~~may~~economic ~~not~~conditions have adecreased ~~second~~the ~~manufacturing~~level ~~source~~of ~~immediately~~liquidity ~~available.~~in ~~Such~~many anfinancial ~~event~~markets ~~could~~and ~~cause~~resulted in significant ~~delays~~ volatility in ~~shipments~~the ~~until~~credit weand ~~could~~equity ~~shift~~markets. ~~the~~These ~~products~~conditions ~~from~~may ~~an affected~~make ~~facility~~it ordifficult ~~supplier~~for foundries to ~~another~~obtain ~~facility~~adequate capital to finance the building or ~~supplier.~~expansion of their wafer ~~The~~fabrication ~~manufacturing~~facilities, ~~processes~~which wewould ~~rely~~have an adverse impact on ~~are~~their ~~specialized~~production capacity and ~~are available~~could ~~from~~in aturn ~~limited~~negatively ~~number~~impact our wafer output. In addition, certain of our suppliers. ~~Alternate~~have ~~sources~~required that we keep in place standby letters of credit for all or part of ~~manufacturing~~the ~~capacity,~~products ~~particularly~~we ~~wafer~~order. ~~fabrication capacity~~Such requirement, ~~may~~or ~~not~~a berequirement ~~available~~that towe uspre-pay onfor aall ~~timely~~or ~~basis.~~part ~~Even~~of ~~if alternate~~vendor ~~wafer~~invoices ~~fabrication~~or ~~capacity~~that iswe ~~available~~shorten our payment cycle times in the future, wemay negatively impact our liquidity and cash position, or may not be ~~able~~available to ~~obtain~~us itdue onto ~~favorable~~our ~~terms,~~then-current liquidity or atcash ~~all.~~position, ~~All~~and ~~such~~would ~~delays or~~have ~~disruptions~~a ~~could~~negative ~~impair~~impact on our ability to ~~meet~~produce ~~our customers’ requirements~~ and ~~have~~deliver aproducts ~~material~~to ~~adverse~~our ~~effect~~ customers on ~~our~~a ~~operating~~timely ~~results~~basis.

The foundries we use may allocate their limited capacity to fulfill the production requirements of other customers that are larger and better financed than us. If we choose to use a new foundry, it typically takes several months to redesign our products for the process technology and intellectual property cores of the new foundry and to complete the qualification process before we can begin shipping products from the new foundry.

We are also dependent upon third parties for the assembly and testing of our products. Our reliance on others to assemble and test our products subjects us to many of the same risks that we have with respect to our reliance on outside foundries, including competition for the servicing capabilities of the third parties. Wafer fabrication processes are subject to obsolescence, and foundries may discontinue a process used for certain of our products. In such event, we generally offer our customers a “last time buy” program to satisfy their anticipated requirements for that product. The unanticipated discontinuation of wafer fabrication processes on which we rely may adversely affect our revenues and our customer relationships.

In the event of a disruption of the operations of one or more of our suppliers, we may not have a second manufacturing source immediately available. Such an event could cause significant delays in shipments until we could shift the products from an affected facility or supplier to another facility or supplier. The manufacturing processes we rely on are specialized and are available from a limited number of suppliers. Alternate sources of manufacturing capacity, particularly wafer fabrication capacity, may not be available to us on a timely basis. Even if alternate wafer fabrication capacity is available, we may not be able to obtain it on favorable terms. All such delays or disruptions could impair our ability to meet our customers’ requirements and have a material adverse effect on our operating results.

In addition, the highly complex and technologically demanding nature of semiconductor manufacturing has caused foundries from time to time to experience lower than anticipated manufacturing yields, particularly in connection with the introduction of new products and the installation and start-up of new process technologies. Lower than anticipated manufacturing yields may affect our ability to fulfill our customers’ demands for our products on a timely basis and may adversely affect our cost of goods sold and our results of operations.

If we are not successful in protecting our intellectual property rights, it may harm our ability to compete.

We use a significant amount of intellectual property in our business. We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality ~~agreements~~ ~~and other methods~~agreements, to protect our proprietary technologies and processes. At times, we incorporate intellectual property licensed from our customers and other third parties into our designs, and we have obligations with respect to the non-use and non-disclosure of their ~~intellectual~~ intellectual property. In the past, we have engaged in litigation to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others, including our customers. We may engage in future litigation on similar grounds, which may require us to expend significant resources and to divert the efforts and attention of our management from our business operations. We cannot assure you that:

• the steps we take to prevent misappropriation or infringement of our intellectual property or the intellectual property of our customers will be successful; ~~• any existing or future patents will not be challenged, invalidated or circumvented; or • any of the measures described above would provide meaningful protection.~~

•

any existing or future patents will not be challenged, invalidated or circumvented; or

•

any of the measures described above would provide meaningful protection.

Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, develop similar technology independently or design around our patents. If any of our patents fails to protect our technology, it would make it easier for our competitors to offer similar products. In addition, effective patent, copyright, trademark and trade secret protection may be unavailable or limited in certain countries.

A significant portion of our intellectual property rights is located in foreign jurisdictions. Because of the differences in foreign patent, trademark and other laws concerning proprietary rights, our intellectual property rights frequently do not receive the same degree of protection in foreign jurisdictions as they would in the U.S. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.

We may be subject to claims of infringement of third-party intellectual property rights or demands that we license third-party technology, which could result in significant expense and loss of our ability to use, make, sell, export or import our products or one or more components comprising our products.

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark and other intellectual property rights to technologies that are important to our business and have demanded and may in the future demand that we license their patents and technologies. Any litigation to determine the validity of claims that our products infringe or may infringe these rights, including claims arising through our contractual indemnification of our customers, regardless of their merit or resolution, could be costly and divert the efforts and attention of our management and technical personnel. We cannot assure you that we would prevail in litigation given the complex technical issues and inherent uncertainties in intellectual property litigation. If litigation results in an adverse ruling we could be required to:

• pay substantial damages; • cease the manufacture, use or sale of infringing products, processes or technologies; • discontinue the use of infringing technology; • expend significant resources to develop non-infringing technology, which we may not be successful in developing; or • license technology from the third party claiming infringement, which license may not be available on commercially reasonable terms, or at all.

~~The price~~• ofcease ~~our~~the ~~common stock may fluctuate significantly~~manufacture, ~~which~~use ~~may make~~or itsale ~~difficult~~of ~~for~~infringing ~~you~~products, toprocesses ~~resell your common stock when you want~~ or ~~at prices you find attractive.~~ technologies;

~~The~~• ~~price~~discontinue ~~of our common stock is volatile and may fluctuate significantly. For example, since September 29, 2007,~~ the ~~price~~ ofuse ~~our stock has ranged from a high~~ of ~~$14.80~~infringing per share to a low of $0.26 per share. We cannot assure you as to the prices at which our common stock will trade or that an active trading market in our common stock will be sustained in the future. In addition to the matters discussed in other risk factors included herein, some of the reasons for fluctuations in our stock price could include: technology;

• ~~our~~expend ~~operating~~significant ~~and~~resources ~~financial~~to ~~performance~~develop ~~and~~non-infringing ~~prospects;~~technology, ~~• the depth and liquidity of the market for our common stock; • investor perception of us and the industry in~~ which we ~~operate;~~may •not ~~the~~be ~~level~~successful ~~of research coverage of our common stock; • changes~~ in ~~earnings estimates or buy/sell recommendations by analysts~~developing; ~~• general financial, domestic, international, economic and other market conditions; • proposed acquisitions by us~~ or ~~our competitors; • the hiring or departure of key personnel; and • adverse judgments or settlements obligating us to pay damages.~~

In• ~~addition,~~license ~~public~~technology ~~stock~~from ~~markets have experienced, and may in~~ the ~~future~~third ~~experience,~~party ~~extreme~~claiming ~~price and trading volume volatility~~infringement, ~~particularly~~which inlicense ~~the~~may ~~technology~~not ~~sectors~~be ofavailable ~~the market.~~on ~~This~~commercially ~~volatility~~reasonable ~~has~~terms, ~~significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to~~ or ~~disproportionately~~at ~~impacted by the operating performance of these companies~~all. ~~These broad market fluctuations may adversely affect the market price of our common stock.~~

We own or lease a significant amount of space in which we do not conduct operations, and doing so 17 exposes us to the financial risks of default by our tenants and subtenants and cashflow related to carrying vacant property.

~~Table~~As a result of ~~Contents~~our various reorganization and restructuring related activities, we lease or own a number of facilities in which we do not operate. At September 30, 2011, we had 381,763 square feet of impaired leased space of which approximately 71% was being leased to third parties and 29% was vacant and offered for lease. As of September 30, 2011, the aggregate amount owed to landlords under space we lease but do not operate over the remaining terms of the leases was approximately $53.0 million and, of this amount, subtenants had lease obligations to us in the aggregate amount of $13.9 million. The space we have subleased to others is, in some cases, at rates less than the amounts we are required to pay landlords and, of the aggregate obligations we had to landlords for unused space at September 30, 2011, approximately $5.0 million was attributable to space we were attempting to sublease. In the event one or more of our subtenants fails to make lease payments to us or otherwise defaults on their obligations to us, we could incur substantial unanticipated payment obligations to landlords. In addition, in the event tenants of space we own fail to make lease payments to us or otherwise default on their obligations to us, we could be required to seek new tenants and we cannot assure you that our efforts to do so would be successful or that the rates at which we could do so would be attractive. In the event our estimates regarding our ability to sublet our available space are incorrect, we would be required to adjust our restructuring or impairment reserves, which could have a material impact on our financial results in the future.

We own or lease a significant amount of space in which we do not conduct operations, and doing so exposes us to the financial risks of default by our tenants and subtenants and expenses related to carrying vacant property.

As a result of our various reorganization and restructuring related activities, we lease or own a number of domestic facilities in which we do not operate. At October 1, 2010, we had 407,175 square feet of leased space and 456,000 square feet of owned space, of which approximately 89% was being leased to third parties and 11% was vacant and offered for lease. Included in these amounts are 389,000 square feet of owned space in Newport Beach, California that we have leased to TowerJazz (formerly Jazz Semiconductor, Inc.). As of October 1, 2010, the aggregate amount owed to landlords under space we lease but do not operate over the remaining terms of the leases was approximately $56.0 million and, of this amount, subtenants had lease obligations to us in the aggregate amount of $13.7 million. The space we have subleased to others is, in some cases, at rates less than the amounts we are required to pay landlords and, of the aggregate obligations we had to landlords for unused space at October 1, 2010, approximately $7.0 million was attributable to space we were attempting to sublease. In the event one or more of our subtenants fails to make lease payments to us or otherwise defaults on their obligations to us, we could incur substantial unanticipated payment obligations to landlords. In addition, in the event tenants of space we own fail to make lease payments to us or otherwise default on their obligations to us, we could be required to seek new tenants and we cannot assure you that our efforts to do so would be successful or that the rates at which we could do so would be attractive. In the event our estimates regarding our ability to sublet our available space are incorrect, we would be required to adjust our restructuring reserves, which could have a material impact on our financial results in the future.

We have historically incurred substantial losses and may incur additional future losses.

Our loss from continuing operations (as retrospectively adjusted) for the fiscal years ended October 2, 2009 and October 3, 2008 was $40.5 million and $12.7 million, respectively. These results have had a negative impact on our financial condition and operating cash flows. We cannot assure you that our business will be profitable or that we will not incur additional substantial losses in the future. Additional operating losses or lower than expected product sales will adversely affect our cash flow and financial condition and could impair our ability to satisfy our indebtedness obligations as such obligations come due.

The value of our warrant to purchase 6.1 million shares of Mindspeed common stock is subject to material increases and decreases in value based on factors beyond our control.

We have a warrant to purchase approximately 6.1 million shares of Mindspeed common stock at an exercise price of $16.74 per share through June 2013. At October 1, 2010 and October 2, 2009, the market value of Mindspeed common stock was $7.73 and $3.05 per share, respectively. We account for the Mindspeed warrant as a derivative instrument, and changes in the fair value of the warrant are included under other expense (income), net in the statement of operations for each period. At October 1, 2010 and October 2, 2009, the aggregate fair value of the Mindspeed warrant included on the accompanying consolidated balance sheets was $20.7 million and $5.1 million, respectively. At October 1, 2010, the warrant was valued using the Black-Scholes-Merton model with an expected term of 2.75 years, expected volatility of 101%, risk-free interest rate of 0.58% and no dividend yield. The aggregate fair value of the warrant is reflected as a long-term asset on the accompanying consolidated balance sheets because we do not intend to liquidate any portion of the warrant in the next twelve months. At October 1, 2010 and October 2, 2009, the value of the warrant represented 7% and 1%, respectively, of total assets.

The valuation of this derivative instrument is subjective, and option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in these assumptions can materially affect the fair value estimate. We could, at any point in time, ultimately realize amounts significantly different than the carrying value.

We may ~~not~~ beengage ~~able~~in tomanufacturing, ~~attract~~distribution ~~and~~or ~~retain~~technology ~~qualified management,~~agreements ~~technical~~that ~~and~~involve ~~other~~numerous ~~personnel~~risks, ~~necessary~~including ~~for~~ the ~~design, development~~use ~~and sale~~ of ~~our~~cash, ~~products.~~diversion ~~Our~~of ~~success~~resources ~~could~~and ~~be negatively~~significant ~~affected~~write-offs ~~if key personnel leave.~~

We have ~~Our~~entered ~~future~~into ~~success~~and, ~~depends~~in onthe ~~our~~future, ~~ability~~intend to ~~attract~~enter ~~and~~into ~~to retain~~agreements ~~the~~that ~~continued~~involve ~~service~~numerous ~~and~~risks, ~~availability~~including ofthe ~~skilled personnel~~use atof ~~all~~significant ~~levels~~amounts of our ~~business.~~cash; Asdiversion ~~the~~of ~~source~~resources offrom ~~our technological~~other ~~and~~development ~~product~~projects ~~innovations,~~or market opportunities; our ~~key~~ability ~~technical~~to ~~personnel~~collect ~~represent~~amounts adue ~~significant~~under ~~asset.~~these ~~The~~contracts; ~~competition~~and ~~for such~~market ~~personnel~~acceptance ~~can~~of berelated ~~intense~~products and solutions. ~~While~~If we ~~have~~fail ~~entered~~to ~~into employment~~recover ~~agreements~~the ~~with~~cost ~~some~~ of ~~our~~these ~~key~~or ~~personnel,~~other weassets ~~cannot assure~~from ~~you~~the ~~that~~cash weflow ~~will~~generated beby ~~able~~the torelated ~~attract~~products, ~~and~~our ~~retain~~assets ~~qualified management~~will ~~and~~become ~~other~~impaired ~~personnel~~and ~~necessary for the design,~~our ~~development~~financial ~~and~~results ~~sale~~would ofbe ~~our products~~harmed.

Our business is subject to the risks of earthquakes, other catastrophic events and business interruptions for which we may maintain limited insurance

Our operations, our suppliers, our customers and their suppliers are vulnerable to the effects that fire, earthquake, power loss, flood, terrorist acts and other catastrophic events beyond our control can have, including interrupted supply, our ability to source all of the goods and services needed to meet customer requirements. In particular, we rely on certain suppliers to manufacture our products and would not be able to qualify an alternate supplier of our products for several quarters. Our suppliers often hold significant quantities of our inventories which, in the event of a disaster, could be destroyed. In addition, our business processes and systems are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. Any catastrophic event, such as an earthquake or other natural disaster, the failure of our computer systems, war or acts of terrorism, could significantly impair our ability to maintain our records, invoice and receive payment from our customers, pay our suppliers, or design, manufacture or ship our products. The occurrence of any of these events could shift buying patterns, also affect our customers, distributors and suppliers and produce similar disruptive effects upon their business. If there is an earthquake or other catastrophic event near our headquarters, our customers’ facilities, our distributors’ facilities or our suppliers’ facilities, our business could be seriously harmed.

We do not maintain sufficient business interruption and other insurance policies to compensate us for all losses that may occur. Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss could have a material adverse effect on our business.

Changes to existing accounting pronouncements or taxation rules or practices may cause adverse revenue fluctuations, affect our reported financial results or how we conduct our business

Generally accepted accounting principles, or GAAP, are promulgated by, and are subject to the interpretation of the Financial Accounting Standards Board, or FASB, and the SEC. New accounting pronouncements or taxation rules and varying interpretations of accounting pronouncements or taxation practices have occurred and may occur in the future. Any future changes in accounting pronouncements or taxation rules or practices may have a significant effect on how we report our results and may even affect our reporting of transactions completed before the change is effective. In addition, a review of existing or prior accounting practices may result in a change in previously reported amounts. This change to existing rules, future changes, if any, or the questioning of current practices may adversely affect our reported financial results and customers and lenders perceptions of our financial condition or the way we conduct our business and subject us to regulatory inquiries or litigation.

We have implemented import and export control procedures to comply with United States regulations but we are still exposed to potential risks from import and export activity

Our products, solutions, technology and software are subject to import and export control laws and regulations which, in some instances, may impose restrictions on business activities, or otherwise require licenses or other authorizations from agencies such as the U.S. Department of State, U.S. Department of Commerce and U.S. Department of the Treasury. These restrictions may impact deliveries to customers or limit development and manufacturing alternatives. We have import and export licensing and compliance procedures in place for purposes of conducting our business consistent with U.S. and applicable international laws and regulations, and we periodically review these procedures to maintain compliance with the requirements relating to import and export regulations. If we are not able to remain in compliance with import and export regulations, we might be subject to investigation, sanctions or penalties by regulatory authorities. Such penalties can include civil, criminal or administrative remedies such as loss of export privileges. We cannot be certain as to the outcome of an evaluation, investigation, inquiry or other action or the impact of these items on our operations. Any such action could adversely affect our financial results and the market price of our common stock.

We may not have the liquidity to support our future operations and capital requirements

Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted, and our investment portfolio is subject to a degree of interest rate and liquidity risk. Unless such cash flow levels are achieved and our investment portfolio remains liquid and its capital is preserved, we may need to borrow additional funds or sell debt or equity

securities, or some combination thereof, to provide funding for our operations. Such additional funding may not be available on commercially reasonable terms, or at all. If adequate funds are not available when needed, our financial condition and operating results would be materially and adversely affected and we may not be able to operate our business without significant changes in our operations, or at all.

The value of our warrant to purchase 6.1 million shares of Mindspeed common stock is subject to material increases and decreases in value based on factors beyond our control.

We have a warrant to purchase approximately 6.1 million shares of Mindspeed common stock at an exercise price of $16.74 per share through June 2013. At September 30, 2011 and October 1, 2010, the market value of Mindspeed common stock was $5.20 and $7.73 per share, respectively. We account for the Mindspeed warrant as a derivative instrument, and changes in the fair value of the warrant are included under other expense (income), net in the statement of operations for each period. At September 30, 2011 and October 1, 2010, the aggregate fair value of the Mindspeed warrant included on the accompanying consolidated balance sheets was $1.7 million and $20.7 million, respectively. At September 30, 2011, the warrant was valued using the Black-Scholes-Merton model with an expected term of 1.75 years, expected volatility of 64%, risk-free interest rate of 0.22% and no dividend yield. The aggregate fair value of the warrant is reflected as a long-term asset on the accompanying consolidated balance sheets because we do not intend to liquidate any portion of the warrant in the next twelve months. At September 30, 2011 and October 1, 2010, the value of the warrant represented 0.4% and 6.8%, respectively, of total assets.

The valuation of this derivative instrument is subjective, and option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Changes in these assumptions can materially affect the fair value estimate. The amount, if any, that we realize upon exercise of this warrant may significantly differ from the carrying value.

Litigation could be costly and harmful to our business.

We are ~~involved~~subject into ~~various~~legal ~~claims~~proceedings and ~~lawsuits~~claims ~~from time to time. For example,~~ in ~~February~~the ~~2005,~~ordinary ~~certain~~course of our current and former officers and our Employee Benefits Plan Committee were named as defendants in a purported breach of fiduciary duties class action lawsuit that we recently settled for $3business.~~25 million.~~ Any of these claims or legal actions could adversely affect our business, financial position and results of operations and divert management’s attention and resources from other matters.

If any of the tax holidays or favorable tax incentives under which we operated in certain foreign jurisdictions are disallowed, our results of operations may be materially and adversely affected.

We operated under tax holidays and favorable tax incentives in certain foreign jurisdictions. While we believe we qualified for these incentives that reduced our income taxes and operating costs, the incentives required us to meet specified criteria, which are subject to audit and review. We cannot assure you that we met such criteria that would enable us to enjoy such tax holidays and incentives or realize any tax benefits from the tax holidays and incentives. If any of our tax holidays or incentives are terminated, our results of operations may be materially and adversely affected.

Our ability to use our net operating losses (“NOLs”) and other tax attributes to offset future taxable income ~~could~~has bebeen limited by anthe ownership change and/or decisions by California and other states to suspend the use of NOLs.

The Weacquisition ~~have significant NOLs, R&D tax credits, capitalized R&D and amortizable goodwill available to offset our future U.S. federal and state taxable income. A significant amount~~ of our ~~NOLs~~common ~~were~~stock ~~acquired~~ in ~~the~~connection ~~acquisition~~with ofthe ~~certain~~Merger oftriggered ~~our subsidiaries.~~an ~~Those~~ownership ~~NOLs~~change ~~are~~under ~~subject to limitations imposed by~~ Section 382 of the Internal Revenue Code ~~(and~~of ~~applicable state~~1986 ~~law~~(“Section 382”). InSection 382 ~~addition,~~imposes ~~our~~an ~~ability~~annual tolimitation ~~utilize~~(based ~~any~~upon ~~of our NOLs~~the ~~and~~value ~~other~~at ~~tax~~the ~~attributes~~time ~~may~~of bethe ~~subject~~ownership tochange, ~~significant limitations~~as determined under Section 382 of the Internal Revenue Code ~~(and applicable state law~~) ifon wethe ~~undergo~~amount anof ~~ownership~~taxable ~~change.~~income ~~An ownership~~that ~~change~~can ~~occurs~~be ~~for~~offset ~~purposes~~with ofnet ~~Section 382~~operating ofloss ~~the Internal~~(“NOL”) ~~Revenue~~carryovers ~~Code~~that ~~if,~~existed ~~among~~at ~~other~~time ~~things,~~of ~~5% stockholders~~the (iacquisition.~~e.,~~ ~~stockholders~~Section 383 ~~who~~will ~~own~~also orlimit ~~have~~our ~~owned~~ability 5%to oruse ~~more~~R&D oftax ~~our stock~~credit ~~(with~~carryovers. ~~certain~~In ~~groups~~addition, ofas ~~less-than-5%~~the ~~stockholders~~tax ~~treated as~~basis ~~single~~of ~~stockholders~~our ~~for~~assets ~~this~~exceeded ~~purpose))~~the ~~increase~~fair ~~their aggregate~~market ~~percentage~~value ~~ownership~~ of our ~~common~~assets ~~stock~~at bythe ~~more~~time ~~than fifty~~of ~~percentage points above~~ the ~~lowest~~ownership ~~percentage~~change, ofSection 382 ~~the~~will ~~stock~~also ~~owned~~limit byour ~~these~~ability ~~stockholders~~to atuse ~~any~~amortization ~~time~~of ~~during~~capitalized ~~the~~R&D ~~relevant testing~~and ~~period.~~goodwill ~~Stock~~to ~~ownership~~offset ~~for~~taxable ~~purposes~~income offor ~~Section 382 of~~ the ~~Internal~~first ~~Revenue~~five ~~Code~~years isfollowing ~~determined~~an ~~under~~ownership achange. ~~complex~~Any ~~set of~~unused ~~attribution~~annual ~~rules,~~limitation somay ~~that~~be acarried ~~person~~over isto ~~treated~~later asyears ~~owning~~until the applicable ~~stock~~expiration ~~directly,~~date ~~indirectly~~for ~~(i.e.,~~the ~~through~~respective ~~certain~~NOLs. ~~entities)~~Similar ~~and constructively~~limitations ~~(through~~have ~~certain~~been ~~related~~implemented ~~persons~~by states and certain ~~unrelated~~ ~~persons~~foreign ~~acting~~jurisdictions. asWe aare ~~group).~~in In the ~~event~~process of ~~an ownership~~finalizing ~~change,~~the ~~Section 382~~impact ~~imposes~~of anSection ~~annual~~382 ~~limitation (based~~on ~~upon~~ our ~~value~~deferred attax ~~the~~items ~~time~~and, ofwe ~~the~~have ~~ownership~~preliminarily assessed ~~change,~~the ~~as determined~~impact ~~under~~of Section 382 ~~of the Internal Revenue Code)~~ on ~~the~~our ~~amount~~fully ofreserved ~~taxable~~deferred ~~income~~tax ~~a corporation may offset with NOLs~~assets. IfThe wechange ~~undergo~~of an ownership ~~change,~~has ~~Section 383~~significantly ~~would also~~limited ~~limit~~ our ability to ~~use~~utilize ~~R&D~~our federal and state deferred tax ~~credits.~~assets Inand ~~addition, if~~impaired the ~~tax~~carrying ~~basis~~value of ~~our~~the deferred tax assets ~~exceeded~~and changed the ~~fair~~amount ~~market value~~ of our ~~assets~~unrecognized attax ~~the~~benefits. ~~time~~As of the ~~ownership~~federal ~~change,~~and ~~Section 382 could~~state ~~also~~deferred ~~limit~~tax ~~our~~assets ~~ability~~are tofully ~~use~~reserved, ~~amortization~~this ofimpairment ~~capitalized R&D~~has ~~and~~not ~~goodwill~~had toan ~~offset~~impact ~~taxable~~on ~~income~~our ~~for~~current ~~the~~year ~~first five~~financial ~~years~~position ~~following~~or anresults ~~ownership~~of ~~change~~operations. ~~Any~~However, ~~unused annual~~the limitation ~~may~~on bethe ~~carried~~use ~~over~~of toour ~~later~~NOLs, ~~years~~credits ~~until~~and ~~the applicable~~amortization ~~expiration~~which ~~date~~resulted ~~for~~from the ~~respective~~ownership ~~NOLs~~changes could adversely impact our future operating results and financial condition. As a result~~, our~~ ~~inability~~of tothe ~~utilize~~Section 382 ~~these NOLs~~limitation, ~~credits~~as orof September 30, ~~amortization~~2011, ~~as a~~the ~~result~~Company ofhas ~~any~~U.S. ~~ownership~~federal ~~changes~~and ~~could~~California ~~adversely~~net ~~impact~~realizeable ~~our~~ net operating ~~results~~loss carryforwards of approximately $272 million and ~~financial~~$553 ~~condition~~million, respectively.

In addition, we can within nine and a half months of the Merger elect under Section 338 of the Internal Revenue Code to treat the Merger as if it were an asset purchase for federal income tax purposes. If we make a Section 338 election, generally the tax basis of our assets will equal the fair market value at the time of the Merger, the intangible assets would be 19 deductible

over 15 years under IRC Section 197 and the net operating losses, federal credits and remaining deferred taxes would be eliminated. Our financial position and results of operations and cash flows could materially change if we make a Section 338 election.

In addition, California and certain states have suspended use of NOLs and credits for certain taxable years, and other states are considering similar measures. As a result, we may incur higher state income tax expense in the future. Depending on our future tax position, continued suspension of our ability to use NOLs, credits and tax attributes in states in which we are subject to income tax could have an adverse impact on our operating results and financial condition.

In the event of a change of control, we may not be able to repurchase our outstanding debt as required by the applicable indenture, which would result in a default under the indenture.

Upon a change of control, we will be required to offer to repurchase all of our senior notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the applicable repurchase date. As of October 1, 2010, the aggregate outstanding principal amount of the senior notes was $175.0 million. Future debt agreements may contain similar provisions. We may not have the financial resources to repurchase our indebtedness.

We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial condition and results of operations.

At ~~October~~September 130, ~~2010~~2011, we had $~~109~~223.9 million of goodwill and $468.34 million of intangible assets, net, which together represented approximately 3774% of our total assets. In periods subsequent to an acquisition, at least on an annual basis or when indicators of impairment exist, we must evaluate goodwill and acquisition-related intangible assets for impairment. When such assets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings. If our ~~market~~ ~~capitalization~~fair value drops below our book value for a prolonged period of time, our assumptions regarding our future operating performance change or other indicators of impairment are present, we may be required to write-down the value of our goodwill and acquisition-related intangible assets by taking a charge against earnings.

~~Our~~During ~~remaining goodwill is associated with our business. Goodwill is tested at~~ the ~~reporting unit level annually in the~~ fourth ~~fiscal~~ quarter ~~and,~~of iffiscal ~~necessary~~2011, ~~whenever~~we ~~events~~determined orthat indicators ~~changes~~of ~~in circumstances~~impairment ~~indicate~~existed ~~that~~based ~~the~~on ~~carrying~~our ~~amount~~operating ~~may~~results ~~not~~and ~~be recoverable~~forecasts. ~~During~~As ~~the~~a ~~fourth fiscal quarter of 2010~~result, we ~~determined~~ ~~that~~recalculated the fair value of our ~~business~~acquisition-related ~~was greater than its carrying value and therefore there was no impairment of goodwill as of October 1, 2010. Because of the significance of our remaining goodwill and~~ intangible ~~asset balances, any future impairment of these~~ assets ~~could~~and ~~have~~based ~~a material adverse effect~~ on ~~our~~their ~~financial~~revised ~~condition~~fair ~~and~~values ~~results~~recorded ofan ~~operations, although,~~impairment ~~as a~~ charge, itof ~~would have no effect on our cash flow~~$41.0 ~~Significant~~million ~~impairments~~in ~~may~~the ~~also~~Successor ~~impact~~period ~~shareholders’ equity~~in ~~(deficit)~~fiscal 2011.

Our remaining goodwill is associated with our business. Goodwill is tested for impairment at the reporting unit level annually in the fourth fiscal quarter and, if necessary, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. During the fourth quarter of fiscal 2011, we determined that the fair value of our business was less than its carrying value. As a result, we tested whether the implied fair value of goodwill was greater than the carrying amount of goodwill. Based on our test, we determined that the implied fair value of goodwill was greater than the carrying amount of goodwill and therefore there was no impairment of goodwill as of September 30, 2011. Because of the significance of our remaining goodwill and intangible asset balances, any future impairment of these assets could have a material adverse effect on our financial condition and results of operations, although, as a charge, it would have no effect on our cash flow. Significant impairments may also impact shareholders’ equity.

Our revenues, cash flow from operations and results of operations have fluctuated in the past and may fluctuate in the future, particularly given uncertain domestic and global economic conditions.

Our revenues, cash flow and results of operations have fluctuated in the past and may fluctuate in the future. These fluctuations are due to a number of factors, many of which are beyond our control. These factors include, among others:

• changes in end-user demand for the products manufactured and sold by our customers; • the timing of receipt, reduction or cancellation of significant orders by customers; • adverse economic conditions, including the unavailability or high cost of credit to our customers; • the inability of our customers to forecast demand based on uncertain economic conditions; • seasonal customer demand; • the gain or loss of significant customers; • market acceptance of our products and our customers’ products; • our ability to develop, introduce and market new products and technologies on a timely basis;

20 • the timing of receipt, reduction or cancellation of significant orders by customers;

•

adverse economic conditions, including the unavailability or high cost of credit to our customers;

•

the inability of our customers to forecast demand based on uncertain economic conditions;

•

seasonal customer demand;

•

the gain or loss of significant customers;

•

market acceptance of our products and our customers’ products;

•

our ability to develop, introduce and market new products and technologies on a timely basis;

•

the effect of our long term debt and related covenants on our ability to raise funds through asset sales or increase our debt;

•

our ability to refinance our long term debt;

• the timing and extent of product development costs; • new product and technology introductions by competitors; • changes in the mix of products we develop and sell; • fluctuations in manufacturing yields; • availability and cost of products from our suppliers; • intellectual property disputes; and • the effect of competitive pricing pressures, including decreases in average selling prices of our products.

•

new product and technology introductions by competitors;

•

changes in the mix of products we develop and sell;

•

fluctuations in manufacturing yields;

•

availability and cost of products from our suppliers;

•

intellectual property disputes; and

•

the effect of competitive pricing pressures, including decreases in average selling prices of our products.

The foregoing factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our business, financial condition, cash flow and results of operations.

Item 1B.

Unresolved Staff Comments

~~Not~~None ~~applicable.~~

Item 2.

Properties

Our corporate headquarters are located in Newport Beach, California. Our other principal facility in the United States is located in Waltham, Massachusetts. Activities at these locations include research and development (including design centers) and operations functions. We also have facilities in India, ~~and~~ China and Taiwan. The following table summarizes the locations and respective leased square footage of the facilities in which we operated at ~~October~~at September 130, ~~2010~~2011 (leased square footage in thousands):

	Leased		Owned
	Leased SquareFootage
	Square		Square
United States:
	Footage		Footage		Total
Newport Beach, California		97
United States:
San Diego, California		14
Newport Beach, California		106		51		157
Waltham, MA		18
Waltham, MA		29		—		29
		129
		135		51		186
India		20
India		20		—		20
China		27
China		27		—		27
Taiwan		28
Other Asia		3710		—		37
Europe		31		—		3
		222		51		273
		215

As a result of our various reorganization and restructuring-related activities, we also lease ~~or own~~ a number of ~~domestic~~ of facilities in which we do not operate. At ~~October~~ September 130, ~~2010~~2011, we had ~~407~~381,~~175~~763 square feet of impaired leased ~~space~~ ~~and 456,000 square feet of owned~~ space, of which approximately 8971% was being leased to third parties and 1129% was vacant and offered for lease. ~~Included in these amounts are 389,000 square feet of owned space in Newport Beach that we have leased to TowerJazz (formerly Jazz Semiconductor, Inc.).~~

WeOn ~~own approximately 25~~December ~~acres~~22, of2010, ~~land~~we insold ~~Newport~~certain ~~Beach, California,~~real ~~including~~property ~~the~~adjacent ~~land~~to ~~on which~~ our ~~456~~Newport Beach,~~000 square feet~~ ofCalifornia ~~owned~~headquarters ~~space~~to isUptown ~~located.~~Newport ~~We have determined that~~L.P. ~~approximately~~for 17$23.5 ~~acres~~million, ofwhich ~~this~~consisted ~~property currently zoned for light industrial use could be sold and/or re-developed under the current provisions~~ of ~~our lease agreement with TowerJazz~~$21.5 million ~~Under~~in ~~the~~cash ~~passage~~and of a ~~new~~limited ~~general~~partnership ~~plan~~interest ~~for~~in the ~~City~~ ~~of Newport Beach in November 2006~~property, which we ~~initiated~~have ~~efforts~~valued ~~to re-zone~~at ~~the property for mixed use (e~~$0.g4 million., ~~residential,~~The ~~retail, etc.)~~property ~~and~~primarily ~~secure~~consists ~~entitlements~~of toapproximately ~~maximize~~25 ~~the~~acres ~~value~~ of ~~this~~ land~~. On September 28~~, ~~2010,~~and ~~the~~included ~~Newport Beach City Council~~two ~~unanimously~~leased ~~approved~~buildings, ~~our~~improvements ~~conceptual~~and ~~mixed~~site ~~use (residential/commercial)~~ development ~~plan~~costs. ~~This~~The ~~approval~~net isbook ~~the first~~value ~~step in obtaining the City~~ of ~~Newport Beach’s final entitlement approvals specific to our land. An exact date for when~~ the ~~entitlements~~property ~~will~~sold bewas ~~completed~~as isfollows ~~still~~(in ~~unclear~~thousands): ~~but efforts continue with the City of Newport Beach.~~


	Predecessor
Land	$	1,662
Land and leasehold improvements, net		356
Buildings, net		5,610
Machinery and equipment, net		262
Site development costs		7,583

	$	15,473

InThe ~~November~~Company ~~2009,~~has wecontinuing ~~committed~~involvement with the property related to agroundwater ~~plan~~and ~~for~~soil remediation, and therefore at the time of the sale deferred the gain of ~~certain~~ $6.9 million on the monetary portion of ~~this~~the ~~property~~proceeds ~~located~~of onthe ~~Jamboree~~transaction, ~~Road~~net ~~adjacent~~of totransaction ~~our Newport~~costs ~~Beach~~of ~~headquarters~~$0.4 million. WeThe ~~have~~deferred ~~retained~~gain awas ~~broker~~eliminated toin ~~solicit~~the Merger ~~bids~~purchase ~~from~~price ~~potential~~allocation. ~~buyers~~Responsibility for ~~the~~soil ~~land~~remediation was transferred to Uptown Newport L.P. Awith ~~buyer~~the ~~would~~Company ~~be selected~~retaining ~~based~~certain ~~upon~~obligations ~~their~~to ~~ability~~assist in the soil remediation process for up to ~~acquire~~five ~~our~~years ~~land~~(or earlier under certain circumstances set forth in the ~~current~~ ~~real~~agreement ~~estate~~between ~~market~~the parties). ~~These~~Responsibility ~~marketing~~for ~~and~~groundwater ~~sales~~remediation ~~efforts are~~remains ~~continuing~~with the Company. The Company has accrued $3.8 million of reserves as of September 30, 2011 based on management’s best estimate of remaining remediation costs, of which $2.8 million is classified in long-term other liabilities.

The Company retained an approximately 7.5% limited partnership interest in the property that is recognized at an estimated fair value of $2.0 million. The limited partnership interest holds its limited partnership interest in Uptown Newport L.P., which will own, operate and develop the real property sold by the Company in December 2010. The Company has the option to sell its partnership interest to the developer at $2.0 million plus a 12% return, if Uptown Newport L.P obtains certain financing. The $0.4 million fair market value is derived in large part based on our estimate of the probability that the Company will be able to exercise its put option to sell its interest in the partnership.

We believe our properties have been well-maintained, are in sound operating condition and contain all the equipment and facilities necessary to operate at present levels. Our California facilities, including one of our design centers, are located near major earthquake fault lines. We maintain no earthquake insurance with respect to these facilities. In addition, certain of our facilities are located in countries that may experience civil unrest.

Item 3.

Legal Proceedings

None

Item 4. Removed and Reserved

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ Global Select Market under the symbol “CNXT”. The following table lists the high and low intra-day sale prices for our common stock as reported by the NASDAQ Global Select Market for the periods indicated:

	High		Low
Fiscal year ended October 1, 2010:
Fourth quarter	$	2.48	$	1.38
Third quarter		4.20		2.02
Second quarter		5.17		2.30
First quarter		3.31		2.04
Fiscal year ended October 2, 2009:
Fourth quarter	$	3.95	$	1.11
Third quarter		1.74		0.68
Second quarter		0.86		0.26
First quarter		3.35		0.64

At October 29, 2010, there were approximately 27,234 holders of record of our common stock.

We have never paid cash dividends on our common stock. We are also currently prohibited from paying cash dividends under the terms of our senior secured notes indenture. Accordingly, we currently intend to retain any earnings for use in our business and to repay our indebtedness, and do not anticipate paying cash dividends in the foreseeable future.

Shareowner Return Performance Graph

Set forth below is a line graph comparing the cumulative total shareowner return on our common stock against the cumulative total return of the Standard & Poor’s 500 Stock Index and the Nasdaq Electronic Components Index for the five-year period ended October 1, 2010. The graph assumes that $100 was invested in each of our common stock, the Standard & Poor’s 500 Stock Index and the Nasdaq Electronic Components Index at the respective closing prices on September 30, 2005, the last trading day before the beginning of our fifth preceding fiscal year and that all dividends were reinvested, and is adjusted to give effect to our June 30, 2008 reverse stock split. No cash dividends have been paid or declared on our common stock.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Conexant Systems, Inc., The S&P 500 Index And The NASDAQ Electronic Components Index

* $100 invested on 9/30/05 in stock or index, including reinvestment of dividends. Fiscal year ending Friday nearest to September 30 of each year. Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

	9/05		9/06		9/07		9/08		9/09		9/10
Conexant Systems, Inc.		100.00		111.73		67.04		22.40		15.31		9.16
S&P 500		100.00		110.79		129.01		100.66		93.70		103.22
NASDAQ Electronic Components		100.00		95.01		114.47		80.09		86.57		91.20

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Prior to the Merger, Conexant’s common stock was listed on the NASDAQ Stock Market under the symbol “CNXT”. Subsequent to the Merger, CNXT’s common stock is privately held and is not traded on any stock exchange or organized market.

Holders

As of September 30, 2011, Conexant Holdings, Inc. held all 100,000,000 outstanding shares of Conexant’s common stock.

Dividends

No dividends were declared or paid by Conexant during the fiscal year ended September 30, 2011. The indenture governing our senior secured notes due 2015 limits our ability to pay dividends on our capital stock.

Sales and Repurchases of Equity Securities

There were no unregistered sales or repurchases of our equity securities during the fiscal year ended September 30, 2011.

Item 6.

Selected Financial Data

On April 19, 2011, Conexant, completed the Merger with Merger Sub, and Conexant Holdings, pursuant to the Merger Agreement, dated as of February 20, 2011. In connection with the Merger, shares of our common stock ceased to be traded on the NASDAQ Stock Market after the close of market on April 19, 2011.

On October 3, 2009, the Company adopted the accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement). The provisions of the accounting guidance were retrospectively applied, and all prior period amounts have been adjusted to apply the method of accounting.

In August 2009, the Company completed the sale of its Broadband Access (“BBA”) business to Ikanos Communications, Inc. and in August 2008, the Company completed the sale of its Broadband Media Processing (“BMP”) business unit to NXP B.V. The selected financial data for all periods have been restated to reflect the BMP and BBA businesses as discontinued operations.

The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto appearing elsewhere in this report.

	Fiscal Year Ended
	2010			2009			2008			2007			2006
	(In thousands, except per share amounts)
Statement of Operations Data:
Net revenues	$	240,726		$	208,427		$	331,504		$	360,703		$	485,571
Cost of goods sold(1)		94,157			86,674			137,251			161,972			223,809
Gain on cancellation of supply agreement(2)		—			—			—			—			(17,500	)
Gross margin		146,569			121,753			194,253			198,731			279,262
Operating expenses:
Research and development(1)		55,745			51,351			58,439			91,885			101,274
Selling, general and administrative(1)		48,249			62,740			77,905			80,893			89,863
Amortization of intangible assets		1,249			2,976			3,652			9,555			18,450
Gain on sale of intellectual property(3)		—			(12,858	)		—			—			—
Asset impairments(4)		—			5,672			277			225,380			85
Special charges(5)		837			18,983			18,682			8,360			3,731
Total operating expenses		106,080			128,864			158,955			416,073			213,403
Operating income (loss)		40,489			(7,111	)		35,298			(217,342	)		65,859
Interest expense		30,072			34,693			40,713			48,798			39,540
Other (income) expense, net		(12,455	)		(5,025	)		9,223			(36,505	)		14,281
Income (loss) from continuing operations before income taxes and (loss) gain on equity method investments		22,872			(36,779	)		(14,638	)		(229,635	)		12,038
Provision for income taxes		567			871			849			798			889
Income (loss) from continuing operations before (loss) gain on equity method investments		22,305			(37,650	)		(15,487	)		(230,433	)		11,149
(Loss) gain on equity method investments		(66	)		(2,807	)		2,804			51,182			(8,164	)
Income (loss) from continuing operations		22,239			(40,457	)		(12,683	)		(179,251	)		2,985
Gain on sale of discontinued operations, net of tax(6)		—			39,170			6,268			—			—
Loss from discontinued operations, net of tax(1)(6)		(2,005	)		(17,521	)		(306,670	)		(235,056	)		(132,549	)
Net income (loss)	$	20,234		$	(18,808	)	$	(313,085	)	$	(414,307	)	$	(129,564	)

	Fiscal Year Ended
	Successor			Predecessor
	2010			2009			2008			2007			2006
	Period from April20, 2011 throughSeptember 30,2011			Period fromOctober 2, 2010through April 19,2011			Fiscal YearEnded October 1,2010			Fiscal Year EndedOctober 2,2009			Fiscal Year EndedOctober 3,2008			Fiscal Year EndedSeptember 28,2007
	(In thousands, except per share amounts)
	(in thousands)			(in thousands, except per share amounts)
Income (loss) per share from continuing operations — basic	$	0.31		$	(0.81	)	$	(0.26	)	$	(3.67	)	$	0.06
Statement of Operations Data:
Income (loss) per share from continuing operations — diluted	$	0.30		$	(0.81	)	$	(0.26	)	$	(3.67	)	$	0.06
Net revenues	$	72,930		$	93,111		$	240,726		$	208,427		$	331,504		$	360,703
Gain per share from sale of discontinued operations — basic and diluted	$	0.00		$	0.78		$	0.13		$	0.00		$	0.00
Cost of goods sold(1)		57,925			39,849			94,157			86,674			137,251			161,972
Loss per share from discontinued operations — basic	$	(0.03	)	$	(0.35	)	$	(6.21	)	$	(4.80	)	$	(2.76	)
Gross margin		15,005			53,262			146,569			121,753			194,253			198,731
Loss per share from discontinued operations — diluted	$	(0.03	)	$	(0.35	)	$	(6.21	)	$	(4.80	)	$	(2.71	)
Operating expenses:
Net income (loss) per share — basic	$	0.28		$	(0.38	)	$	(6.34	)	$	(8.47	)	$	(2.70	)
Research and development(1)		25,803			30,932			55,745			51,351			58,439			91,885
Net income (loss) per share — diluted	$	0.27		$	(0.38	)	$	(6.34	)	$	(8.47	)	$	(2.65	)
Selling, general and administrative(1)		15,417			24,155			48,249			62,740			77,905			80,893
Amortization of intangible assets		9,139			621			1,249			2,976			3,652			9,555
Gain on sale of intellectual property(2)		—			(1,249	)		—			(12,858	)		—			—
Asset impairments(3)		41,058			—			—			5,672			277			225,380
Special charges(4)		15,237			20,890			837			18,983			18,682			8,360
Total operating expenses		106,654			75,349			106,080			128,864			158,955			416,073
Operating (loss) income		(91,649	)		(22,087	)		40,489			(7,111	)		35,298			(217,342	)
Interest expense		6,963			12,278			30,072			34,693			40,713			48,798
Other expense (income), net		9,393			8,423			(12,455	)		(5,025	)		9,223			(36,505	)
(Loss) income from continuing operations before income taxes and gain (loss) on equity method investments		(108,005	)		(42,788	)		22,872			(36,779	)		(14,638	)		(229,635	)
Provision for income taxes		(2,595	)		380			567			871			849			798
(Loss) income from continuing operations before gain (loss) on equity method investments		(105,410	)		(43,168	)		22,305			(37,650	)		(15,487	)		(230,433	)
Gain (loss) on equity method investments		429			1,495			(66	)		(2,807	)		2,804			51,182
(Loss) income from continuing operations		(104,981	)		(41,673	)		22,239			(40,457	)		(12,683	)		(179,251	)
Gain on sale of discontinued operations, net of tax(5)		—			—			—			39,170			6,268			—
Loss from discontinued operations, net of tax(1)(5)		(2,268	)		(461	)		(2,005	)		(17,521	)		(306,670	)		(235,056	)
Net (loss) income	$	(107,249	)	$	(42,134	)	$	20,234		$	(18,808	)	$	(313,085	)	$	(414,307	)
(Loss) income per share from continuing operations — basic				$	(0.51	)	$	0.31		$	(0.81	)	$	(0.26	)	$	(3.67	)
(Loss) income per share from continuing operations — diluted				$	(0.51	)	$	0.30		$	(0.81	)	$	(0.26	)	$	(3.67	)
Gain per share from sale of discontinued operations — basic and diluted				$	0.00		$	0.00		$	0.78		$	0.13		$	0.00
Loss per share from discontinued operations — basic and diluted				$	0.00		$	(0.03	)	$	(0.35	)	$	(6.21	)	$	(4.80	)
Net (loss) income per share — basic				$	(0.51	)	$	0.28		$	(0.38	)	$	(6.34	)	$	(8.47	)
Net (loss) income per share — diluted				$	(0.51	)	$	0.27		$	(0.38	)	$	(6.34	)	$	(8.47	)

Balance Sheet Data at Fiscal Year End:

	2010		2009			2008			2007			2006
	Successor		Predecessor
	(In thousands)
	Fiscal Year EndedSeptember 30,		Fiscal YearEnded October 1,			Fiscal Year EndedOctober 2,			Fiscal Year EndedOctober 3,			Fiscal Year EndedSeptember 28,
Working capital(7)	$	79,472	$	42,047		$	115,617		$	318,360		$	127,635
	2011		2010			2009			2008			2007
Total assets		305,844		350,201			445,284			984,365			1,571,544
	(in thousands)		(in thousands)
Short-term debt		10,978		28,653			40,117			80,000			80,000
Working capital(6)	$	27,380	$	79,472		$	42,047		$	115,617		$	318,360
Current portion of long-term debt		—		61,400			17,707			58,000			188,375
Total assets		397,239		305,844			350,201			445,284			984,365
Long-term obligations		230,740		290,667			394,597			474,591			540,035
Short-term debt		—		10,978			28,653			40,117			80,000
Shareholders’ equity (deficit)		12,092		(97,778	)		(102,416	)		193,742			569,170
Current portion of long-term debt		—		—			61,400			17,707			58,000
Long-term obligations		250,478		230,740			290,667			394,597			474,591
Shareholders’ equity (deficit)		96,811		12,092			(97,778	)		(102,416	)		193,742

(1) Stock-based compensation expense included within cost of goods sold, research and development expense, ~~and~~ selling, general and administrative expense, special charges and loss from discontinued operations in the Predecessor in fiscal 2011 and the Predecessor period of the fiscal years ended October 1, 2010, 2009, 2008, ~~2007~~ and ~~2006~~2007 is based on the fair value of all stock options, stock awards and employee stock purchase plan shares. Stock-based compensation in the Successor period in fiscal 2011 was less than $1,000. Non-cash employee stock-based compensation expense included in our consolidated statements of operations was as follows ~~(in thousands)~~:

	Fiscal Year Ended
	2010			2009		2008		2007		2006
	(In thousands)
Cost of goods sold	$	298		$	247	$	370	$	426	$	382
Research and development		1,681			869		2,725		6,157		9,249
Selling, general and administrative		4,700			3,736		9,185		7,271		19,312
Loss from discontinued operations, net of tax		(30	)		868		3,589		5,897		16,632

(2)		In fiscal 2006, Conexant and Jazz Semiconductor, Inc. (Jazz) terminated a wafer supply and services agreement. In lieu of credits towards future purchases of product from Jazz, we received additional shares of Jazz common stock and recorded a gain of $17.5 million.
(3)		In fiscal 2009, we recorded a $12.9 million gain on sale of intellectual property.
(4)		In fiscal 2007, we recorded $184.7 million of goodwill impairment charges, $30.3 million of intangible impairment charges and $6.1 million of property, plant and equipment impairment charges associated with our Embedded Wireless Network products.

(5) Special charges include the following related to the settlement of legal matters and restructuring charges, among others (in thousands):


	Predecessor
	Period from October 2, 2010 through April 19,		Fiscal Year Ended October 1,			Fiscal Year Ended October 2,		Fiscal Year Ended October 3,		Fiscal Year Ended September 28,
	2011		2010			2009		2008		2007
	(In thousands)
Cost of goods sold	$	154	$	298		$	247	$	370	$	426
Research and development		825		1,681			869		2,725		6,157
Selling, general and administrative		2,291		4,700			3,736		9,185		7,271
Special charges		787		—			—		—		—
Loss from discontinued operations, net of tax		—		(30	)		868		3,589		5,897

	Fiscal Year Ended
	2010			2009		2008		2007		2006
	(In thousands)
Legal settlements	$	589		$	3,475	$	—	$	1,497	$	—
Restructuring charges		(282	)		15,116		11,539		7,227		3,641

(2)	In the Predecessor period in fiscal 2011 and the Predecessor fiscal year ended October 2, 2009, we recorded gains of $1.2 million and $12.9 million, respectively, on sale of intellectual property.

(6)		As a result of our decision to sell certain assets and liabilities of the BMP and BBA business units in fiscal 2008 and 2009, respectively, the results of the BMP and BBA business and the gain on sale of the BMP business are reported as discontinued operations for all periods presented.
(7)		Working capital is defined as current assets minus current liabilities.

(3)

During the Successor period in fiscal 2011. We recorded intangible asset impairment charges of $41.0 million, consisting primarily of a $19.1 million impairment of customer relationships, $3.6 million impairment of trade name and trademarks, and an $18.3 million impairment of capitalized in-process research and development (“IPR&D”) costs.

During the Predecessor fiscal year ended October 2, 2009, we recorded impairment charges of $10.8 million, consisting primarily of an $8.3 million impairment of a patent license with Freescale Semiconductor, Inc., land and fixed asset impairments of $1.4 million, electronic design automation (“EDA”) tool impairments of $0.8 million, intangible asset impairments of $0.3 million. Asset impairments recorded in continuing operations were $5.7 million, and asset impairments related to the BMP and BBA business units were $5.1 million and were recorded in discontinued operations.

In the Predecessor fiscal year ended September 28, 2007, we recorded $184.7 million of goodwill impairment charges, $30.3 million of intangible impairment charges and $6.1 million of property, plant and equipment impairment charges associated with our Embedded Wireless Network products.

(4)	Special charges include the following related to the settlement of legal matters and restructuring charges, among others:


	Successor		Predecessor
	Period from April 20, 2011 through September 30,		Period from October 2, 2010 through April 19,		Fiscal Year Ended October 1,			Fiscal Year Ended October 2,		Fiscal Year Ended October 3,		Fiscal Year Ended September 28,
	2011		2011		2010			2009		2008		2007
			(In thousands)
Legal settlements	$	—	$	—	$	589		$	3,475	$	—	$	1,497
Restructuring charges		1,786		925		(282	)		15,116		11,539		7,227

(5)	As a result of our decision to sell certain assets and liabilities of the BMP and BBA business units in fiscal 2008 and 2009, respectively, the results of the BMP and BBA business and the gain on sale of the BMP business are reported as discontinued operations for all periods presented.

(6)	Working capital is defined as current assets minus current liabilities.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part II, Item 8 of this ~~report~~Annual Report and the Risk Factors included in Part I, Item 1A of this ~~report~~Annual Report, as well as other cautionary statements and risks described elsewhere in this Annual ~~report~~Report.

Overview

Fiscal Year

Our fiscal year is the 52- or 53-week period ending on the Friday closest to September 30. each year. In a 52-week year, each fiscal quarter consists of 13 weeks. The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks. References ~~Fiscal~~made to ~~years~~our fiscal year ended September 30, 2011, or fiscal 2011, refer to the combined results of the Predecessor for the period from October 2, 2010 through April 19, 2011, and ~~2009~~the Successor for the period from April 20, 2011 ~~were~~through ~~52-week~~September 30, ~~years~~2011. References ~~and~~made to our fiscal year ended onOctober 1, 2010, or fiscal 2010, refer to the results of the Predecessor for the period from October 3, 2009 through October 1, 2010. References ~~and~~made to our fiscal year ended October 2, 2009, ~~respectively.~~or ~~Fiscal~~fiscal ~~year~~2009, ~~2008~~refer ~~was~~to ~~a 53-week~~the ~~year~~results ~~and~~of ~~ended~~the onPredecessor for the period from October 34, 2008 through October 2, 2009. Fiscal years 2011, 2010 and 2009 were each fiscal years that consisted of 52-weeks.

~~Sale~~Merger ~~of Property~~ with Conexant Holdings, Inc.

InOn ~~November~~April 19, ~~2009~~2011, weConexant, ~~committed~~completed ~~to a plan for~~ the ~~sale~~Merger ofwith ~~certain of~~Merger ~~our~~Sub, ~~property~~and ~~located~~Conexant onHoldings, ~~Jamboree~~pursuant ~~Road adjacent~~ to ~~our~~the ~~Newport Beach~~Merger Agreement, ~~California~~dated ~~headquarters.~~as ~~The property consists~~ of ~~an approximately 25-acre site~~February 20, ~~including~~2011. ~~two~~In ~~leased~~connection ~~buildings,~~with ~~certain personal property on~~ the ~~site~~Merger, ~~and~~shares of ~~all~~our ~~easements~~common ~~and~~stock ~~other~~ceased ~~intangible rights appurtenant~~ to ~~the~~be ~~property.~~traded Weon ~~determined that this property met~~ the ~~criteria~~NASDAQ ~~for~~Stock ~~“held~~Market ~~for~~after ~~sale” in accordance with~~ the ~~accounting~~close ~~guidance for impairment or disposal~~ of ~~long-lived~~ ~~assets~~market ~~and have presented the respective group of assets separately~~ on ~~the consolidated balance sheet as of October~~April 119, ~~2010~~2011.

The aggregate consideration for all equity securities including cancelled and converted stock options and restricted stock units (“RSUs”) of the Company was $203.8 million. An additional $0.1 million of consideration was paid to satisfy an existing bank line of credit outstanding on the Merger date. The Merger was funded with the proceeds of equity contributions from Golden Gate Capital and affiliated entities in the amount of $203.9 million.

Termination of Merger Agreement with Standard Microsystems Corporation

On February 23, 2011, we terminated our previously announced Agreement and Plan of Merger, dated January 9, 2011 (the “SMSC Agreement”), with Standard Microsystems Corporation, a Delaware corporation (“SMSC”), and Comet Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SMSC. Pursuant to the terms of the SMSC Agreement, we paid a termination fee of $7.7 million to SMSC.

Sale of Real Property

On December 22, 2010, we sold certain real property adjacent to our Newport Beach, California headquarters to Uptown Newport L.P. for $23.5 million, which consisted of $21.5 million in cash and a limited partnership interest in the property, which we have valued at $0.4 million. The property primarily consists of approximately 25 acres of land, and included two leased buildings, improvements and site development costs. The net book value of the property sold was as follows (in thousands):


	Predecessor
Land	$	1,662
Land and leasehold improvements, net		356
Buildings, net		5,610
Machinery and equipment, net		262
Site development costs		7,583

	$	15,473

Discontinued Operations

Broadband Access Business

In August 2009, we completed the sale of our Broadband Access (“BBA”) business to Ikanos Communications, Inc. (“Ikanos”). The results of the BBA business have been reported as discontinued operations in the consolidated statements of operations for all periods presented.

Broadband Media Processing Business

In August 2008, we completed the sale of our Broadband Media Processing (“BMP”) business to NXP B.V. (“NXP”). The results of the BMP business have been reported as discontinued operations in the consolidated statements of operations for all periods presented.

We anticipate continuing to accumulate pretax losses in discontinued operations due to accretion on lease liability from a restructured facility related to the BMP business.

Business Enterprise Segments

We operate in one reportable segment, the semiconductor system solutions market. Based on the accounting guidance in accordance with Segment Reporting, public business enterprises must report ~~information~~ information about operating segments in their annual consolidated financial statements. ~~Following~~We ~~our sale of the BBA operating segment, the results of which~~ have ~~been classified in discontinued operations, we have~~ one ~~remaining~~ operating segment, comprised of one reporting unit, which was identified based upon the availability of discrete financial information and the chief operating decision makers’ regular review of the financial information for this operating segment. ~~Additional geographic~~Geographic segment reporting information is included in Note 16 17 to consolidated financial statements in this report.

Critical Accounting Policies

~~The~~We ~~preparation~~have ofprepared ~~financial~~our ~~statements~~discussion inof ~~accordance with accounting principles generally accepted in~~ the ~~United~~results ~~States requires us to make estimates and assumptions that affect the reported amounts~~ of ~~assets~~operations ~~and~~for ~~liabilities~~fiscal ~~and~~2011 ~~disclosure~~by ~~of contingent~~adding ~~assets and liabilities at~~ the ~~date of the financial~~ statements ~~and the reported amounts~~ of ~~revenues~~operations and ~~expenses during~~cash ~~the~~flows ~~reporting~~for ~~period. Among~~ the ~~significant~~Successor ~~estimates affecting~~twenty-three ~~our~~weeks ~~consolidated~~ended ~~financial statements are those relating to revenue recognition~~September 30, ~~allowances~~2011 ~~for doubtful~~and ~~accounts,~~Predecessor ~~sales~~twenty-eight ~~returns~~weeks ~~and~~ended ~~allowances~~April 19, ~~warranty~~2011. ~~reserves, inventory~~Although ~~reserves,~~this ~~stock-based~~combined ~~compensation~~presentation ~~expense,~~does ~~goodwill and~~not ~~purchased~~comply ~~intangible~~with ~~asset~~United ~~valuations,~~States ~~valuation~~generally ofaccepted ~~warrants and~~accounting ~~strategic~~principles ~~investments~~(“GAAP”), ~~deferred~~we ~~income~~believe ~~tax~~that ~~asset~~it ~~valuation allowances,~~provides ~~uncertain~~a ~~tax~~meaningful ~~positions,~~method ~~restructuring costs, and~~of ~~other loss contingencies~~comparison. WeThe ~~regularly~~combined ~~evaluate~~operating ~~our~~results ~~estimates and~~have ~~assumptions~~not ~~based~~been ~~upon~~prepared ~~historical~~on ~~experience~~a ~~and~~pro ~~various other~~forma ~~factors~~basis ~~that~~under weapplicable ~~believe~~regulations toand bemay ~~reasonable~~not ~~under~~reflect the ~~circumstances.~~ ~~The~~actual results ofwe ~~our~~would ~~estimates~~have ~~and~~achieved ~~assumptions~~absent ~~form~~ the ~~basis~~Transactions ~~for making judgments about the carrying values of assets~~ and ~~liabilities~~may ~~that are~~ not ~~readily~~be ~~apparent~~predictive ~~from~~of ~~other sources. To the extent actual results differ from those estimates, our~~ future results of operations ~~may be affected~~.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Among the significant estimates affecting the consolidated financial statements are those related to fair-value measurements applied to tangible and intangible assets acquired and liabilities assumed in connection with the Merger, revenue recognition, allowance for doubtful accounts, reserves related to inventories and sales returns, long-lived assets (including goodwill and intangible assets), deferred income taxes, valuation of warrants, our 7.5% investment in Uptown Newport L.P, stock-based compensation, environmental remediation reserve, restructuring charges, and other loss contingencies. We regularly evaluate our estimates and assumptions based upon historical experience and various other factors that we believe to be reasonable under the circumstances. The results of our estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from those estimates our future results of operations may be affected.

Revenue recognition

We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the sales price and terms are fixed and determinable, and (iv) the collection of the receivable is reasonably assured. These terms are typically met upon shipment of product to the customer. The majority of our distributors have limited stock rotation rights, which allow them to rotate up to 10% of product in their inventory two times per year. We recognize revenue to these distributors upon shipment of product to the distributor, as the stock rotation rights are limited and we believe that we have the ability to reasonably estimate and establish allowances for expected product returns in accordance with accounting guidance for revenue recognition when right of return exists. ~~Development~~We ~~revenue~~also ishave ~~recognized~~established ~~when~~allowances ~~services~~for price adjustments, rebates and warranty returns. The estimate of future returns and ~~are~~credits ~~performed~~is based on historical sales returns, analysis of credit memo data, and ~~was~~other ~~not~~factors ~~significant~~known ~~for~~at ~~any~~the ~~periods~~time ~~presented~~of revenue recognition. The Company monitors product returns and potential price adjustments on an ongoing basis.

We accrue 100% of potential rebates at the time of sale and do not apply a breakage factor. We reverse the accrual for unclaimed rebate ~~Revenue~~amounts ~~with~~as ~~respect~~specific torebate ~~sales~~programs tocontractually ~~customers,~~end toand ~~whom~~when we ~~have significant~~believe ~~obligations~~unclaimed ~~after~~rebates ~~delivery,~~are isno ~~deferred~~longer ~~until~~subject ~~all significant~~to ~~obligations~~payment ~~have~~and ~~been~~will ~~completed~~not be paid. Development revenue is recognized when services are performed and was not significant for any periods presented.

~~Allowance for~~28 ~~doubtful accounts~~

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We use a specific identification method for some items, and a percentage of aged receivables for others. The percentages are determined based on our past experience. If the financial condition of our customers were to deteriorate, our actual losses may exceed our estimates, and additional

~~allowances~~Allowance ~~would be required. At October 1, 2010 and October 2, 2009, our allowances~~ for doubtful accounts ~~were within management’s expectations.~~

Derivatives

We account for derivatives in accordance with guidance on derivatives and hedging. As of ~~October~~September 130, ~~2010~~2011, derivatives consisted of our warrant to purchase 6.1 million shares of ~~Mindspeed~~ Mindspeed common stock. The fair value of this warrant is determined using a standard Black-Scholes-Merton valuation model with assumptions consistent with current market conditions and our intent to liquidate the warrant over a specified time period. The Black-Scholes-Merton valuation model requires the input of highly-subjective assumptions, including expected stock price volatility. Changes in these assumptions, or in the underlying valuation model, could cause the fair value of the ~~Mindspeed~~ Mindspeed warrant to vary significantly from period to period. There were no changes to the ~~assumptions or~~ underlying valuation model during the current fiscal year. Changes in the value of the warrant are recorded in income or loss in the period in which they occur.

Inventories

We assess the recoverability of our inventories at least quarterly through a review of inventory levels in relation to foreseeable demand, generally over twelve months. Foreseeable demand is based upon all available information, including sales backlog and forecasts, product marketing plans and product life cycle information. When the inventory on hand exceeds the foreseeable demand, we write down the value of those inventories which, at the time of our review, we expect to be unable to sell. The amount of the inventory write-down is the excess of historical cost over estimated realizable value. Once established, these write-downs are considered permanent adjustments to the cost basis of the excess inventory. Demand for our products may fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than those projected by management. In the event that actual demand or product pricing is lower than originally projected, additional inventory write-downs may be required. Further, on a quarterly basis, we assess the net realizable value of our inventories. When the estimated average selling price of our inventory, net of selling expenses, falls below our inventory cost, we adjust our inventory to the current estimated market value. The amount of the inventory write-down is the excess of historical cost over estimated realizable value. Once established, these write-downs are considered permanent adjustments to the cost basis of the excess inventory.

Impairment of goodwill, ~~Long-lived~~ intangible and long assets

Long-lived assets, including fixed assets and intangible assets (other than goodwill) are amortized over their estimated useful lives. They are also continually monitored and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use of an asset and its eventual disposition. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to our business model or changes in operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the asset. Fair value is determined using available market data, comparable asset quotes and/or discounted cash flow models. During fiscal year 2010, there were no triggering events or circumstances indicating an impairment of long-lived assets.

Goodwill

Goodwill is not amortized. Instead, goodwill is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. Goodwill is tested annually during the fourth fiscal quarter and, if necessary, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill impairment testing is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. In our annual test in the fourth quarter of fiscal 2011, we assessed the fair value of our reporting unit for purposes of goodwill impairment testing using a weighted average of fair values calculated using the income approach, which uses valuation techniques to convert future cash flows to a single discounted present value amount and the market approach which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities, including a business. The resulting fair value of the reporting unit is then compared to the carrying amounts of the net assets of the reporting unit, including goodwill. As we have only one reporting unit, the carrying amount of the reporting unit equals our net book value.

The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. In our annual test in the fourth fiscal quarter of 2010, we assessed the fair value of our reporting unit for purposes of goodwill impairment testing based upon the fair value of the quoted market price of our common stock, which we believe is an accurate method of calculating fair value. The resulting fair value of the reporting unit is then compared to the carrying amounts of the net assets of the reporting unit, including goodwill. As we have only one reporting unit, the carrying amount of the reporting unit equals our net book value.

If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. Goodwill impairment testing requires significant judgment and management estimates, including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units. The estimates and assumptions described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses.

~~All~~29 of the goodwill reported on our balance sheet is attributable to our single reporting unit. During the fourth fiscal quarter of 2010, we determined, based on the methods described above, that the fair value of our single reporting unit is substantially in excess of the carrying value of our single reporting unit and therefore there is no impairment of goodwill as of October 1, 2010.

Based on the result of the first step of the goodwill impairment test, we determined that the fair value of our business was less than its carrying value as of September 30, 2011. As a result, we performed the second step of the goodwill impairment test. Based on the result of the second step test we determined that the implied fair value of goodwill was greater than the carrying amount of goodwill as of September 30, 2011 therefore no impairment of goodwill was required as of September 30, 2011. Because of the significance of our remaining goodwill and intangible asset balances, any future impairment of these assets could have a material adverse effect on our financial condition and results of operations, although, as a charge, it would have no effect on our cash flow. Significant impairments may also impact shareholders’ equity.

Intangible and long-lived assets

An intangible and long-lived asset that is subject to amortization is reviewed for impairment in accordance with the guidance for impairment or disposal of long-lived assets. If indicators of impairment are present, then a recoverability test is performed based on an estimate of undiscounted cash flows expected to result from the use of the intangible and long-lived asset compared to its carrying value. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes to our business model or changes in operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the intangible or long-lived asset. Fair value is determined using available market data, comparable asset quotes and/or discounted cash flow models. Our significant intangible and long-lived assets include fixed assets and intangible assets for customer relationships and patents.

An intangible asset that is not subject to amortization is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset to its carrying amount. Fair value is determined using available market data, comparable asset quotes and/or discounted cash flow models. Our indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) and trade name and trademarks.

During the fourth quarter of fiscal 2011, we determined that indicators of impairment existed based on our operating results for the fiscal year ended September 30, 2011 and decreases in sales forecasts for future periods. As a result of these indicators of impairment, we tested our indefinite-lived intangible assets for impairment by comparing the fair value of the indefinite-lived intangible assets to their carrying amounts. The fair value of the IPR&D intangible asset, based on a discounted cash flow model using our revised sales forecast for each project which continued to be classified as IPR&D as of September 30, 2011, was less than the carrying amount of the IPR&D intangible asset as of September 30, 2011 resulting in an impairment charge of $15.1 million. In addition, one IPR&D project was completed and a product based on the project began shipping as of September 30, 2011. As a result, the fair value of the project, based on the discounted cash flow from the product shipments was transferred to amortizable intangible assets as of September 30, 2011. The fair value for this project was calculated to be $0.9 million, which was less than the historical carrying value of the project in IPR&D of $4.1 million as of the Merger date resulting in an impairment charge of $3.2 million. Amortization expense on the project in the successor period from April 20, 2011 through September 30, 2011 was $0.1 million. The fair value of the trade name and trademarks intangible asset, based on a discounted cash flow model using our revised sales forecast was less than the carrying amount of trade name and trademarks resulting in an impairment charge of $3.6 million.

Income Taxes

We utilize the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

In assessing the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence, such as ~~cumulative~~ cumulative losses in recent years. As a result of our cumulative losses in the U.S. and the full utilization of our loss carryback opportunities, management has concluded that a full valuation allowance against our net deferred tax assets is appropriate in such jurisdictions. In certain other foreign jurisdictions where we do not have cumulative losses, a valuation allowance is ~~recorded~~ to reduce the net deferred tax assets to the amount management believes is more likely than not to be realized. In the future, if we realize a deferred tax asset that currently carries a valuation allowance, a reduction to income tax expense may be recorded in the period of such realization.

We30 recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position in accordance with the accounting guidance for uncertainty in income taxes. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to these unrecognized tax benefits in the income tax provision.

The accounting guidance also provides for derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

~~payment~~recorded ofto ~~these~~reduce ~~liabilities will be unnecessary,~~ the ~~liability will~~net bedeferred ~~reversed and we will recognize a~~ tax ~~benefit~~assets ~~during~~to the ~~period~~ inamount ~~which~~management itbelieves is ~~determined~~more ~~the~~likely ~~liability~~than nonot ~~longer applies~~to be realized. ~~Conversely~~In the future, if we ~~may~~realize ~~record~~a ~~additional~~deferred tax ~~charges~~asset inthat currently carries a ~~period~~valuation inallowance, ~~which~~a itreduction isto ~~determined~~income ~~that~~tax aexpense ~~recorded~~may ~~tax~~be ~~liability is~~recorded ~~less~~in ~~than~~ the ~~ultimate~~period ~~assessment~~of issuch ~~expected to be~~realization.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position in accordance with the accounting guidance for uncertainty in income taxes. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to these unrecognized tax benefits in the income tax provision.

The accounting guidance also provides for de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. If, based on new facts that arise in a period, management ultimately determines that the payment of these liabilities will be unnecessary, the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies. Conversely, we may record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for federal, state or foreign taxes may be materially different from management’s estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Valuation of equity securities

We have a portfolio of investments in non-marketable equity securities. We review equity securities periodically for other-than-temporary impairments, which requires significant judgment. In determining whether a decline in value is other-than-temporary, we evaluate, among other factors, (i) the duration and extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer and (iii) our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. These reviews may include assessments of each investee’s financial condition, its business outlook for its products and technology, its projected results and cash flows, the likelihood of obtaining subsequent rounds of financing and the impact of any relevant contractual equity preferences held by us or by others. We have experienced substantial impairments in the value of our equity securities over the past few years. Future adverse changes in market conditions or poor operating results of underlying investments could result in our inability to recover the carrying amounts of our investments, which could require additional impairment charges to write-down the carrying amounts of such investments.

Stock-based compensation

We recognize the fair-value of stock-based compensation awards at the date of grant using the Black-Scholes-Merton option pricing model. In addition, forfeitures are estimated when recognizing compensation expense and the estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

The Black-Scholes-Merton model requires certain assumptions to determine an option fair value, including expected stock price volatility, risk-free interest rate, and expected life of the option. The expected stock price volatility rates are based on the historical volatility of our common stock. The risk free interest rates are based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option or award. The average expected life represents the weighted average period of time that options or awards granted are expected to be outstanding, as calculated using the simplified method. We measure service-based awards at the stock price on the grant date.

We have elected to adopt the alternative transition method for calculating the tax effects of stock-based compensation. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool, or APIC Pool, related to the tax effects of employee stock-based compensation expense, and to determine the subsequent impact on the APIC Pool and consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that were outstanding at the adoption. In addition we have elected to recognize excess income tax benefits from stock option exercises in additional paid-in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to us, in accordance with applicable accounting guidance. See Note 9, to the consolidated financial statements for additional information.

Restructuring charges

Restructuring activities and related charges have related primarily to reductions in our workforce and related impact on the use of facilities. The estimated charges contain estimates and assumptions made by management about matters that are uncertain at the time that the assumptions are made (for example, the timing and amount of sublease income that will be achieved on vacated property and the operating costs to be paid until lease termination, and the discount rates used in ~~determining~~ the present value (fair value) of remaining minimum lease payments on vacated properties). While we have used our best estimates based on facts and circumstances available at the time, different estimates reasonably could have been used in the relevant periods, the actual results may be different, and those differences could have a material impact on the presentation of our financial position or results of operations. Our policies require us to review the estimates and assumptions periodically and to reflect the effects of any revisions in the period in which they are determined to be necessary. Such amounts also contain estimates and assumptions made by management, and are reviewed periodically and adjusted accordingly.

determining the present value (fair value) of remaining minimum lease payments on vacated properties). While we have used our best estimates based on facts and circumstances available at the time, different estimates reasonably could have been used in the relevant periods, the actual results may be different, and those differences could have a material impact on the presentation of our financial position or results of operations. Our policies require us to review the estimates and assumptions periodically and to reflect the effects of any revisions in the period in which they are determined to be necessary. Such amounts also contain estimates and assumptions made by management, and are reviewed periodically and adjusted accordingly.

Results of Operations

Net Revenues

Net revenues consist of product sales, which we generally recognize upon shipment, less an estimate for returns and allowances. We sell our products to distributors, contract manufacturers (ODMs) and end-customers (OEMs), whose products include our products. End customers may purchase directly from us or from distributors or contract manufacturers.

Our net revenues ~~increased~~decreased 1531% to $~~240~~166.7 0 million in ~~fiscal~~the Successor ~~2010~~period ~~from $208.4 million~~ in fiscal ~~2009.~~2011 ~~This~~and ~~increase~~the ~~was primarily~~Predecessor ~~driven~~period ~~by a 14% increase~~ in ~~unit~~fiscal ~~volume~~2011 ~~shipments~~from ~~and a~~$240.7 1%million ~~increase~~ in ~~average~~the ~~selling~~Predecessor ~~prices~~fiscal ~~(ASPs).~~year ~~The~~ended ~~volume increase~~October 1, ~~between fiscal~~ 2010. ~~and~~This ~~fiscal~~decrease ~~2009~~ was primarily driven by ~~the shipment~~a ~~growth~~23% ofdecrease ~~our~~in ~~imaging,~~unit ~~audio,~~volume ~~and~~shipments ~~video~~due ~~solutions, partially~~to ~~offset~~lower bydemand ~~declines in our analog modems, specifically~~across ~~our~~all ~~computer~~product ~~modems~~lines and ~~modems~~a ~~for~~12% ~~digital~~decrease ~~television platforms~~ in ~~Japan.~~average ~~The~~selling ~~increase~~prices in (ASPs) ~~was attributable to a change~~ in ~~product~~ ~~mix~~audio, ~~partially~~video, ~~offset~~imaging byand ~~pricing~~modem ~~erosion~~product inlines ~~our~~due ~~audio and~~to ~~video~~competitive ~~businesses~~pressures.

Our net revenues ~~decreased~~increased 3715% to $~~208~~240.4 7 million in the Predecessor fiscal ~~2009~~ year ended October 1, 2010 from $~~331~~208.5 4 million in the Predecessor fiscal ~~2008~~year ended October 2, 2009. This ~~decrease~~increase was primarily driven by a 2114% ~~decrease~~increase in ~~ASPs~~unit volume shipments and a 201% ~~decrease~~increase in ~~unit~~ ~~volume shipments~~ASPs. The ~~revenue~~volume ~~decline~~increase ~~was~~between ~~primarily~~the Predecessor fiscal year ended October 1, 2010 and the Predecessor fiscal year ended October 2, 2009 was driven by the shipment ~~economic~~growth ~~downturn~~of ~~combined~~our ~~with~~imaging, ~~the~~audio, ~~modem~~and ~~business de-bundling~~video ~~trend~~solutions, partially offset by declines in our analog modems, specifically our computer modems and ~~lower~~modems ~~shipments~~for ofdigital ~~legacy~~television ~~wireless products~~platforms in Japan. The increase in ASPs was attributable to a change in product mix, partially offset by pricing erosion in our audio and video businesses.

We ~~remain~~were ~~focused~~fortunate onthat ~~capturing~~the ~~higher~~tsunami event ~~market~~which ~~share~~impacted ~~for~~Japan ~~our existing~~in ~~products~~March, 2011 and ~~delivering~~the ~~new~~flood ~~and~~event ~~innovative~~that ~~solutions for~~impacted ~~imaging,~~Thailand ~~audio~~in November, ~~and~~2011 ~~video~~did ~~applications~~not have a material impact on our business. ~~While~~Our weprimary sources ~~are~~of supply were not materially affected by these catastrophic events and, ~~enthusiastic~~in ~~about~~situations where other suppliers to our ~~current~~customers ~~products~~were affected, our manufacturing suppliers activated their qualified second source raw material suppliers and ~~markets,~~moved quickly to qualify new sources of supply as well. While we ~~expect~~experienced some ~~that~~minor ~~declines~~changes in ~~our~~requested ~~analog~~delivery ~~modem~~dates ~~and~~because ~~legacy~~of ~~wireless~~these ~~networking solutions~~events ~~will~~they ~~make~~were itnot ~~difficult~~material to ~~deliver~~our ~~overall~~annual ~~revenue growth~~results for the ~~next~~Successor ~~several~~or ~~quarters~~Predecessor periods in fiscal 2011.

Gross Margin

Gross margin represents net revenue less cost of goods sold. As a fabless semiconductor company, we use third parties for wafer production and assembly and test services. Our cost of goods sold consists predominantly of purchased finished wafers, assembly and test services, royalties, labor and overhead associated with product procurement and non-cash stock-based compensation charges for procurement personnel.

Our gross margin percentage for the Successor period in fiscal ~~2010~~2011 and the Predecessor period in fiscal 2011 was ~~60.9~~41% compared with ~~58.4~~61% for the Predecessor fiscal ~~2009~~year ended October 1, 2010. The ~~increase~~decrease in gross margin percentage is primarily attributable to the ~~lower~~$23.1 ~~product~~million ~~manufacturing~~sell-off ~~costs~~and $1.7 million reserve of fair value applied to inventory as part of the purchase price allocated in connection with the Merger. Excluding the inventory purchase price fair value reserve, our gross margin percentage for the Successor period in fiscal 2011 and athe ~~favorable~~Predecessor ~~revenue~~period in fiscal 2011 was 56%. The 5% decrease in gross margin percentage compared to the Predecessor fiscal year ended October 1, 2010 was due to price erosion, reserves for excess and obsolete inventory and product mix.

Our gross margin percentage for the Predecessor fiscal ~~2009~~year ended October 1, 2010 was ~~58.4~~61% compared with 58.6% for ~~fiscal~~the ~~2008.~~Predecessor ~~Our gross margin percentage for~~ fiscal ~~2008~~year ~~includes~~ended ~~a non-recurring royalty buyout of $14.7~~October ~~million~~2, ~~that occurred in the first quarter~~2009. The ~~royalty~~ ~~buyout contributed 1.9% to our gross margin percentage during fiscal 2008. The~~ increase in gross margin percentage is attributable to lower product ~~cost~~manufacturing ~~reduction~~costs ~~efforts~~ and ~~improved inventory management, resulting in lower excess and obsolete inventory provisions as~~ a ~~percentage~~favorable ofrevenue ~~sales~~product mix.

Research and Development

Our research and development (R&D) expenses consist principally of direct personnel costs to develop new semiconductor solutions, allocated indirect costs of the R&D function, photo mask and other costs for pre-production evaluation and testing of new devices, and design and test tool costs. Our R&D expenses also include the costs for design automation advanced package development and non-cash stock-based compensation charges for R&D personnel.

R&D expense increased $41.4 0 million, or 92%, in the Successor period in fiscal 2011 and the Predecessor period ~~2010~~in fiscal 2011 compared to the Predecessor fiscal ~~2009~~year ended October 1, 2010. The increase is due primarily to higher ~~compensation~~ ~~expenses~~employee ~~from~~headcount ~~higher~~and ~~incentive~~salary ~~programs~~expense and higher ~~photo~~ ~~mask~~allocated facility costs, offset by lower stock-based compensation and project expenses.

~~R&D~~32 expense decreased $7.1 million, or 12%, in fiscal 2009 compared to fiscal 2008. The decrease is due to a 17% reduction in R&D headcount from September 2008 to September 2009, driven by restructuring activities and cost cutting measures, partially offset by our ongoing cost associated with our acquisition of the Freescale “SigmaTel” design center.

R&D expense increased $4.4 million, or 9%, in the Predecessor fiscal year ended October 1, 2010 compared to the Predecessor fiscal year ended October 2, 2009. The increase is due to higher compensation expenses from higher incentive programs and higher photo mask expenses.

Selling, General and Administrative

Our selling, general and administrative (SG&A) expenses include personnel costs, sales representative commissions, advertising and other marketing costs. Our SG&A expenses also include costs of corporate functions including legal, accounting, treasury, human resources, customer service, sales, marketing, field application engineering, allocated indirect costs of the SG&A function, and non-cash stock-based compensation charges for SG&A personnel.

SG&A expense decreased $148.5 7 million, or 2318%, in the Successor period in fiscal 2011 and the Predecessor period in fiscal ~~2010~~2011 compared to the Predecessor fiscal ~~2009~~year ended October 1, 2010. The decrease is primarily due to ~~the~~a 2229% ~~decline~~decrease in ~~SG&A~~ headcount ~~from~~primarily ~~fiscal~~in ~~2009 to~~the ~~fiscal~~successor ~~2010~~period, ~~resulting~~and ~~from~~lower ~~restructuring~~incentive ~~activities~~accruals and professional fees, ~~cost-cutting~~offset ~~measures~~by an increase in legal expenses and allocated facility costs.

SG&A expense decreased $1514.2 5 million, or 1923%, in the Predecessor fiscal ~~2009~~year ended October 1, 2010 compared to the Predecessor fiscal ~~2008~~year ended October 2, 2009. The decrease is primarily due to the 3022% decline in SG&A headcount from ~~September~~the Predecessor fiscal year ended October 2, ~~2008~~2009 to ~~September~~the ~~2009~~Predecessor fiscal year ended October 1, 2010, resulting from restructuring activities and cost-cutting measures.

Amortization of Intangible Assets

~~Amortization~~Intangible ofassets ~~intangible~~subject ~~assets~~to ~~consists~~amortization of $57.5 million were recorded in connection with the Merger. As a result, amortization expense ~~for~~increased ~~intangible~~to ~~assets~~$9.8 ~~acquired~~million in ~~various~~the ~~business~~Successor period in fiscal 2011 ~~combinations~~and the Predecessor period in fiscal 2011, compared to $1.2 ~~Our~~million in the Predecessor fiscal year ended October 1, 2010. An impairment charge of $19.1 million was recorded on customer relationships as of September 30, 2011. The remaining balance of intangible assets ~~are~~subject to amortization of $30.1 million is being amortized over a weighted-average remaining period of approximately 4 6.5 6 years.

Amortization expense decreased $1.8 million, or 58%, in the Predecessor fiscal year ended October 1, 2010 compared to the Predecessor fiscal year ended October 2, 2009. The decrease in amortization expense is primarily attributable to intangible assets that became fully amortized in the Predecessor fiscal year ended October 2, 2009.

Amortization expense decreased $0.7 million, or 19%, in fiscal 2009 compared to fiscal 2008. The decrease in amortization expense is primarily attributable to the completion of amortization on an intangible asset in the third quarter of fiscal 2009.

Gain on Sale of Intellectual Property

In the Predecessor period in fiscal ~~2009~~2011, we sold acertain ~~portfolio~~internally ofdeveloped ~~patents~~Conexant ~~including~~RF ~~patents related~~Patents and MPEG Patents to Skyworks and terminated our ~~wireless~~exclusive ~~networking~~rights ~~technology~~in Skyworks RF Patents obtained pursuant to aan ~~third~~agreement ~~party for~~we ~~cash~~entered ofinto ~~$14.5 million~~with Skyworks in 2003, ~~net~~in exchange for non-exclusive licenses to each of ~~costs~~the Conexant RF Patents, MPEG Patents and ~~recognized~~Skyworks ~~a gain~~RF ofPatents and $121.9 25 million onin ~~the transaction~~cash. InWe ~~accordance with~~received ~~the~~$0.6 ~~terms~~million of the ~~agreement~~sale ~~with~~price in November 2010 and the ~~third~~remainder ~~party,~~in weMarch ~~retain a~~2011. ~~cross-license~~The toentire ~~this~~$1.25 ~~portfolio~~million ofwas recognized as gain as the patents had no book value.

In the Predecessor fiscal year ended October 2, 2009, we sold a portfolio of patents including patents related to our wireless networking technology to a third party for cash of $14.5 million, net of costs, and recognized a gain of $12.9 million on the transaction. In accordance with the terms of the agreement with the third party, we retain a cross-license to this portfolio of patents.

Asset Impairments

During the Successor period in fiscal ~~2009~~2011, we recorded intangible asset impairment charges of $1041.8 0 million, consisting primarily of an a $819.3 1 million impairment of acustomer ~~patent license with Freescale Semiconductor~~relationships, ~~Inc.,~~ ~~land and fixed asset impairments of~~ $13.~~4 million, electronic~~6 ~~design automation (“EDA”) tool impairments of $0.8~~ million, ~~intangible~~impairment ~~asset impairments~~ of ~~$0.3 million.~~ ~~Asset~~trade ~~impairments~~name ~~recorded~~and ~~in continuing operations were $5.7 million~~trademarks, and ~~asset~~an ~~impairments related to the BMP and BBA business units were~~ $518.1 3 million ~~and were~~impairment ~~recorded~~of incapitalized ~~discontinued~~IPR&D ~~operations~~costs.

During the Predecessor fiscal year ended October 2, 2009, we recorded impairment charges of $10.8 million, consisting primarily of an $8.3 million impairment of a patent license with Freescale Semiconductor, Inc., land and fixed asset impairments of $1.4 million, electronic design automation (“EDA”) tool impairments of $0.8 million, intangible asset impairments of $0.3 million. Asset impairments recorded in continuing operations 32 were $5.7 million, and asset impairments related to the BMP and BBA business units were $5.1 million and were recorded in discontinued operations.

As a result of the sale of our BBA business and decrease in revenues in the continuing business, we determined that the technology license with Freescale Semiconductor Inc. had no value and therefore recorded an impairment charge of $8.3 million for the license, of which $3.3 million was recorded in discontinued operations and $5.0 million in operating expenses in the year ended October 2, 2009.

During fiscal 2008, we continued our review and assessment of the future prospects of our businesses, products and projects with particular attention given to the BBA business unit. The challenges in the competitive digital subscriber line (DSL) market resulted in the net book value of certain assets within the BBA business unit to be considered not fully recoverable. As a result, we recorded impairment charges of $108.8 million related to goodwill, $1.9 million related to intangible assets, $6.5 million related to property, plant and equipment and $3.4 million related to EDA tools. The impairment charges have been included in net loss from discontinued operations.

During fiscal 2008, we reevaluated our reporting unit operations with particular attention given to various scenarios for the BMP business. The determination was made that the net book value of certain assets within the BMP business unit were considered not fully recoverable. As a result, we recorded impairment charges of $119.6 million related to goodwill, $21.1 million related to EDA tools and technology licenses and $2.1 million related to property, plant and equipment, respectively. The impairment charges have been included in net loss from discontinued operations.

Asset impairment charged to continuing operations in fiscal 2008 of $0.3 million consisted primarily of property, plant and equipment charges.

Special Charges

	Fiscal Year Ended
	Successor			Predecessor
	2010			2009		2008
	Period from April20, 2011 throughSeptember 30,2011			Period fromOctober 2, 2010through April 19,2011		Fiscal Year EndedOctober 1,2010			Fiscal Year EndedOctober 2,2009
	(In thousands)
Severance charges	$	9,621		$	2,873	$	342		$	—
Settlements	$	589		$	3,475	$	—
Merger transaction charges		68			16,860		—			—
Other special charges		530			—		(112	)
Environmental remediation charges		1,483			145		—			—
Restructuring charges		(282	)		15,116		11,539
Lease impairment charges		2,279			87		188			—
Voluntary Early Retirement Plan (“VERP”) settlement charge		—			—		6,294
Restructuring charges		1,786			925		(282	)		15,116
Loss on disposal of property		—			392		961
Settlements		—			—		589			3,475
	$	837		$	18,983	$	18,682
Other special charges		—			—		—			392
	$	15,237		$	20,890	$	837		$	18,983

For the Successor period in fiscal 2011, special charges consisted primarily of $9.6 million of severance ~~Special~~charges resulting from reduction in headcount after the Merger, $2.3 million of lease impairment charges resulting from under-utilized space after the Merger under which we have continuing lease obligations, $1.8 million for restructuring charges resulting primarily from changes in projected sub-lease income on restructured leases and $1.5 million additional accrual for environmental remediation charges. For the Predecessor period in fiscal ~~2010~~2011, special charges consisted primarily of an$16.9 ~~estimated~~million ~~settlement~~for ~~amount~~transaction charges, including payment of a $7.7 million fee for ~~unasserted~~termination ~~insurance~~of ~~claims~~the SMSC Agreement and $9.2 million of financial advisory, ~~lease~~ ~~charge~~legal and aother ~~one-time~~fees related to the terminated merger with SMSC and the Merger, $2.9 million for severance ~~benefit~~benefits associated with ~~certain~~ reductions in headcount primarily in the first quarter of fiscal 2011, and ~~credits~~$0.9 ~~due~~million toof anrestructuring ~~increase~~ charges from accretion of ~~subtenant~~lease ~~income~~liability related to restructured facilities.

Special charges for the Predecessor fiscal ~~2009~~year ended October 1, 2010 consisted primarily of ~~restructuring~~ ~~charges~~an ~~due~~estimated tosettlement ~~reduction~~amount offor unasserted ~~subtenant~~insurance ~~income~~claims, ~~from restructured~~lease ~~office~~charge ~~space~~ and ~~$3.5 million~~a ~~for~~one-time aseverance ~~settlement of~~benefit ~~our~~associated ~~class~~with ~~action~~certain ~~lawsuit~~reductions ~~related~~in headcount, and restructuring credits due to ~~our~~an ~~401(k)~~increase ~~plan~~of subtenant income.

Special charges for ~~fiscal~~the ~~2008~~Predecessor ~~consisted~~fiscal ~~primarily~~year ~~of restructuring~~ended ~~charges of $11.5~~October ~~million~~2, ~~that~~2009 ~~were~~consisted primarily ~~comprised~~ of ~~employee~~restructuring ~~severance~~charges ~~and~~due ~~termination~~to ~~benefit costs~~reduction ~~related~~of tosubtenant ~~our~~income ~~fiscal~~from ~~2008~~restructured ~~restructuring~~office ~~actions.~~space Inand ~~addition, we incurred a charge of~~ $6.3 .5 million ~~related~~for toa ~~the~~ settlement of our ~~liability~~class action lawsuit related to ~~the~~our ~~VERP~~401(k) ~~via the purchase of a non-participating annuity contract~~plan.

Interest Expense

Interest expense decreased $410.6 8 million, orto ~~13%, during~~$19.2 million in the Successor period in fiscal ~~2010~~2011 ~~compared~~and tothe Predecessor period in fiscal ~~2009~~2011 from $30.1 million in the Predecessor fiscal year ended October 1, 2010. The decrease is primarily attributable to ~~lower~~the ~~debt~~extinguishment ~~balances~~of ~~due~~debt toin the Predecessor ~~extinguishment~~fiscal ~~of $238.8~~year ended October ~~million~~1, of2010 ~~our~~and ~~4.00%~~resulting ~~convertible~~reduction ~~subordinated~~in ~~notes~~interest and debt discount expense, ~~partially~~ ~~offset~~and by$2.0 amillion ~~higher~~amortization ~~interest~~of ~~rate~~$20.1 ~~charged~~million debt premium on ~~our~~ the Company’s 11.25% senior secured notes recorded at the Merger date. Interest expense in ~~fiscal 2010~~the ~~and~~Predecessor fiscal ~~2009~~year ~~also~~ended October 1, 2010 includes debt discount amortization of ~~$7.8 million~~ ~~and~~ $148.0 ~~million,~~ ~~respectively~~million.

Interest expense decreased $4.6 million, or 13%, during the Predecessor fiscal year ended October 1, 2010 compared to the Predecessor fiscal year ended October 2, 2009. The decrease is primarily attributable to lower debt balances due to the extinguishment of $238.8 million of our 4.00% convertible subordinated notes, partially offset by a higher interest rate charged on our 11.25% senior secured notes. Interest expense in the Predecessor 33 fiscal year ended October 1, 2010 and the Predecessor fiscal year ended October 2, 2009 also includes debt discount amortization of $7.8 million and $14.0 million, respectively.

~~Interest~~Other ~~expense~~Expense ~~decreased $6.0 million~~(Income), orNet 15%, during fiscal 2009 compared to fiscal 2008. The decrease is primarily attributable to lower debt balances due to our repurchase of $133.6 million of debt in 2008 and lower interest rates on our remaining variable rate debt.

Other (Income) Expense, Net


	Successor			Predecessor
	April 20, 2011 through September 30, 2011			Period from October 2, 2010 through April 19, 2011			Fiscal Year Ended October 1, 2010			Fiscal Year Ended October 2, 2009
Investment and interest income	$	(101	)	$	(159	)	$	(265	)	$	(1,747	)
Gain on sale of investments		(5	)		(1,393	)		(16,054	)		(1,856	)
Loss on extinguishment of debt		—			—			18,583			—
Decrease (increase) in the fair value of derivative instruments		9,509			9,469			(15,632	)		(4,508	)
Impairment of equity securities		—			—			—			2,770
Loss on termination of interest rate swap		—			—			—			1,087
Other		(10	)		506			913			(771	)

Other expense (income), net	$	9,393		$	8,423		$	(12,455	)	$	(5,025	)

	Fiscal Year Ended
	2010			2009			2008
	(In thousands)
Investment and interest income	$	(265	)	$	(1,747	)	$	(7,237	)
Gain on sale of investments		(16,054	)		(1,856	)		(896	)
Loss on extinguishment of debt		18,583			—			—
(Increase) decrease in the fair value of derivative instruments		(15,632	)		(4,508	)		14,974
Impairment of equity securities		—			2,770			—
Loss on rental property		—			—			1,435
Loss on swap termination		—			1,087			—
Other		913			(771	)		947
Other (income) expense, net	$	(12,455	)	$	(5,025	)	$	9,223

Other expense, net of $17.8 million during the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011 consisted primarily of a $19.0 million decrease in the value of the Mindspeed warrant partially offset by a $1.4 million gain on sale of equity investments. Of the $1.4 million gain on sale of equity investments, we have received proceeds in the amount of $0.8 million. The difference between the gain and proceeds has been recorded as a receivable.

Other income of $12.5 million, net, during the Predecessor fiscal year ended October 1, 2010 primarily consisted of a $16.1 million gain on sale of equity investments and a $15.6 million increase in the fair value of our warrant to purchase 6.1 million shares of Mindspeed common stock, partially offset by a loss of $18.6 million on extinguishment of debt, which consisted of $13.4 million of unamortized debt discount, $1.8 million premium over par paid upon extinguishment and $3.4 million of transaction costs.

Other income, net for the Predecessor fiscal year ended October 2, 2009 was primarily comprised of a $4.5 million increase in the fair value of our warrant to purchase 6.1 million shares of Mindspeed common stock, $1.9 million in gains on sales of equity securities, $1.7 million of investment and interest income on invested ~~cash~~ cash balances, offset by $2.8 million of impairments on equity securities and a $1.1 million realized loss on the termination of interest rate swaps.

Other expense, net for fiscal 2008 was primarily comprised of $7.2 million of investment and interest income on invested cash balances, a $15.0 million decrease in the fair value of our warrant to purchase 6.1 million shares of Mindspeed common stock and $1.4 million of expense related to a rental property.

Provision for Income Taxes

InWe ~~fiscal 2010, 2009 and 2008, we~~ recorded ~~income~~a tax ~~provisions~~benefit of $02.6 million, ~~$0.9 million~~for ~~and~~the ~~$0.8 million, respectively,~~Successor ~~primarily~~period ~~reflecting~~in ~~income~~fiscal ~~taxes~~2011, ~~imposed~~primarily ondue ~~our foreign~~to ~~subsidiaries.~~the ~~All~~reduction of our ~~U.S. federal~~deferred ~~income~~tax ~~taxes and~~liability due to the ~~majority~~impairment of our ~~state~~indefinite ~~income~~life ~~taxes~~intangible ~~are offset by fully reserved deferred tax~~ assets. ~~The~~We ~~Company~~recorded ~~has~~a ~~significant federal and state net operating losses and other deferred~~ tax ~~assets~~ ~~that~~provision ~~the Company expects will eliminate its federal and the majority~~ of ~~its~~$0.4 ~~state~~million ~~taxes payable~~ for the ~~foreseeable~~ ~~future.~~Predecessor ~~When~~period ~~the~~in ~~Company~~fiscal ~~believes~~2011, ~~that~~primarily ~~the~~reflecting ~~future~~income ~~realization~~taxes ~~of its~~imposed ~~deferred~~on ~~tax~~our ~~assets~~foreign issubsidiaries. ~~more~~All ~~likely than not, the Company will release some or all~~ of ~~its~~our ~~valuation allowance~~U.S. Iffederal ~~and~~income ~~when this~~taxes ~~occurs,~~and the ~~release~~majority of ~~the~~our ~~valuation~~state ~~allowance~~income ~~will~~taxes ~~result in~~are aoffset ~~deferred~~by ~~income~~fully reserved deferred tax ~~benefit~~assets.

The acquisition of our common stock in connection with the Merger triggered an ownership change under Section 382. Section 382 ~~Gain~~ imposes an annual limitation (~~Loss~~based upon the value at the time of the ownership change, as determined under Section 382 of the Internal Revenue Code) on ~~Equity~~the ~~Method~~amount ~~Investments~~of taxable income that can be offset with net operating loss (“NOL”) carryovers that existed at time of the acquisition. Section 383 will also limit our ability to use R&D tax credit carryovers. In addition, as the tax basis of our assets exceeded the fair market value of our assets at the time of the ownership change, Section 382 will also limit our ability to use amortization of capitalized R&D and goodwill to offset taxable income for the first five years following an ownership change. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOLs. Similar limitations have been implemented by states and certain foreign jurisdictions. We are in the process of finalizing the impact of Section 382 on the Company’s deferred tax items and, we have preliminarily assessed the impact of Section 382 on our fully reserved deferred tax assets. The change of ownership has significantly limited our ability to utilize our federal and state deferred tax assets and impaired the carrying value of the deferred tax assets and changed the amount of our unrecognized tax benefits. As the federal and state deferred tax assets are fully reserved, this impairment has not had an impact on our current year financial position or results of operations. However, the limitation on the use of our NOLs, credits and amortization which resulted from the ownership changes could adversely impact our future operating results and financial condition. As a result of the Section 382 limitation, as of September 30, 2011, the Company has U.S. federal and California net realizeable net operating loss carryforwards of approximately $272 million and $553 million, respectively.

~~Gain~~In ~~(loss)~~addition, onwe ~~equity~~can ~~method~~within ~~investments~~nine ~~includes~~and ~~our~~a ~~share~~half months of the ~~earnings~~Merger orelect ~~losses~~under Section 338 of the ~~investments~~Internal ~~that~~Revenue ~~are~~Code ~~recorded~~to treat the ~~under~~Merger as if it were an asset purchase for federal income tax purposes. If we make a Section 338 election, generally our tax basis of our assets will equal the ~~equity~~fair ~~method~~market value at the time of ~~accounting~~the Merger, asthe ~~well~~intangible asassets ~~the~~would ~~gains~~be deductible over 15 years under IRC Section 197 and the net operating losses, ~~recognized~~federal oncredits ~~the~~and ~~sale~~remaining ofdeferred ~~our~~taxes ~~equity~~would ~~method~~be ~~investments~~eliminated. Our financial position and results of operations and cash flows could materially change if we make a Section 338 election.

~~Loss~~In onthe ~~equity~~Predecessor ~~method~~fiscal ~~investments~~years ~~for~~ended ~~fiscal~~October 1, 2010 and 2009, ~~was~~we recorded income tax provisions of $0.16 million and $20.89 million, respectively., ~~Gain~~primarily reflecting income taxes imposed on ~~equity~~ ~~method~~our ~~investments~~foreign ~~for~~subsidiaries. ~~fiscal~~All ~~2008~~of ~~was~~our $2U.~~8 million~~S. federal income taxes and the majority of our state income taxes are offset by fully reserved deferred tax assets. The Company has

34 35

significant federal and state net operating losses and other deferred tax assets that the Company expects will eliminate its federal and the majority of its state taxes payable for the foreseeable future. When the Company believes that the future realization of its deferred tax assets is more likely than not, the Company will release some or all of its valuation allowance. If and when this occurs, the release of the valuation allowance will result in a deferred income tax benefit.

Income (Loss) on Equity Method Investments

Income (loss) on equity method investments includes our share of the earnings or losses of the investments that are recorded under the equity method of accounting, as well as the gains and losses recognized on the sale of our equity method investments.

Income on equity method investments for the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011 was $1.9 million. Loss on equity method investments for the Predecessor fiscal years ended October 1, 2010 and 2009 was $0.1 million and $2.8 million, respectively.

Loss from Discontinued Operations, net of tax

Loss from discontinued operations, net of tax, consists of the operating results of our discontinued BMP and BBA businesses. For the Successor period in fiscal 2011 and Predecessor period in fiscal 2011 and the Predecessor fiscal years 2010, ~~2009~~ and ~~2008~~2009, BMP and BBA operations consisted of the following:

	Fiscal Year Ended
	Successor			Predecessor
	2010			2009			2008
	Period from April20, 2011 throughSeptember 30,2011			Period fromOctober 2, 2010through April 19,2011			Fiscal Year EndedOctober 1,2010			Fiscal Year EndedOctober 2,2009
	(In thousands)
Net revenues	$	—		$	—		$	1,428		$	116,590
Net revenues	$	1,428		$	116,590		$	351,179
Cost of goods sold		—			—			54			59,680
Cost of goods sold		54			59,680			212,823
Gross margin		—			—			1,374			56,910
Gross margin		1,374			56,910			138,356
Operating expenses:
Operating expenses:
Research and development		—			—			45			40,085
Research and development		45			40,085			141,395
Selling, general and administrative		—			(64	)		108			4,863
Selling, general and administrative		108			4,863			18,429
Amortization of intangible assets		—			—			—			4,430
Amortization of intangible assets		—			4,430			12,492
Asset impairments		—			—			—			5,164
Asset impairments		—			5,164			262,177
Special charges		2,268			820			2,157			14,518
Special charges		2,157			14,518			2,791
Total operating expenses		2,268			756			2,310			69,060
Total operating expenses		2,310			69,060			437,284
Operating loss		(2,268	)		(756	)		(936	)		(12,150	)
Operating loss		(936	)		(12,150	)		(298,928	)
Interest expense		—			—			—			2,741
Interest expense		—			2,741			12,836
Other expense (income), net		—			(45	)		988			1,132
Other expense (income), net		988			1,132			(9,682	)
Loss from continuing operations before income taxes		(2,268	)		(711	)		(1,924	)		(16,023	)
Loss from continuing operations before income taxes		(1,924	)		(16,023	)		(302,082	)
Provision for income taxes		—			(250	)		81			1,498
Provision for income taxes		81			1,498			4,588
Loss from discontinued operations, net of tax	$	(2,268	)	$	(461	)	$	(2,005	)	$	(17,521	)
Loss from discontinued operations, net of tax	$	(2,005	)	$	(17,521	)	$	(306,670	)

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, sales of non-core assets, borrowings and operating cash flow. In addition, we have generated additional liquidity in the past through the sale of equity and debt securities.

Our cash and cash equivalents decreased $16.4 million in the Successor period in fiscal 2011 and the Predecessor period in fiscal 2011. The decrease was primarily due to cash used in operating activities of $46.7 million, including $16.9 million related to the Merger and terminated merger transactions and $11.1 million for severance payments, acquisition of Predecessor of $203.9 million, the redemption of our remaining $11.2 million of outstanding 4.00% convertible subordinated notes due 2026, purchases of property, plant and equipment of $1.6 million, and employee tax paid by us in lieu of issuing restricted stock units of $0.7 million offset by the equity contributions of $203.9 million, sale of real property for net proceeds of $21.1 million, proceeds from the maturity of marketable securities of $20.0 million, proceeds from the sale of intellectual property of $1.3 million, proceeds from sale of equity investments of $0.8 million and release of restricted cash of $0.5 million.

Our cash and cash equivalents decreased $70.9 million between October 2, 2009 and October 1, 2010. The decrease was primarily due to the repurchase of our long-term and short-term debt, partially offset by common stock offerings and issuance of our 11.25% senior secured notes due 2015, restricted cash released upon repayment of our short-term debt and escrow, partially offset by the net purchase of marketable securities and cash generated by operations.

Cash flows are as follows (in thousands):

	Fiscal Year Ended
	Successor			Predecessor
	2010			2009			2008
	Period from April20, 2011 throughSeptember 30,2011			Period fromOctober 2, 2010through April 19,2011			Fiscal Year EndedOctober 1,2010			Fiscal Year EndedOctober 2,2009
	(In thousands)
Net cash (used in) provided by operating activities	$	(15,478	)	$	(31,237	)	$	4,478		$	8,476
Net cash provided by (used in) operating activities	$	4,478		$	8,476		$	(18,350	)
Net cash (used in) provided by investing activities		(204,682	)		42,994			11,451			85,404
Net cash provided by investing activities		11,451			85,404			63,515
Net cash provided by (used in) financing activities		197,422			(5,429	)		(86,848	)		(74,378	)
Net cash used in financing activities		(86,848	)		(74,378	)		(174,887	)
Net (decrease) increase in cash and cash equivalents	$	(22,738	)	$	6,328		$	(70,919	)	$	19,502
Net increase (decrease) in cash and cash equivalents	$	(70,919	)	$	19,502		$	(129,722	)

Operating Activities

Cash ~~provided~~used byin operating activities was $446.5 7 million for the Successor period in fiscal ~~2010~~2011 and the Predecessor period in fiscal 2011 compared to $84.5 million provided by operating activities for the Predecessor fiscal ~~2009~~year ended October 1, 2010. Cash ~~provided~~ byused in operating activities for the Successor period in fiscal ~~2010~~2011 and the Predecessor period in fiscal 2011 was primarily driven by a net loss of $20149.2 4 million, inoffset ~~net~~by ~~income,~~$95.2 million of net non- cash operating expenses and a $7.5 million increase from changes in working capital.

Cash provided by operating activities was $4.5 million for the Predecessor fiscal year ended October 1, 2010 compared to $8.5 million for the Predecessor fiscal year ended October 2, 2009. Cash provided by operating activities for the Predecessor fiscal year ended 35 October 1, 2010 was primarily driven by $20.2 million in net income, net non-cash operating expenses of $6.2 million, partially offset by net cash used by changes in operating assets and liabilities of $22.0 million.

cash operating expenses of $6.2 million, partially offset by net cash used by changes in operating assets and liabilities of $22.0 million.

Cash provided by operating activities was $8.5 million for fiscal 2009 compared to $18.4 million used in operating activities in fiscal 2008. During fiscal 2009, we used $18.3 million of cash in operations and generated $26.8 million for working capital (accounts receivable, inventories, accounts payable and other accrued expenses). The changes in working capital were primarily driven by a $19.2 million decrease in accounts receivable and a $15.9 million decrease in inventories, offset by a $10.3 million decrease in accounts payable and a $2.0 million increase in other accrued expenses. The decreases in accounts receivable, inventories and accounts payable were primarily driven by the sale of the BBA business and overall lower business volume.

Investing Activities

Cash ~~provided~~used byin investing activities was $11161.5 7 million for the Successor period in fiscal ~~2010~~2011 and the Predecessor period in fiscal 2011 compared to cash provided by investing activities of $8511.~~4 million~~5 million for the Predecessor fiscal ~~2009~~year ended October 1, 2010. Cash ~~provided~~ byused in investing activities for the Successor period in fiscal ~~2010~~2011 and the Predecessor period in fiscal 2011 was primarily ~~due~~ todriven by the ~~release~~acquisition of ~~restricted~~the ~~cash~~Predecessor offor $9203.3 9 million, and capital expenditures of ~~which~~ $81.5 6 million isoffset ~~associated~~by ~~with~~proceeds ~~our~~from ~~repayment~~the sale of ~~short-term~~ ~~debt,~~real ~~and~~property of $621.8 1 million, ~~associated~~proceeds ~~with divestiture~~from ~~contingency~~the maturity of marketable securities of $20.0 million, proceeds from the sale of ~~our~~intellectual ~~BBA~~property ~~business,~~of $1.2 ~~partially~~million, ~~offset~~proceeds byfrom ~~our~~the ~~net~~sale ~~purchase~~ of ~~marketable~~equity ~~securities~~investments of $30.4 8 million and ~~capital~~release ~~expenditures~~of restricted cash of $2.0 .5 million.

Cash provided by investing activities was $8511.4 5 million for the Predecessor fiscal ~~2009~~year ended October 1, 2010 compared to $6385.5 4 million for the Predecessor fiscal ~~2008~~year ended October 2, 2009. Cash provided by investing activities isfor ~~primarily~~the Predecessor ~~related~~fiscal toyear ~~the $44.6~~ended October ~~million~~1, in2010 ~~proceeds~~was onprimarily due to the ~~sale~~release of ~~the~~restricted ~~BBA~~cash ~~business,~~ of $189.3 million, inof ~~release~~which $8.5 million is associated with repayment of ~~restricted~~short-term ~~cash~~debt, and $146.5 8 million associated with divestiture contingency from the sale of ~~intellectual~~our ~~property~~BBA ~~and~~ business, partially offset by our net purchase of marketable securities of $103.4 million ofand ~~proceeds~~capital ~~from~~expenditures ~~resolution~~ of ~~acquisition related~~$2.0 ~~escrow~~million.

Financing Activities

Cash ~~used~~provided inby financing activities was $86192.8 0 million for the Successor period in fiscal ~~2010~~2011 ~~compared~~and tothe ~~$74.4 million~~Predecessor ~~for~~period in fiscal ~~2009~~2011 compared to $86.8 ~~Cash~~ million used in financing activities for ~~fiscal~~the ~~2010,~~Predecessor ~~was~~fiscal ~~primarily~~year ~~due to~~ended ~~the~~October 1, ~~extinguishment~~2010. ofCash ~~our~~provided ~~remaining~~by ~~floating~~financing ~~rate senior~~activities ~~secured~~for ~~notes~~the ~~due~~Successor ~~November~~period ~~2010~~in ~~for~~fiscal ~~$62.0 million, extinguishment~~2011 ofand ~~our~~the ~~4.00%~~Predecessor ~~convertible~~period ~~subordinated~~in ~~notes~~fiscal ~~due March~~2011 ~~2026~~was ~~for~~primarily ~~$226.7 million~~driven ~~and~~by ~~repayment~~the equity contributions of $29203.~~1 million~~9 ~~of our short-term debt~~million, ~~partially~~ offset by the ~~common~~redemption ~~stock~~of ~~offering~~our ~~and~~remaining ~~issuance~~$11.2 million of ~~our~~outstanding 114.2500% ~~senior~~ convertible ~~secured~~subordinated notes due ~~2015,~~2026 ~~net~~and ofemployee ~~expenses,~~tax ofpaid ~~$62.5 million and~~by ~~$168.4 million,~~us ~~respectively~~in ~~and~~lieu ~~issuance~~ of ~~common stock~~issuing ~~under~~restricted ~~employee~~ stock ~~plans~~units ~~for~~of $0.1 7 million.

Cash used in financing activities was $7486.4 8 million for the Predecessor fiscal ~~2009~~year ended October 1, 2010 compared to $~~174~~74.9 4 million for the Predecessor fiscal ~~2008~~year ended October 2, 2009. Cash used in financing activities isfor the Predecessor fiscal year ended October 1, 2010, was primarily ~~comprised~~due ofto ~~our repurchase~~the extinguishment of our remaining floating rate senior secured notes due November 2010 for $62.0 million, extinguishment of our 4.00% convertible subordinated notes due March 2026 for $80 226.7 million and ~~net~~repayment ~~repayments~~of on$29.1 million of our short-term debt, partially offset by the common stock offering and issuance of our 11.25% senior secured notes due 2015, net of expenses, of $1262.5 million and $168.4 million, ~~offset~~respectively byand ~~proceeds~~issuance ~~from a~~of common stock ~~offering~~under ofemployee stock plans for $180.4 1 million.

~~Recent Financing~~37 ~~Transactions~~

In October 2009, we raised additional net proceeds of approximately $2.6 million from the exercise of the over-allotment option in connection with our September 2009 common stock offering of $18.4 million.

In December 2009, as further described below, our wholly-owned subsidiary, Conexant CF, LLC, established a $15.0 million credit facility with a bank. We are required to maintain certain minimum amounts on deposit (restricted cash) of approximately $0.8 million with the bank during the term of the credit agreement. As of October 1, 2010, no amounts had been borrowed under this facility.

In December 2009, we repurchased all outstanding floating rate senior secured notes due November 2010, amounting to $61.4 million, at a price of 101% of par. We also entered into exchange agreements with certain holders of our outstanding 4.00% convertible subordinated notes due March 2026 to issue an aggregate of 7.1 million shares of our common stock, par value $0.01 per share, in exchange for $17.6 million aggregate principal amount of the notes.

In March 2010, we sold 16.1 million shares of our common stock, including 2.1 million shares of common stock pursuant to an exercise by the underwriters of their over-allotment option, at a price of $4.00 per share, raising

~~proceeds~~Recent ofFinancing ~~approximately~~Transactions $59.9 million, net of expenses of $4.5 million. We also issued $175.0 million aggregate principal amount of 11.25% senior secured notes due 2015 at a price of 99.06%, raising proceeds of $168.4 million, net of expenses of $4.9 million. We also repurchased by means of a tender offer approximately $104.7 million of our 4.00% convertible subordinated notes due March 2026.

InOn ~~May~~April 19, ~~2010~~2011, wethe ~~repurchased~~Predecessor bywas ~~means~~acquired offor ~~negotiated transactions approximately~~ $~~116~~203.5 9 million, funded with the proceeds of ~~our~~equity ~~4.00%~~financings ~~convertible subordinated~~from ~~notes~~Golden ~~due~~Gate Capital ~~March~~and ~~2026~~affiliated entities.

AtOn ~~October~~March 1, ~~2010~~2011, we ~~had~~redeemed athe ~~total~~remaining of $11.2 million ~~aggregate~~ ~~principal amount~~ of 4.00% convertible ~~subordinated~~ ~~notes~~subordinated ~~outstanding. These~~ notes ~~are~~ due ~~in March~~ 2026, but the holders may require us to repurchase, for cash, all or part of their notes on March 1, 2011, March 1, 2016 and March 1, 2021 at a price equal to 100% of the principal amount, plus any accrued and unpaid interest. A further description of our 4.00% convertible subordinated notes is included in Note 7 of the consolidated financial statements. We were in compliance with all covenants under the indenture governing our 4.00% convertible subordinated notes as of October 1, 2010.

AsOn ~~of October~~December 122, 2010, we ~~also~~sold ~~had~~certain areal ~~total~~property ~~of $175.0 million~~adjacent ~~aggregate~~to ~~principal~~our ~~amount~~Newport ofBeach, ~~11.25% senior~~California ~~secured~~headquarters ~~notes~~to ~~due~~Uptown ~~2015~~Newport ~~outstanding~~L. ~~These notes accrue interest at a rate of 11~~P.~~25%~~ ~~per~~for ~~annum payable semiannually on March 15 and September 15 of each year and mature on March~~$23.5 15million, ~~2015.~~which ~~The~~consisted ~~obligations under the senior notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis, by all~~ of ~~our existing domestic subsidiaries (except for Conexant CF, LLC)~~$21.5 ~~and~~million ~~by all~~in ofcash ~~our future domestic subsidiaries (except for immaterial subsidiaries~~ and ~~receivables~~a ~~financing~~limited ~~subsidiaries).~~partnership ~~The~~interest ~~notes and~~in ~~note guarantees are also secured by liens on substantially all of our and~~ the ~~guarantors’ tangible and intangible~~ property, ~~subject~~which towe ~~certain~~have ~~exceptions~~valued ~~and~~at ~~permitted liens~~$0. ~~A further description of our 11.25%~~4 ~~senior secured notes is included in Note 7 of the consolidated financial statements~~million. ~~We were in compliance with all covenants under the indenture governing our 11.25% senior secured notes as of October 1, 2010.~~

WeEffective ~~are~~on ~~currently also committed to a plan for~~ the ~~sale~~date of ~~certain~~ ofthe Merger, our ~~property~~credit ~~located~~facility onwith ~~Jamboree~~a ~~Road~~bank ~~adjacent~~was ~~to our Newport Beach, California headquarters~~terminated. ~~The~~No ~~property~~amounts ~~consists~~were ~~of an~~due ~~approximately 25-acre site,~~under ~~including two leased buildings, certain personal property on~~ the ~~site,~~facility ~~and~~at ~~all easements and other intangible rights~~the ~~appurtenant~~termination ~~to the property~~date.

We believe that our existing sources of liquidity, together with cash expected to be generated from operations, will be sufficient to fund our operations, research and development, anticipated capital expenditures and working capital for at least the next twelve months.

Contractual Obligations and Commitments

Contractual obligations at ~~October~~ September 130, ~~2010~~2011 were as follows (in thousands):

	Payments Due by Period
	Payments Due by Fiscal Year
			Less Than								More Than
	Total		2012		2013		2014		2015		2016		Thereafter
	Total		1 Year		1 Year		2 Years		3-5 Years		5 Years
Long-term debt	$	175,000	$	—	$	—	$	—	$	175,000	$	—	$	—
Long-term debt		175,000	$	—	$	—	$	—	$	175,000	$	—
Interest on debt		68,908		19,688		19,688		19,688		9,844		—		—
Short-term debt		11,218		11,218		—		—		—		—
Operating leases		67,495		13,717		13,799		12,702		10,118		7,963		9,196
Interest on debt		88,878		19,972		19,688		19,688		29,531		—
Other purchase commitments		9,735		8,237		1,498		—		—		—		—
Operating leases		81,344		14,582		12,672		12,703		30,585		10,802
	$	321,138	$	41,642	$	34,985	$	32,390	$	194,962	$	7,963	$	9,196
Other purchase commitments		19,792		13,754		4,422		1,616		—		—
	$	376,232	$	59,526	$	36,782	$	34,007	$	235,116	$	10,802

AsAt ~~discussed~~September 30, ~~above~~2011, ~~the~~we ~~holders~~had ofmany ~~remaining~~sublease ~~$11.2 million of~~arrangements ~~our~~on ~~4.00%~~operating ~~convertible~~leases ~~subordinated~~for ~~notes~~terms ~~due~~ranging ~~March 2026 could~~from ~~require~~near usterm to ~~repurchase~~approximately ~~all~~six ~~or part of their notes as early as March 1, 2011~~years. AsAggregate ascheduled ~~result,~~sublease ~~the~~income ~~convertible~~based ~~subordinated notes~~on ~~are~~current ~~presented~~terms asis ~~being~~approximately ~~due~~$18.3 million inand ~~less~~is ~~than~~not ~~one~~reflected ~~year~~ in the table above.

At October 1, 2010, we had many sublease arrangements on operating leases for terms ranging from near term to approximately seven years. Aggregate scheduled sublease income based on current terms is approximately $22.3 million and is not reflected in the table above.

Other purchase commitments include our commitments to foundries for wafer production, contractual obligations to acquire engineering design tools and other contractual payments.

In addition to the amounts shown in the table above, as of ~~October~~ September 130, ~~2010~~2011, we have $6810.0 million of unrecognized ~~tax~~ tax benefits, which includes $1.37 million for potential interest related to these unrecognized tax benefits. We are uncertain as to if or when such amounts may be settled.

Off-Balance Sheet Arrangements

We have made guarantees and indemnities, under which we may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. In connection with our spin-off from Rockwell International Corporation (“Rockwell”), we assumed responsibility for ~~all~~ all contingent liabilities and then-current and future litigation (including environmental and intellectual property proceedings) against Rockwell or its subsidiaries in respect of the operations of the semiconductor systems business of Rockwell. In connection with our contribution of certain of our manufacturing operations to Jazz Semiconductor, Inc. (now “TowerJazz”), we agreed to indemnify TowerJazz for certain environmental matters and other customary divestiture-related matters. In connection with our sale of the BMP business to NXP, we agreed to indemnify NXP for certain claims related to the transaction. In connection with our sale of the BBA business to Ikanos, we agreed to indemnify Ikanos for certain claims related to the transaction. In connection with the sales of our products, we provide intellectual property indemnities to our customers. In connection with certain facility leases, we have indemnified our lessors for certain claims arising from the facility or the lease. We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware.

The durations of our guarantees and indemnities vary, and in many cases are indefinite. The guarantees and indemnities to customers in connection with product sales generally are subject to limits based upon the amount of the related product sales. The majority of other guarantees and indemnities do not provide for any limitation of the maximum potential future payments we could be obligated to make. We have not recorded any liability for these guarantees and indemnities in our consolidated balance sheets. Product warranty costs are not significant.

We have other outstanding letters of credit collateralized by restricted cash aggregating $5.6 million to secure various long-term operating leases and our self-insured worker’s compensation plan. The restricted cash associated with these letters of credit is classified as other long-term assets on the consolidated balance sheets.

Special Purpose Entities

We have one special purpose entity, Conexant CF, LLC (“Conexant CF”), which is our wholly-owned, consolidated subsidiary. Conexant CF is not permitted, nor may its assets be used, to guarantee or satisfy any of our obligations or those of our subsidiaries.

On November 29, 2005, we established an accounts receivable financing facility whereby we sold, from time to time, certain accounts receivable to a then-existing special purpose entity, Conexant USA, LLC (“Conexant USA”). Under the terms of our agreements with Conexant USA, we retained the responsibility to service and collect accounts receivable sold to Conexant USA and received a weekly fee from Conexant USA for handling administrative matters that equaled 1.0%, on a per annum basis, of the uncollected value of the accounts receivable. Our $50.0 million credit facility secured by the assets of Conexant USA expired on November 27, 2009. As permitted by the credit facility, all amounts owed on the credit facility were repaid as of January 1, 2010. Conexant USA was merged into Conexant Systems Worldwide, Inc. in the third fiscal quarter of 2010.

On December 22, 2009, we established a new accounts receivable financing facility whereby we sell, from time to time, certain accounts receivable to Conexant CF. Under the terms of our agreements with Conexant CF, we retain the responsibility to service and collect accounts receivable sold to Conexant CF and receive a weekly fee from Conexant CF for handling administrative matters that is equal to 1.0%, on a per annum basis, of the uncollected value of the purchased accounts receivable.

Concurrently with entering into the new accounts receivable financing facility, Conexant CF entered into a new credit facility to finance the cash portion of the purchase price of eligible receivables. The new credit facility is secured by the assets of Conexant CF. Conexant CF is required to maintain certain minimum amounts on deposit (restricted cash) of approximately $0.8 million with the bank during the term of the credit agreement. Borrowings under the credit facility, which cannot exceed the lesser of $15.0 million or 60% of the uncollected value of purchased accounts receivable that are eligible for coverage under an insurance policy for the receivables, bear interest equal to the bank

~~prime~~The ~~rate~~durations ~~(minimum~~ of ~~3.25%)~~our ~~plus~~guarantees ~~applicable~~and ~~margins~~indemnities ~~(between 1~~vary, and in many cases are indefinite.5% The guarantees and indemnities to 2customers in connection with product sales generally are subject to limits based upon the amount of the related product sales.~~25%).~~ AsThe majority of ~~October 1,~~other ~~2010,~~guarantees ~~eligible~~and ~~borrowings under~~indemnities ~~this~~do ~~facility~~not ~~were~~provide ~~$15.0 million.~~for Inany ~~addition,~~limitation ifof the ~~aggregate~~maximum ~~amount~~potential offuture ~~interest~~payments ~~earned~~we bycould ~~the~~be ~~bank~~obligated into make. We have not recorded any ~~month~~liability ~~is less~~for ~~than~~these ~~$20,000,~~guarantees ~~Conexant~~and CFindemnities ~~pays~~in anour ~~amount~~consolidated ~~equal~~balance tosheets. ~~the minimum~~Product ~~monthly~~warranty ~~interest~~costs ofare ~~$20,000~~not ~~minus~~significant. ~~the~~We ~~aggregate~~have ~~amount~~other outstanding letters of ~~all~~credit ~~interest~~collateralized ~~earned~~ by ~~the~~restricted ~~bank~~cash aggregating $5.1 ~~The~~million ~~credit~~to ~~agreement~~secure ~~matures on~~various ~~December 31,~~long-term ~~2010~~operating leases and ~~remains~~our ~~subject~~self-insured toworker’s ~~additional 364-day renewal~~compensation ~~periods~~plan. atThe ~~the~~restricted ~~discretion~~cash associated with these letters of credit is classified as other long-term assets on the ~~bank~~consolidated balance sheets.

~~The~~Special ~~credit~~Purpose ~~facility~~Entities is subject to financial covenants including a minimum level of shareholders’ equity covenant, an adjusted quick ratio covenant and a minimum cash and cash equivalents covenant. Further, any failure by us or Conexant CF to pay their respective debts as they become due would allow the bank to terminate the credit agreement and cause all borrowings under the credit facility to immediately become due and payable. At October 1, 2010, Conexant CF had not borrowed any amounts under this credit facility and was in compliance with all covenants under the credit facility.

~~Recently Adopted~~We ~~Accounting~~have ~~Pronouncements~~one special purpose entity, Conexant CF, which is not permitted, nor may its assets be used, to guarantee or satisfy any of our obligations or those of our subsidiaries. Effective on the date of the Merger, the credit facility between Conexant CF and a bank was terminated. No amounts were due under the facility at the termination date.

On October 3, 2009, we adopted accounting guidance for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), which requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer’s hypothetical nonconvertible debt borrowing rate. The guidance resulted in recognizing a higher interest expense in our statement of operations due to amortization of the discount that results from separating the liability and equity components. The provisions of the accounting guidance were retrospectively applied, and all prior period amounts have been adjusted to apply the new method of accounting. Our Form 8-K filed on February 8, 2010 gave effect to the retrospective application of this accounting standard.

Recently Issued Accounting Pronouncements

In June ~~2009~~ 2011, the Financial Accounting Standards Board , (“FASB”), issued ~~revised~~ guidance ~~for~~regarding the ~~accounting~~presentation of ~~transfers~~ ofcomprehensive ~~financial assets~~income. ~~This~~The ~~guidance~~new ~~improves~~standard requires the presentation of ~~relevance~~comprehensive income, ~~representational~~the ~~faithfulness,~~components of net income and ~~comparability~~the components of ~~the~~ ~~information~~other ~~that~~comprehensive income either in a ~~reporting~~single ~~entity~~continuous ~~provides~~statement of comprehensive income or in ~~its financial~~two ~~statements~~separate ~~about~~but aconsecutive ~~transfer~~statements. ofThe ~~financial~~new ~~assets;~~standard ~~the~~also requires ~~effects~~presentation of aadjustments ~~transfer~~for onitems ~~its~~that ~~financial~~are ~~position,~~reclassified ~~financial performance,~~from ~~and~~other ~~cash~~comprehensive ~~flows;~~income ~~and~~to anet ~~transferor’s~~income ~~continuing involvement,~~in ifthe ~~any,~~statement inwhere ~~transferred~~the ~~financial~~components ~~assets~~of net income and the components of other comprehensive income are presented. ~~This accounting~~The updated guidance ~~will~~is effective beon ~~effective~~a retrospective basis for financial statements issued for fiscal years ~~beginning after November 15~~, ~~2009,~~ and interim periods within those fiscal years., ~~Early~~beginning ~~adoption~~after ~~is not~~December 15, ~~permitted~~2011. WeThe ~~do not believe that~~ adoption of this guidance will not have a material impact on our financial ~~position and results of operations~~statements.

In ~~June 2009~~May 2011, the FASB issued ~~revised~~additional guidance ~~for~~on ~~the accounting~~fair ofvalue ~~variable~~measurements ~~interest entities, which replaces the quantitative-based risks and rewards approach with a qualitative approach~~ that ~~focuses~~clarifies ~~on identifying which enterprise has~~ the ~~power~~application ~~to direct the activities~~ of aexisting ~~variable interest entity that most significantly impact the entity’s economic performance. This accounting~~ guidance ~~also~~and ~~requires~~disclosure anrequirements, ~~ongoing reassessment~~changes ofcertain ~~whether~~fair anvalue ~~entity~~measurement isprinciples ~~the primary beneficiary~~ and requires additional disclosures about anfair ~~enterprise’s involvement~~value inmeasurements. ~~variable~~The ~~interest~~updated ~~entities.~~guidance ~~This~~is ~~accounting guidance~~effective ~~will~~on bea ~~effective~~prospective basis for financial statements issued for fiscal years ~~beginning after November 15~~, ~~2009,~~ and interim periods within those fiscal years., ~~Early~~beginning ~~adoption~~after isDecember 15, ~~not permitted~~2011. WeThe ~~do not believe that~~ adoption of this guidance will not have a material impact on our financial ~~position and results of operations~~statements.

In September 2011 the FASB issued new accounting guidance intended to simplify goodwill impairment testing. Entities will be allowed to perform a qualitative assessment on goodwill impairment to determine whether a quantitative assessment is necessary. This guidance is effective for goodwill impairment tests performed in interim and annual periods for fiscal years beginning after December 15, 2011. Early adoption is permitted. The adoption of this guidance will not have a material impact on our financial statements.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Our financial instruments include cash and cash equivalents, ~~short-term~~ ~~investments,~~ a warrant to purchase Mindspeed common stock, ~~short~~long-term ~~debt~~restricted ~~and~~cash and long-term debt. Our main investment objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio. Consequently, we invest with only high credit quality issuers, and we limit the amount of our credit exposure to any one issuer.

Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of ~~October~~September 130, ~~2010~~2011, the carrying value of our cash and cash equivalents approximated fair value.

We hold a warrant to purchase approximately 6.1 million shares of Mindspeed common stock at an exercise price of $16.74 per share through June 2013. For financial accounting purposes, this is a derivative instrument and the fair value of the warrant is subject to significant risk related to changes in the market price of Mindspeed’s common stock. As of September 30, 2011, a 10% decrease in the market price of Mindspeed’s common stock would result in a $0.5 million decrease in the fair value of this warrant. At September 30, 2011, the market price of Mindspeed’s common stock was $5.20 per share. During the fourth quarter of fiscal 2011, the market price of Mindspeed’s common stock ranged from a low of $4.92 per share to a high of $8.40 per share.

Our long-term debt consists of our 11.25% senior secured notes with interest at fixed rates. The fair value of the 11.25% senior secured notes is based on an indicative bid price provided by the underwriter of the senior secured notes.

~~the~~The ~~fair~~following ~~value~~table ofshows the ~~warrant~~fair isvalues ~~subject~~of toour ~~significant~~financial ~~risk related~~instruments toas ~~changes in the market price~~ of ~~Mindspeed’s~~ ~~common stock. As of October~~September 130, ~~2010,~~2011 ~~a 10% decrease~~ (in ~~the market~~thousands): price of Mindspeed’s common stock would result in a $3.0 million decrease in the fair value of this warrant. At October 1, 2010, the market price of Mindspeed’s common stock was $7.73 per share. During fiscal 2010, the market price of Mindspeed’s common stock ranged from a low of $2.98 per share to a high of $11.13 per share.

Our short-term debt consists of 4% convertible subordinated notes with interest at fixed rates. The fair value of our 4.00% convertible subordinated notes due March 2026 could be subject to significant fluctuation due to their convertibility into shares of our common stock and was calculated using a quoted market price in an active market.


	Carrying Value		Fair Value
Cash and cash equivalents	$	38,056	$	38,056
Mindspeed warrant		1,708		1,708
Long-term restricted cash		5,064		5,064
Long-term debt: senior secured notes		193,121		196,000

Our long-term debt consists of 11.25% senior secured notes with interest at fixed rates. The fair value of the 11.25% senior secured notes is based on an indicative bid price provided by the underwriter of the senior secured notes.

The following table shows the fair values of our financial instruments as of October 1, 2010 (in thousands):

	Carrying
	Value		Fair Value
Cash and cash equivalents	$	54,466	$	54,466
Marketable securities		20,059		20,059
Mindspeed warrant		20,685		20,685
Long-term restricted cash		5,600		5,600
Short-term debt: convertible subordinated notes		11,218		11,232
Long-term debt: senior secured notes		175,000		168,000

Exchange Rate Risk

We consider our direct exposure to foreign exchange rate fluctuations to be minimal. Currently, sales to customers and arrangements with third-party manufacturers provide for pricing and payment in U.S. dollars, and, therefore, are not subject to exchange rate fluctuations. Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us. Fluctuations in currency exchange rates could affect our business in the future. At ~~October~~ September 130, ~~2010~~2011, we did not have any foreign currency exchange contracts outstanding.

Item 8.

Financial Statements and Supplementary Data

CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	October 1,			October 2,
	2010			2009
	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	54,466		$	125,385
Marketable securities		20,059			—
Restricted cash		—			8,500
Receivables, net of allowances of $368 and $453 at October 1, 2010 and October 2, 2009, respectively		31,463			30,110
Inventories, net		8,747			9,216
Other current assets		14,690			26,148
Assets held for sale		13,059			—
Total current assets		142,484			199,359
Property, plant and equipment, net of accumulated depreciation of $30,050 and $70,139 at October 1, 2010 and October 2, 2009, respectively		6,080			15,299
Goodwill		109,908			109,908
Other assets		47,372			25,635
Total assets	$	305,844		$	350,201
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	—		$	61,400
Short-term debt		10,978			28,653
Accounts payable		12,516			24,553
Accrued compensation and benefits		7,682			8,728
Other current liabilities		31,836			33,978
Total current liabilities		63,012			157,312
Long-term debt		173,543			228,578
Other liabilities		57,197			62,089
Total liabilities		293,752			447,979
Commitments and contingencies (Note 6)
Shareholders’ equity (deficit):
Preferred and junior preferred stock: 20,000 and 5,000 shares authorized, respectively		—			—
Common stock, $0.01 par value: 200,000 shares authorized; 81,273 and 56,917 shares issued and outstanding at October 1, 2010 and October 2, 2009, respectively		813			570
Additional paid-in capital		4,919,582			4,833,919
Accumulated deficit		(4,909,509	)		(4,929,743	)
Accumulated other comprehensive income (loss)		1,206			(2,524	)
Total shareholders’ equity (deficit)		12,092			(97,778	)
Total liabilities and shareholders’ equity	$	305,844		$	350,201

(in thousands, except for par value)


	Successor			Predecessor
	September 30, 2011			October 1, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	38,056		$	54,466
Marketable securities		—			20,059
Receivables, net of allowance of $123 and $368 at September 30, 2011 and October 1, 2010, respectively		19,012			31,463
Inventories		12,693			8,747
Other current assets		7,569			14,690
Assets held for sale		—			13,059

Total current assets		77,330			142,484
Property, plant and equipment, net of accumulated depreciation of $1,747 and $30,050 at September 30, 2011 and October 1, 2010, respectively		10,792			6,080
Goodwill		223,853			109,908
Intangible assets		68,425			4,308
Other assets		16,839			43,064

Total assets	$	397,239		$	305,844


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	—		$	10,978
Accounts payable		8,367			12,516
Accrued compensation and benefits		7,909			7,682
Other current liabilities		33,674			31,836

Total current liabilities		49,950			63,012
Long-term debt		193,121			173,543
Other liabilities		57,357			57,197

Total liabilities		300,428			293,752
Commitments and contingencies (Note 9)
Shareholders’ equity:
Preferred and junior preferred stock: zero and 20,000 shares authorized; zero issued and outstanding at September 30, 2011 and October 1, 2010, respectively		—			—
Common stock, $0.01 par value: 200,000 shares authorized; 100,000 and 81,273 shares issued and outstanding at September 30, 2011 and October 1, 2010, respectively		1,000			813
Additional paid-in capital		202,865			4,919,582
Accumulated deficit		(107,249	)		(4,909,509	)
Accumulated other comprehensive income		195			1,206

Total shareholders’ equity		96,811			12,092

Total liabilities and shareholders’ equity	$	397,239		$	305,844

See accompanying notes to consolidated financial statements

CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Fiscal Year Ended
	October 1,			October 2,			October 3,
	2010			2009			2008
	(In thousands, except per share amounts)
Net revenues	$	240,726		$	208,427		$	331,504
Cost of goods sold		94,157			86,674			137,251
Gross margin		146,569			121,753			194,253
Operating expenses:
Research and development		55,745			51,351			58,439
Selling, general and administrative		48,249			62,740			77,905
Amortization of intangible assets		1,249			2,976			3,652
Gain on sale of intellectual property		—			(12,858	)		—
Asset impairments		—			5,672			277
Special charges		837			18,983			18,682
Total operating expenses		106,080			128,864			158,955
Operating income (loss)		40,489			(7,111	)		35,298
Interest expense		30,072			34,693			40,713
Other (income) expense, net		(12,455	)		(5,025	)		9,223
Income (loss) from continuing operations before income taxes and (loss) gain on equity method investments		22,872			(36,779	)		(14,638	)
Provision for income taxes		567			871			849
Income (loss) from continuing operations before (loss) gain on equity method investments		22,305			(37,650	)		(15,487	)
(Loss) gain on equity method investments		(66	)		(2,807	)		2,804
Income (loss) from continuing operations		22,239			(40,457	)		(12,683	)
Gain on sale of discontinued operations, net of tax		—			39,170			6,268
Loss from discontinued operations, net of tax		(2,005	)		(17,521	)		(306,670	)
Net income (loss)	$	20,234		$	(18,808	)	$	(313,085	)
Income (loss) per share from continuing operations — basic	$	0.31		$	(0.81	)	$	(0.26	)
Income (loss) per share from continuing operations — diluted	$	0.30		$	(0.81	)	$	(0.26	)
Gain per share from sale of discontinued operations — basic and diluted	$	0.00		$	0.78		$	0.13
Loss per share from discontinued operations — basic and diluted	$	(0.03	)	$	(0.35	)	$	(6.21	)
Net income (loss) per share — basic	$	0.28		$	(0.38	)	$	(6.34	)
Net income (loss) per share — diluted	$	0.27		$	(0.38	)	$	(6.34	)
Shares used in basic per-share computations		72,903			49,856			49,394
Shares used in diluted per-share computations		73,708			49,856			49,394

(in thousands, except per share data)


	Successor			Predecessor
	Period from April 20, 2011 through September 30,			Period from October 2, 2010 through April 19,			Fiscal Year Ended October 1,			Fiscal Year Ended October 2,
	2011			2011			2010			2009
Net revenues	$	72,930		$	93,111		$	240,726		$	208,427
Cost of goods sold		57,925			39,849			94,157			86,674

Gross margin		15,005			53,262			146,569			121,753

Operating expenses:
Research and development		25,803			30,932			55,745			51,351
Selling, general and administrative		15,417			24,155			48,249			62,740
Amortization of intangible assets		9,139			621			1,249			2,976
Gain on sale of intellectual property		—			(1,249	)		—			(12,858	)
Asset impairments		41,058			—			—			5,672
Special charges		15,237			20,890			837			18,983

Total operating expenses		106,654			75,349			106,080			128,864

Operating (loss) income		(91,649	)		(22,087	)		40,489			(7,111	)
Interest expense		6,963			12,278			30,072			34,693
Other expense (income), net		9,393			8,423			(12,455	)		(5,025	)

(Loss) income from continuing operations before income taxes and income (loss) on equity method investments		(108,005	)		(42,788	)		22,872			(36,779	)
Income tax (benefit) provision		(2,595	)		380			567			871

(Loss) income from continuing operations before income (loss) on equity method investments		(105,410	)		(43,168	)		22,305			(37,650	)
Income (loss) on equity method investments		429			1,495			(66	)		(2,807	)

(Loss) income from continuing operations		(104,981	)		(41,673	)		22,239			(40,457	)
Gain on sale of discontinued operations		—			—			—			39,170
Loss from discontinued operations, net of tax		(2,268	)		(461	)		(2,005	)		(17,521	)

Net (loss) income	$	(107,249	)	$	(42,134	)	$	20,234		$	(18,808	)

(Loss) income per share from continuing operations — basic				$	(0.51	)	$	0.31		$	(0.81	)

(Loss) income per share from continuing operations — diluted				$	(0.51	)	$	0.30		$	(0.81	)

Gain per share from sale of discontinued operations — basic and diluted				$	0.00		$	0.00		$	0.78

Loss per share from discontinued operations — basic and diluted				$	0.00		$	(0.03	)	$	(0.35	)

Net (loss) income per share — basic				$	(0.51	)	$	0.28		$	(0.38	)

Net (loss) income per share — diluted				$	(0.51	)	$	0.27		$	(0.38	)

Shares used in basic per-share computations					81,996			72,903			49,856

Shares used in diluted per-share computations					81,996			73,708			49,856

See accompanying notes to consolidated financial statements

CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Year Ended
	October 1,			October 2,			October 3,
	2010			2009			2008
	(In thousands)
Cash flows from operating activities
Net income (loss)	$	20,234		$	(18,808	)	$	(313,085	)
Adjustments to reconcile net loss to net cash used in operating activities, net of effects of acquisitions:
Depreciation		3,409			8,198			19,311
Gain on sale of business		—			(39,170	)		(6,268	)
Amortization of intangible assets		1,249			7,406			16,144
Reversal of provision for bad debts, net		(85	)		(325	)		(751	)
Charges for (reversal of) inventory provisions, net		80			(806	)		7,253
Amortization of debt discount		8,008			14,015			13,394
Asset impairments		—			10,835			263,535
Other-than-temporary impairment of marketable and non-marketable securities		—			2,770			—
Loss on termination of defined benefit plan		—			—			6,294
Deferred income taxes		(1,981	)		(15	)		(39	)
Stock-based compensation		6,649			5,720			15,869
(Increase) decrease in fair value of derivative instruments		(15,632	)		(4,002	)		14,881
Loss on termination of swap		1,728			1,087			—
Loss on extinguishment of debt		18,583			—			—
Losses (gains) on equity method investments		172			3,798			(2,804	)
Loss on resolution of pre-acquisition contingency		—			1,575			—
Gain on sales of equity securities, investments and other assets		(16,054	)		(1,856	)		(896	)
Gain on sale of intellectual property		—			(12,858	)		—
Currency translation adjustment recognized in net income		1,304			—			—
Other items, net		(1,221	)		4,149			4,021
Changes in assets and liabilities:
Receivables		(1,268	)		19,212			32,633
Inventories		389			15,871			9,326
Accounts payable		(12,122	)		(10,341	)		(45,010	)
Accrued expenses and other current liabilities		(4,531	)		(17,080	)		(36,210	)
Other, net		(4,433	)		19,101			(15,948	)
Net cash provided by (used in) operating activities		4,478			8,476			(18,350	)
Cash flows from investing activities
Purchases of property, plant and equipment		(2,041	)		(686	)		(5,958	)
Proceeds from sales of property, plant and equipment		741			134			8,949
Proceeds from resolution of divestiture/acquisition contingencies		6,750			10,446			—
Payments for acquisitions, net of cash acquired		(625	)		(4,207	)		(16,088	)
Proceeds from sales of marketable securities		91,889			2,310			—
Purchases of marketable securities		(95,334	)		—			—
Proceeds from sale of intellectual property		—			14,548			—
Purchases of equity securities		—			—			(755	)
Restricted cash		9,323			18,300			(18,000	)
Net proceeds from sale of business		—			44,559			95,367
Return of capital from equity method investments		748			—			—
Net cash provided by investing activities		11,451			85,404			63,515
Cash flows from financing activities
Repayment of short-term debt		(29,136	)		(12,365	)		(39,883	)
Extinguishment of debt		(288,748	)		(80,000	)		(133,600	)
Proceeds from common stock offerings, net of offering costs of $4,881 and $1,514		62,510			18,436			—
Proceeds from issuance of senior secured notes, net of offering costs of $4,920		168,440			—			—
Proceeds from issuance of common stock under employee stock plans		124			28			1,088
Employee income tax paid related to vesting of restricted stock units		(38	)		(258	)		—
Interest rate swap security deposit		—			2,517			(2,517	)
Payment for swap termination		—			(2,815	)		—
Repayment of shareholder notes receivable		—			79			25
Net cash used in financing activities		(86,848	)		(74,378	)		(174,887	)
Net (decrease) increase in cash and cash equivalents		(70,919	)		19,502			(129,722	)
Cash and cash equivalents at beginning of year		125,385			105,883			235,605
Cash and cash equivalents at end of year	$	54,466		$	125,385		$	105,883

(in thousands)


	Successor			Predecessor
	Period from April 20, 2011 through September 30,			Period from October 2, 2010 through April 19,			Fiscal Year Ended October 1,			Fiscal Year Ended October 2,
	2011			2011			2010			2009
Cash flows from operating activities:
Net (loss) income	$	(107,249	)	$	(42,134	)	$	20,234		$	(18,808	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation		1,713			1,425			3,409			8,198
Gain on sale of business		—			—			—			(39,170	)
Amortization of intangible assets		9,139			621			1,249			7,406
Reversal of provision for bad debts, net		(245	)		—			(85	)		(325	)
Charges for inventory provisions, net		4,607			449			80			(806	)
Release of inventory step-up upon shipment		23,036			—			—			—
Amortization of debt (premium) discount		(2,004	)		419			8,008			14,015
Asset impairments		41,058			—			—			10,835
Other-than-temporary impairment of marketable and non-marketable securities		—			—			—			2,770
Deferred income taxes		(3,019	)		19			(1,981	)		(15	)
Stock-based compensation		—			4,057			6,649			5,720
Decrease (increase) in fair value of derivative instruments		9,509			9,469			(15,632	)		(4,002	)
(Gains) losses on equity method investments		(429	)		(1,495	)		172			3,798
Loss on termination of swap		—			—			1,728			1,087
Loss on extinguishment of debt		—			—			18,583			—
Loss on resolution of pre-acquisition contingency		—			—			—			1,575
Net gain on sale of equity securities		(5	)		(1,393	)		(16,054	)		(1,856	)
Gain on sale of intellectual property		—			(1,249	)		—			(12,858	)
Currency translation adjustment recognized in net (loss) income		—			—			1,304			—
Other items, net		(189	)		(276	)		(1,221	)		4,149
Changes in assets and liabilities:
Receivables		6,763			6,071			(1,268	)		19,212
Inventories		237			(6,291	)		389			15,871
Accounts payable		(5,681	)		1,576			(12,122	)		(10,341	)
Accrued expenses and other current liabilities		1,773			(5,269	)		(4,531	)		(17,080	)
Other, net		5,508			2,764			(4,433	)		19,101

Net cash (used in) provided by operating activities		(15,478	)		(31,237	)		4,478			8,476
Cash flows from investing activities:
Purchases of property, plant and equipment		(858	)		(729	)		(2,041	)		(686	)
Acquisition of Predecessor		(203,865	)		—			—			—
Proceeds from sale of real estate, net of closing costs of $439		—			21,087			—			—
Proceeds from sale of property, plant and equipment		15			52			741			134
Proceeds from resolution of divestiture/acquisition contingencies		—			—			6,750			10,446
Payments for acquisitions, net of cash acquired		—			—			(625	)		(4,207	)
Proceeds from sales of marketable securities		—			20,000			91,889			2,310
Purchases of marketable securities		—			—			(95,334	)		—
Proceeds from sales of equity securities		23			802			—			—
Restricted cash		3			533			9,323			18,300
Net proceeds from sale of business		—			—			—			44,559
Proceeds from sale of intellectual property		—			1,249			—			14,548
Return of capital from equity method investments		—			—			748			—

Net cash (used in) provided by investing activities		(204,682	)		42,994			11,451			85,404
Cash flows from financing activities:
Net repayments of short-term debt		—			(11,278	)		(29,136	)		(12,365	)
Extinguishment of debt		—			—			(288,748	)		(80,000	)
Proceeds from common stock offerings, net of expenses of $4,881 and $1,514		—			—			62,510			18,436
Proceeds from issuance of senior secured notes, net of expenses of $4,920		—			—			168,440			—
Proceeds from issuance of common stock under employee stock plans		—			95			124			28
Employee income tax paid related to vesting of restricted stock units		—			(689	)		(38	)		(258	)
Interest rate swap security deposit		—			—			—			2,517
Payment for swap termination		—			—			—			(2,815	)
Repayment of shareholder notes receivable		—			—			—			79
Advances from Gold Holdings, Inc.		(6,443	)		6,443			—			—
Equity contributions		203,865			—			—			—

Net cash provided by (used in) financing activities		197,422			(5,429	)		(86,848	)		(74,378	)

Net increase in cash and cash equivalents		(22,738	)		6,328			(70,919	)		19,502
Cash and cash equivalents at beginning of period		60,794			54,466			125,385			105,883

Cash and cash equivalents at end of period	$	38,056		$	60,794		$	54,466		$	125,385

See accompanying notes to consolidated financial statements

CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY ~~(DEFICIT) AND COMPREHENSIVE INCOME (LOSS)~~

											Accumulated
											Other			Notes			Total
					Additional						Comprehensive			Receivable			Shareholders’
	Common Stock				Paid-In			Accumulated			Income (Loss)			from Stock			Equity
	Shares		Amount		Capital			Deficit			(Net of Tax)			Sales			(Deficit)
	(In thousands)
Balance at September 28, 2007		49,236	$	493	$	4,791,774		$	(4,597,037	)	$	(1,385	)	$	(103	)	$	193,742
Net loss		—		—		—			(313,085	)		—			—			(313,085	)
Currency translation adjustment		—		—		—			—			(1,686	)		—			(1,686	)
Change in unrealized gain on derivative contracts		—		—		—			—			(837	)		—			(837	)
Change in unrealized losses on available-for-sale securities		—		—		—			—			(1,934	)		—			(1,934	)
Minimum pension liability adjustment		—		—		—			—			3,759			—			3,759
Comprehensive loss																		(313,783	)
Issuance of common stock		365		3		1,084			—			—			—			1,087
Reclassification to equity award		—		—		1,458			—			—			—			1,458
Adoption of FIN 48		—		—		—			(813	)		—			—			(813	)
Settlement of notes receivable		—		—		—			—			—			24			24
Employee stock-based compensation expense		—		—		15,869			—			—			—			15,869
Balance at October 3, 2008		49,601		496		4,810,185			(4,910,935	)		(2,083	)		(79	)		(102,416	)
Net loss		—		—		—			(18,808	)		—			—			(18,808	)
Currency translation adjustment		—		—		—			—			(1,104	)		—			(1,104	)
Change in unrealized gain on derivative contracts		—		—		—			—			(3,017	)		—			(3,017	)
Loss on termination of derivative contracts		—		—		—			—			1,746			—			1,746
Change in unrealized losses on available-for-sale securities		—		—		—			—			650			—			650
Other than temporary loss on available-for-sale securities		—		—		—			—			1,986			—			1,986
Sale of available-for-sale securities		—		—		—			—			(702	)		—			(702	)
Comprehensive loss																		(19,249	)
Common stock issued in offering		7,000		70		18,366			—			—			—			18,436
Common stock issued related to employee stock plans		316		4		(234	)		—			—			—			(230	)
Settlement of notes receivable		—		—		—			—			—			79			79
Employee stock-based compensation expense		—		—		5,602			—			—			—			5,602
Balance at October 2, 2009		56,917		570		4,833,919			(4,929,743	)		(2,524	)		—			(97,778	)
Net income		—		—		—			20,234			—			—			20,234
Currency translation adjustment												685						685
Currency translation adjustment recognized in net income		—		—		—			—			1,304			—			1,304
Loss on termination of derivative contracts		—		—		—			—			1,728			—			1,728
Change in unrealized gain (loss) on available-for-sale securities		—		—		—			—			9,733			—			9,733
Sale of available-for-sale securities		—		—		—			—			(9,720	)		—			(9,720	)
Comprehensive income																		23,964
Common stock issued in offering		17,150		171		62,339			—			—			—			62,510
Common stock issued in exchange for debt		7,063		71		16,590												16,661
Common stock issued related to employee stock plans		143		1		123			—			—			—			124
Employee stock-based compensation expense		—		—		6,611			—			—			—			6,611
Balance at October 1, 2010		81,273	$	813	$	4,919,582		$	(4,909,509	)	$	1,206		$	—		$	12,092

AND COMPREHENSIVE LOSS (SUCCESSOR)

(in thousands)


	Common Stock						Accumulated Deficit			Accumulated Other Comprehensive Income (net of tax)
	Shares		Amount		Additional Paid-In Capital		Accumulated Deficit					Total Shareholders’ Equity
Balance at April 20, 2011		—	$	—	$	—	$	—		$	—	$	—
Net loss		—		—		—		(107,249	)		—		(107,249	)
Currency translation adjustment		—		—		—		—			195		195

Comprehensive loss													(107,054	)
Equity contribution		100,000		1,000		202,865		—			—		203,865

Balance at September 30, 2011		100,000	$	1,000	$	202,865	$	(107,249	)	$	195	$	96,811

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

AND COMPREHENSIVE INCOME (LOSS) (PREDECESSOR)

(in thousands)


	Common Stock										Accumulated Other Comprehensive Income (Loss) (net of tax)						Total Shareholders’ (Deficit) Equity
	Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss) (net of tax)			Notes Receivable from Stock Sales			Total Shareholders’ (Deficit) Equity
Balance at October 3, 2008		49,601	$	496	$	4,810,185		$	(4,910,935	)	$	(2,083	)	$	(79	)	$	(102,416	)
Net loss		—		—		—			(18,808	)		—			—			(18,808	)
Currency translation adjustment		—		—		—			—			(1,104	)		—			(1,104	)
Change in unrealized gain on derivative contracts		—		—		—			—			(3,017	)		—			(3,017	)
Loss on termination of derivative contracts		—		—		—			—			1,746			—			1,746
Change in unrealized losses on available-for-sale securities		—		—		—			—			650			—			650
Other than temporary loss on available-for-sale securities		—		—		—			—			1,986			—			1,986
Sale of available-for-sale securities		—		—		—			—			(702	)		—			(702	)

Comprehensive loss																		(19,249	)
Common stock issued in offering		7,000		70		18,366			—			—			—			18,436
Common stock issued related to employee stock plans		316		4		(234	)		—			—			—			(230	)
Settlement of notes receivable		—		—		—			—			—			79			79
Employee stock-based compensation expense		—		—		5,602			—			—			—			5,602

Balance at October 2, 2009		56,917		570		4,833,919			(4,929,743	)		(2,524	)		—			(97,778	)

Net income		—		—		—			20,234			—			—			20,234
Currency translation adjustment		—		—		—			—			685			—			685
Currency translation adjustment recognized in net income		—		—		—			—			1,304			—			1,304
Loss on termination of derivative contracts		—		—		—			—			1,728			—			1,728
Change in unrealized gain (loss) on available-for-sale securities		—		—		—			—			9,733			—			9,733
Sale of available-for-sale securities		—		—		—			—			(9,720	)		—			(9,720	)

Comprehensive income																		23,964
Common stock issued in offering		17,150		171		62,339			—			—			—			62,510
Common stock issued in exchange for debt		7,063		71		16,590			—			—			—			16,661
Common stock issued related to employee stock plans		143		1		123			—			—			—			124
Employee stock-based compensation expense		—		—		6,611			—			—			—			6,611

Balance at October 1, 2010		81,273		813		4,919,582			(4,909,509	)		1,206			—			12,092

Net loss		—		—		—			(42,134	)		—			—			(42,134	)
Currency translation adjustment		—		—		—			—			526			—			526
Change in unrealized gain on available-for-sale securities		—		—		—			—			(13	)		—			(13	)

Comprehensive loss																		(41,621	)
Common stock issued related to employee stock plans		950		10		85			—			—			—			95
Employee stock-based compensation expense		—		—		3,368			—			—			—			3,368

Balance at April 19, 2011		82,223	$	823	$	4,923,035		$	(4,951,643	)	$	1,719		$	—		$	(26,066	)

See accompanying notes to consolidated financial statements

CONEXANT SYSTEMS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1.	Basis of Presentation and Significant Accounting Policies

Conexant Systems, Inc., a Delaware corporation, (“Conexant” or the “Company”) designs, develops and sells semiconductor system solutions, comprised of semiconductor devices, software and reference designs, for imaging, audio, embedded-modem, and video applications. These solutions include a comprehensive portfolio of imaging solutions for multifunction printers (MFPs), fax platforms, and interactive display frame market segments. The Company’s audio solutions include high-definition (HD) audio integrated circuits, HD audio codecs, and speakers-on-a-chip solutions for personal computers, PC peripheral sound systems, audio subsystems, speakers, notebook docking stations, voice-over-IP speakerphones, USB headsets supporting Microsoft Office Communicator and Skype, and audio-enabled surveillance applications. The Company also offers a full suite of embedded-modem solutions for set-top boxes, point-of-sale systems, home automation and security systems, and desktop and notebook PCs. Additional products include decoders and media bridges for video surveillance security and monitoring applications, and system solutions for analog video-based multimedia applications.

Merger with Conexant Holdings, Inc. — On April 19, 2011, the Company completed a merger with Gold Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly owned subsidiary of Gold Holdings, Inc., a Delaware corporation, subsequently renamed Conexant Holdings, Inc. (“Conexant Holdings”). Pursuant to the Agreement and Plan of Merger dated as of February 20, 2011, by and among the Company, Gold Holdings, Inc. and Merger Sub (the “Merger Agreement”), Merger Sub was merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Conexant Holdings (the “Merger”). In connection with the Merger, shares of the Company’s common stock ceased to be traded on the NASDAQ Stock Market after close of market on April 19, 2011.

At the consummation of the Merger, each share of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”) issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) was converted into the right to receive $2.40 in cash, without interest and subject to any applicable withholding tax (the “Gold Merger Consideration”). Stock options to acquire Company Common Stock that were outstanding and unexercised immediately prior to the Effective Time were cancelled and converted into the right to receive, with respect to each such option, an amount of cash equal to the excess, if any, of the Gold Merger Consideration over the exercise price per share under the option for each share subject to such option. Any option with an exercise price greater than or equal to the Gold Merger Consideration was cancelled without consideration. Each restricted stock unit (“RSU”) that, as of immediately prior to the Effective Time, was outstanding and held by a non-employee director of the Company or a management-level employee of the Company at the rank of senior vice president or above was cancelled and converted into the right to receive an amount of cash equal to the Gold Merger Consideration. All remaining RSUs were cancelled with the Holders of such RSUs being entitled to receive with respect to each RSU on the date that the RSU would have otherwise vested had the Effective Time not occurred an amount of cash equal to the Gold Merger Consideration; provided that such payment will only be required if (a) the employee continues to be employed continuously by the surviving corporation through and including the original vesting date of such RSUs and (b) the employee has not otherwise been issued or granted any incentive compensation following the Effective Time (but prior to such original vesting date) that the surviving corporation’s board of directors has determined in good faith in its sole discretion to be an appropriate replacement for such RSUs.

The aggregate consideration for all equity securities including cancelled and converted stock options and RSUs of the Company was $203.8 million. An additional $0.1 million consideration was paid concurrent with the Merger to satisfy an existing bank line of credit. The Merger was funded with the proceeds of equity contributions from Golden Gate Capital and affiliated entities in the amount of $203.9 million.

Termination of Merger Agreement with Standard Microsystems Corporation — On February 23, 2011, the Company terminated its previously announced Agreement and Plan of Merger, dated January 9, 2011 (the “SMSC Agreement”), with Standard Microsystems Corporation, a Delaware corporation (“SMSC”), and Comet Acquisition Corp., a Delaware corporation and wholly owned subsidiary of SMSC. Pursuant to the terms of the SMSC Agreement, the Company paid a termination fee of $7.7 million to SMSC.

Basis of Presentation — The consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, include the accounts of the Company and each of its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year — The Company’s fiscal year is the 52- or 53-week period ending on the Friday closest to September 30. In a 52-week year, each fiscal quarter consists of 13 weeks. The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks. Fiscal ~~year~~years 2011, 2010 and 2009 were 52-week years and ended on September 30, October 1, 2010 and October 2, 2009, respectively. ~~Fiscal year 2008 was a 53-week year and ended on October 3, 2008.~~

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Among the significant estimates affecting the consolidated financial statements are those related to revenue recognition, allowance for doubtful accounts, inventories, long-lived assets (including goodwill and intangible assets), deferred income taxes, valuation of warrants, valuation of equity securities, stock-based compensation, restructuring charges and litigation. On an on-going basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.

Revenue Recognition — The Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the sales price and terms are fixed and determinable, and (iv) the collection of the receivable is reasonably assured. These terms are typically met upon shipment of product to the customer. The majority of the Company’s distributors have limited stock rotation rights, which allow them to rotate up to 10% of product in their inventory two times per year. The Company recognizes revenue to these distributors upon shipment of product to the distributor, as the stock rotation rights are limited and the Company believes that it has the ability to reasonably estimate and establish allowances for expected product returns in accordance with accounting guidance for revenue recognition when right of return exists. Development revenue is recognized when services are performed and was not significant for any periods presented.

Revenue with respect to sales to customers to whom the Company has significant obligations after delivery is deferred until all significant obligations have been completed. At October 1, 2010 and October 2, 2009, deferred revenue related to shipments of products for which the Company has on-going performance obligations was none and $0.1 million, respectively. Deferred revenue is included in other current liabilities on the accompanying consolidated balance sheets.

Research and Development — The Company’s research and development (R&D) expenses consist principally of direct personnel costs to develop new semiconductor products, allocated indirect costs of the R&D function, photo mask and other costs for pre-production evaluation and testing of new devices and design and test tool costs. The Company’s R&D expenses also include the costs for design automation, advanced package development and non-cash stock-based compensation charges for R&D personnel.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Among the significant estimates affecting the consolidated financial statements are those related to fair-value measurements applied to tangible and intangible assets acquired and liabilities assumed in connection with the Merger, revenue recognition, allowance for doubtful accounts, reserves related to inventories and sales returns, long-lived assets (including goodwill and intangible assets), deferred income taxes, valuation of warrants, the Company’s 7.5% investment in Uptown Newport L.P., stock-based compensation, environmental remediation reserve, restructuring charges, and other loss contingencies. On an ongoing basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.

Revenue Recognition — The Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the sales price and terms are fixed and determinable, and (iv) the collection of the receivable is reasonably assured. These terms are typically met upon shipment of product to the customer. The majority of the Company’s distributors have limited stock rotation rights, which allow them to rotate up to 10% of product in their inventory two times per year. The Company recognizes revenue to these distributors upon shipment of product to the distributor, as the stock rotation rights are limited and the Company believes that it has the ability to reasonably estimate and establish allowances for expected product returns in accordance with accounting guidance for revenue recognition when right of return exists. The Company has also established allowances for price adjustments, rebates and warranty returns. The estimate of future returns and credits is based on historical sales returns, analysis of credit memo data, and other factors known at the time of revenue recognition. The Company monitors product returns and potential price adjustments on an ongoing basis.

The Company accrues 100% of potential rebates at the time of sale and does not apply a breakage factor. The Company reverses the accrual for unclaimed rebate amounts as specific rebate programs contractually end and when the Company believes unclaimed rebates are no longer subject to payment and will not be paid. Development revenue is recognized when services are performed and was not significant for any periods presented.

Research and Development — The Company’s research and development (R&D) expenses consist principally of direct personnel costs to develop new semiconductor products, allocated indirect costs of the R&D function, photo mask and other costs for pre-production evaluation and testing of new devices and design and test tool costs. The Company’s R&D expenses also include the costs for design automation, advanced package development and non-cash stock-based compensation charges for R&D personnel.

Shipping and Handling — In accordance with the accounting guidance for shipping and handling fees and costs, the Company includes shipping and handling fees billed to customers in net revenues. Amounts incurred by the Company for freight are included in cost of goods sold.

Cash and Cash Equivalents — The Company considers all highly liquid investments with insignificant interest rate risk and original maturities of three months or less from the date of purchase to be cash equivalents. Repatriation of cash in foreign locations to the U.S. may be restricted by the terms of the service agreements between the foreign locations and the U.S. and local statutory rules and regulations. Cash held by the Company as of September 30, 2011 which is insured by the Federal Deposit Insurance Corporation (“FDIC”) totaled $0.9 million.

Marketable Securities — The Company defines marketable securities as income yielding debt securities that can be readily converted into cash and equity securities acquired through strategic non-marketable investments that subsequently became listed on public markets. All of the Company’s marketable debt securities are U.S. Treasury obligations rated Aaa or AAA by the major credit rating agencies.

The Company accounts for its investments in marketable securities as available-for-sale and determines the appropriate classification of such securities at the time of purchase and re-evaluates such classification as of each balance sheet date. Marketable securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity ~~(deficit),~~ on the Company’s consolidated balance sheets. Realized gains and losses were included in other expense (income), net in the accompanying consolidated statements of operations. Gains and losses on the sale of available-for-sale securities were determined using the specific-identification method. The Company did not hold any securities for speculative or trading purposes.

Restricted Cash — The ~~restricted~~Company ~~cash~~has ~~balances consists of amounts pledged as collateral on~~ outstanding letters of credit ~~and~~collateralized ~~minimum~~by ~~levels~~restricted of cash ~~deposits held by lending~~aggregating ~~institution~~$5.1 million ~~for~~and ~~a financing facility~~$5.6 million ~~The~~as ~~Company~~of ~~has~~September 30, ~~letters~~2011 ~~of credit~~and ~~collateralized~~October 1, by2010, ~~restricted~~respectively, ~~cash~~ to secure various long-term operating leases and the Company’s self-insured worker’s compensation plan. The restricted cash ~~associated~~ associated with these letters of credit ~~aggregating $5.6 million and $6.4 million~~ is classified as other long-term assets on the consolidated balance sheets ~~as of October 1, 2010 and October 2, 2009, respectively~~. The Company had also classified $8.5 million with respect to its short-term debt credit arrangement that expired on November 27, 2009 as short-term restricted cash as of October 2, 2009.

Inventories — Inventories are stated at the lower of cost or market. Cost is computed using the average cost method on a currently adjusted standard basis (which approximates actual cost) and market is based upon estimated net realizable value. The valuation of inventories at the lower of cost or market requires the use of estimates as to the amounts of current inventories that will be sold and the estimated average selling price. These estimates are dependent on the Company’s assessment of current and expected orders from its customers, and orders generally are subject to cancellation with limited advance notice prior to shipment.

Property, Plant and Equipment — Property, plant and equipment are stated at cost. Depreciation is based on estimated useful lives (principally 10 to 27 years for buildings and improvements, 3 to 5 years for machinery and equipment, and the shorter of the remaining lease terms or the estimated useful lives of the improvements for land and leasehold improvements). Maintenance and repairs are charged to expense.

Investments — The Company accounts for non-marketable investments using the equity method of accounting if the investment gives the Company the ability to exercise significant influence over, but not control of, an investee. Significant influence generally exists if the Company has an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company’s proportionate share of earnings or losses and distributions. Additional investments by other parties in the investee will result in a reduction in the Company’s ownership interest, and the resulting gain or loss will be recorded in the consolidated statements of operations. Where the Company is unable to exercise significant influence over the investee, investments are accounted for under the cost method, except for investments in limited partnerships, where the Company uses the equity method. Under the cost method, investments are carried at cost and adjusted only for other-than-temporary declines in fair value, distributions of earnings or additional investments.

Long-Lived Assets — Long-lived assets, including fixed assets and intangible assets (other than goodwill) are amortized over their estimated useful lives. They are also continually monitored and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The

~~determination~~On ofa ~~recoverability~~quarterly isbasis, ~~based~~the onCompany anassesses ~~estimate~~the ~~of undiscounted~~net ~~cash~~realizable ~~flows~~value ~~expected~~of toits ~~result~~inventories. ~~from~~ When the ~~use~~estimated ofaverage ~~an asset~~selling ~~and~~prices, ~~its~~less ~~eventual~~cost ~~disposition.~~to ~~The~~sell ~~estimate~~its ofinventory, ~~cash~~falls ~~flows is~~below ~~based~~its ~~upon,~~inventory ~~among other things~~cost, ~~certain~~the ~~assumptions~~Company ~~about expected~~adjusts ~~future~~its ~~operating~~inventory ~~performance,~~to ~~growth~~its ~~rates~~current ~~and~~estimated ~~other factors~~market value. ~~Estimates~~Lower of ~~undiscounted~~cost ~~cash~~or ~~flows~~market adjustments may ~~differ~~be ~~from~~ required based upon actual average ~~cash~~selling ~~flows~~prices ~~due~~and changes to, ~~among~~the ~~other~~Company’s ~~things,~~current ~~technological changes~~estimates, ~~economic~~which ~~conditions,~~could ~~changes~~impact to the ~~business~~Company’s ~~model~~gross ~~or changes~~margin inpercentage. ~~operating~~The ~~performance.~~Company Ifrecorded ~~the~~a ~~sum~~lower of ~~the~~cost ~~undiscounted cash~~or ~~flows~~market ~~(excluding~~adjustment ~~interest)~~of is$0.2 ~~less~~million ~~than~~in the ~~carrying~~period ~~value~~from April 20, an2011 ~~impairment~~through ~~loss will be recognized~~September 30, ~~measured~~2011 asreflecting ~~the~~a ~~amount~~price ~~by which~~decrease ~~the~~on ~~carrying~~certain ~~value~~inventory. ~~exceeds~~There ~~the~~were ~~fair~~no ~~value~~lower of ~~the~~cost ~~asset. Fair~~or ~~value is determined using available~~ market ~~data,~~adjustments ~~comparable asset~~in ~~quotes and/or discounted~~any ~~cash~~other ~~flow~~period ~~models~~presented.

~~Goodwill~~Property, Plant and Equipment — ~~Goodwill~~Property, isplant ~~tested~~and ~~for~~equipment ~~impairment~~are ~~on an~~stated ~~annual~~at ~~basis~~cost. ~~during~~Depreciation ~~the~~is ~~fourth~~based ~~fiscal~~on ~~quarter~~estimated ~~and~~useful ~~between annual~~lives ~~tests~~(principally ~~whenever~~10 ~~events~~to or27 years ~~changes~~for inbuildings ~~circumstances~~and ~~indicate~~improvements, ~~that~~3 ~~the~~to ~~carrying~~5 years ~~amount~~for ~~may~~machinery ~~not~~and beequipment, ~~recoverable. Goodwill~~and isthe ~~tested~~shorter atof the ~~reporting~~remaining ~~unit~~lease ~~level,~~terms ~~which~~or isthe ~~defined as~~estimated anuseful ~~operating~~lives ~~segment~~of orthe ~~one~~improvements ~~level~~for ~~below~~land ~~the~~and ~~operating segment~~leasehold improvements). ~~Goodwill~~Maintenance ~~impairment~~and ~~testing~~repairs isare acharged ~~two-step~~to ~~process~~expense.

Investments — The ~~first~~Company ~~step~~accounts offor ~~the~~non-marketable ~~goodwill~~investments ~~impairment~~using ~~test,~~the ~~used~~equity tomethod ~~identify~~of accounting if ~~potential~~the ~~impairment,~~investment ~~compares~~gives the ~~fair~~Company ~~value~~the ofability ato ~~reporting unit~~exercise ~~with~~significant ~~its~~influence ~~carrying~~over, ~~amount~~but not control of, ~~including~~an ~~goodwill~~investee. AsSignificant influence generally exists if the Company has ~~only~~an ~~one~~ownership ~~reporting~~interest ~~unit,~~representing ~~the~~between ~~carrying~~20% ~~amount~~and 50% of the voting ~~reporting~~stock ~~unit~~of ~~equals~~ the ~~net~~investee. ~~book~~Under ~~value~~the equity method of ~~the~~accounting, ~~Company.~~investments Inare stated at initial cost and are adjusted for subsequent additional investments and the Company’s ~~annual~~proportionate ~~test~~share of earnings or losses and distributions. Additional investments by other parties in the ~~fourth~~investee ~~fiscal~~will ~~quarter~~result ofin ~~2010,~~ a reduction in the Company’s ~~assessed~~ownership interest, and the ~~fair~~resulting ~~value~~gain ofor ~~its~~loss ~~reporting~~will ~~unit~~be ~~based on~~recorded in the ~~quoted~~consolidated ~~market~~statements ~~price~~ of operations. Where the Company’s ~~common~~is ~~stock~~unable asto ~~listed~~exercise onsignificant influence over the ~~NASDAQ~~investee, ~~Global~~investments ~~Select~~are ~~Market~~accounted asfor ofunder the ~~date~~cost ofmethod, ~~the goodwill~~except ~~impairment~~for ~~analysis~~investments ~~multiplied~~in bylimited ~~shares~~partnerships, ~~outstanding also~~where asthe ofCompany ~~that~~uses ~~date~~the ~~under~~equity method. Under the ~~market~~cost ~~approach.~~method, ~~The~~investments ~~resulting~~are carried at cost and adjusted only for other-than-temporary declines in fair value, distributions of ~~the~~earnings ~~reporting~~or ~~unit~~additional isinvestments. ~~then~~The ~~compared~~Company tovalues ~~the carrying~~its ~~amounts~~7.5% ofinvestment ~~the~~in ~~net~~Uptown ~~assets~~Newport ofL.P. at its estimated fair value based on the ~~reporting~~Company’s ~~unit,~~estimate of ~~including~~its ~~goodwill~~realizable value.

Goodwill — Goodwill is not amortized. Instead, goodwill is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested at the reporting unit level, which is defined as an operating segment or one level below the operating segment. Goodwill is tested annually during the fourth fiscal quarter and, if necessary, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill impairment testing is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. In the Company’s annual test in the fourth quarter of fiscal 2011, it assessed the fair value of its reporting unit for purposes of goodwill impairment testing using a weighted average of fair values calculated using the income approach, which uses valuation techniques to convert future cash flows to a single discounted present value amount and the market approach which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities, including a business. The resulting fair value of the reporting unit is then compared to the carrying amounts of the net assets of the reporting unit, including goodwill. As the Company has only one reporting unit, the carrying amount of the reporting unit equals the net book value of the Company.

~~All~~Based on the result of the first step of the goodwill ~~reported~~impairment ontest, the Company’s ~~balance~~determined ~~sheet is~~that ~~attributable~~the tofair ~~the~~value ~~Company’s~~of ~~single~~its ~~reporting~~business ~~unit.~~was ~~During~~less ~~the~~than ~~fourth~~its ~~fiscal~~carrying ~~quarter~~value as of ~~2010~~September 30, 2011. As a result, the Company ~~determined,~~ ~~based~~performed onthe second step of the ~~method~~goodwill ~~described~~impairment ~~above,~~test. ~~that~~Based on the ~~fair value~~result of the second step test the Company’s ~~single~~determined ~~reporting~~that ~~unit~~the isimplied ~~greater~~fair value of goodwill was greater than the carrying ~~value~~amount of goodwill as of September 30, 2011 and therefore no impairment of goodwill is required as of September 30, 2011. Because of the significance of the Company’s ~~single~~remaining ~~reporting unit~~goodwill and intangible ~~therefore~~asset ~~there~~balances, isany nofuture impairment of ~~goodwill~~these asassets could have a material adverse effect on its financial condition and results of ~~October 1~~ operations, ~~2010~~although, as a charge, it would have no effect on the Company’s cash flow. Significant impairments may also impact shareholders’ equity.

Long-Lived Assets — An intangible and long-lived asset that is subject to amortization is reviewed for impairment in accordance with the guidance for impairment or disposal of long-lived assets. If indicators of impairment are present, then a recoverability test is performed based on an estimate of undiscounted cash flows expected to result from the use of the intangible and long-lived asset compared to its carrying value. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Estimates of undiscounted cash flows may differ from actual cash flows due to, among other things, technological changes, economic conditions, changes

to the Company’s business model or changes in operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, an impairment loss will be recognized, measured as the amount by which the carrying value exceeds the fair value of the intangible or long-lived asset. Fair value is determined using available market data, comparable asset quotes and/or discounted cash flow models. The Company’s significant amortizable intangible and long-lived assets include fixed assets and intangible assets for customer relationships and patents.

An intangible asset that is not subject to amortization is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of an intangible asset to its carrying amount. Fair value is determined using available market data, comparable asset quotes and/or discounted cash flow models. The Company’s indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) and trade name and trademarks.

During the fourth quarter of fiscal 2011, the Company determined that indicators of impairment existed based on its operating results for the fiscal year ended September 30, 2011 and decreases in sales forecasts for future periods. As a result of these indicators of impairment, the Company tested its indefinite-lived intangible assets for impairment by comparing the fair value of the indefinite-lived intangible assets to their carrying amounts. The fair value of the IPR&D intangible asset, based on a discounted cash flow model using the revised sales forecast for each project which continued to be classified as IPR&D as of September 30, 2011, was less than the carrying amount of the IPR&D intangible asset as of September 30, 2011 resulting in an impairment charge of $15.1 million. In addition, one IPR&D project was completed and a product based on the project began shipping as of September 30, 2011. As a result, the fair value of the project, based on the discounted cash flow from the product shipments was transferred to amortizable intangible assets as of September 30, 2011. The fair value for this project was calculated to be $0.9 million, which was less than the historical carrying value of the project in IPR&D of $4.1 million as of the Merger date resulting in an impairment charge of $3.2 million. Amortization expense on the project in the successor period from April 20, 2011 through September 30, 2011 was $0.1 million. The fair value of the trade name and trademarks intangible asset, based on a discounted cash flow model using the revised sales forecast was less than the carrying amount of trade name and trademarks resulting in an impairment charge of $3.6 million.

Assets Held for Sale — The Company evaluates an asset at the time an asset qualifies for “held for sale” criteria, to determine whether or not the carrying value exceeds its fair value less cost to sell. Any loss as a result of the carrying value being in excess of fair value less cost to sell is recorded in the period an asset meets the criteria. Management judgment is required to assess whether the criteria is met and estimate the expected net amount recoverable upon sale. As of October 1, 2010, the carrying values of the respective assets held for sale did not exceed their fair values less costs to sell.

Foreign Currency Translation and Remeasurement — The Company’s foreign operations are subject to exchange rate fluctuations and foreign currency transaction costs. The functional currency of all of the Company’s foreign subsidiaries is the local currency. Assets and liabilities denominated in foreign functional currencies are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates and income and expense items are translated at the average exchange rates prevailing during the period. Foreign currency translation adjustments are included in accumulated other comprehensive income (loss). The resulting foreign currency translation adjustments are charged to earnings in the period during which the investment in foreign subsidiaries is sold or liquidated. Gains and losses resulting from foreign currency transactions are recognized currently in earnings.

The Company may use other derivatives from time to time 47 to manage its exposure to changes in interest rates, equity prices or other risks. The Company does not enter into derivative financial instruments for speculative or trading purposes.

Net (Loss) Income Per Share — Net (loss) income per share is computed in accordance with the accounting guidance for earnings per share. Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options, restricted stock units and shares of stock issuable upon conversion of the Company’s convertible notes. The dilutive effect of stock options and restricted stock units is computed under the treasury stock method, and the dilutive effect of convertible notes is computed using the if-converted method. Potentially dilutive securities are excluded from the computations of diluted net (loss) income per share if their effect would be antidilutive.

AtThe ~~October 1,~~following ~~2010,~~potentially ~~there~~dilutive ~~were~~securities nohave ~~foreign~~been ~~currency~~excluded ~~exchange contracts outstanding. The Company may use other derivatives~~ from ~~time~~the todiluted ~~time to manage its exposure to changes in interest~~net ~~rates,~~(loss) income ~~equity~~per ~~prices~~share orcalculations ~~other~~because ~~risks.~~their ~~The~~effect ~~Company~~would ~~does~~have ~~not~~been ~~enter into~~antidilutive ~~derivative~~(in ~~financial~~thousands): ~~instruments for speculative or trading purposes.~~

Net Income (loss) Per Share — Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period. Potentially dilutive securities include stock options and warrants and shares of stock issuable upon conversion of the Company’s convertible subordinated notes. The dilutive effect of stock options and warrants is computed under the treasury stock method, and the dilutive effect of convertible subordinated notes is computed using the if-converted method. Potentially dilutive securities are excluded from the computations of diluted net loss per share if their effect would be antidilutive.


	Predecessor
	Period from October 2, 2010 through April 19, 2011		Fiscal Year Ended October 1, 2010		Fiscal Year Ended October 2, 2009
Employee stock options and restricted stock units		1,268		4,350		5,624
4.00 % convertible subordinated notes due March 2026		172		228		5,081

		1,440		4,578		10,705

The following potentially dilutive securities have been excluded from the diluted net income (loss) per share calculations because their effect would have been antidilutive (in thousands):

	Fiscal Year Ended
	2010		2009		2008
Stock awards		4,350		5,624		8,576
4.00% convertible subordinated notes due March 2026		228		5,081		5,081
		4,578		10,705		13,657

Stock-Based Compensation — The Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in its consolidated statements of operations over the service period that the awards are expected to vest. The Company has elected to recognize compensation cost for all options with graded vesting on a straight-line basis over the vesting period of the entire option.

The Company uses the Black-Scholes-Merton model to value the compensation expense associated with stock options. In addition, forfeitures are estimated when recognizing compensation expense, and the estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods. The Company measures the fair value of service-based awards on the date of grant.

Income Taxes — The provision for income taxes is determined in accordance with accounting guidance for income taxes. Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted legislation and statutory tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.

In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence, such as cumulative losses in recent years. As a result of the Company’s cumulative losses in the U.S. and the full utilization of the Company’s loss carryback opportunities, management has concluded that a full valuation allowance against its net deferred tax assets is appropriate in such jurisdictions. In certain other foreign jurisdictions where the Company does not have cumulative losses, a valuation allowance is recorded to reduce the net deferred tax assets to the amount management believes is more likely than not to be realized. In the future, if the Company realizes a deferred tax asset that currently carries a valuation allowance, a reduction to income tax expense may be recorded in the period of such realization.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position in accordance with the accounting guidance for uncertainty in income taxes. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to these unrecognized tax benefits in the income tax provision.

likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to these unrecognized tax benefits in the income tax provision.

As a multinational corporation, the Company is subject to taxation in many jurisdictions, and the calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. If, based on new facts that arise in a period, management ultimately determines that the payment of these liabilities will be unnecessary, the liability will be reversed and the Company will recognize a tax benefit during the period in which it is determined the liability no longer applies. Conversely, the Company records additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be.

Concentrations — Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, marketable securities, and trade accounts receivable. The Company invests its cash balances through high-credit quality financial institutions. The Company places its investments in investment-grade debt securities and limits its exposure to any one issuer. The Company’s trade accounts receivable primarily are derived from sales to manufacturers of communications products, consumer products and personal computers and distributors. Management believes that credit risks on trade accounts receivable are moderated by the diversity of its products and end customers. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral, such as letters of credit and bank guarantees, whenever deemed necessary.

At October 1, 2010, the Company had no customers owing more than 10% of the net accounts receivable balance. At October 2, 2009, there was one customer that accounted for 17% of the Company’s accounts receivable. In fiscal 2010, 2009 and 2008, there was one distributor that accounted for 13%, 23%, and 23% of net revenues, respectively.

Supplemental Cash Flow Information — Cash paid for interest was $17.4 million, $20.3 million and $34.0 million during fiscal 2010, 2009 and 2008, respectively. Net income taxes paid were $2.1 million, $1.4 million and $3.9 million during fiscal 2010, 2009 and 2008, respectively.

Accumulated Other Comprehensive Loss — Other comprehensive loss includes foreign currency translation adjustments, unrealized gains (losses) on marketable securities, unrealized gains (losses) on foreign currency forward exchange contracts and unrealized gains (losses) on interest rate swaps. The components of accumulated other comprehensive loss are as follows (in thousands):

	October 1,		October 2,
	2010		2009
Foreign currency translation adjustments	$	1,193	$	(796	)
Unrealized gains on marketable securities		13		—
Unrealized losses on derivative instruments		—		(1,728	)
Accumulated other comprehensive income (loss)	$	1,206	$	(2,524	)

Business Enterprise Segments

The Company operates in one reportable segment — semiconductor system solutions. Public business enterprises report information about operating segments in their annual consolidated financial statements. Following the sale of the Company’s Broadband Access (“BBA”) operating segment, the results of which have been

~~classified~~The acquisition of the Company’s Common Stock in ~~discontinued~~connection ~~operations,~~with the ~~Company~~Merger ~~has~~triggered an ~~one~~ownership change under Section 382 of the Internal Revenue Code of 1986 (“Section 382”). Section 382 imposes an annual limitation (based upon the value at the time of the ownership change, as determined under ~~remaining~~Section 382 of the Internal Revenue Code) on the amount of taxable income that can be offset with net operating ~~segment~~loss (“NOL”) carryovers that existed at time of the acquisition. Section 383 will also limit the Company’s ability to use R&D tax credit carryovers. In addition, ~~comprised~~as the tax basis of ~~one~~the ~~reporting~~Company’s ~~unit~~assets exceeded the fair market value of its assets at the time of the ownership change, ~~which~~ ~~was~~Section 382 ~~identified~~will ~~based~~also ~~upon~~limit the ~~availability~~Company’s ability to use amortization of ~~discrete~~capitalized R&D and goodwill to offset taxable income for the first five years following an ownership change. Any unused annual limitation may be carried over to later years until the applicable expiration date for the ~~financial~~respective ~~information~~NOLs. Similar limitations have been implemented by states and certain foreign jurisdictions. The Company is in the ~~chief~~process ~~operating~~of ~~decision~~finalizing ~~makers~~the impact of Section 382 on the Company’s deferred tax items and, it has preliminarily assesed ~~regular~~the ~~review~~impact of Section 382 on its fully reserved deferred tax assets. The Company expects the ~~financial~~change ~~information~~of ~~for~~ownership to significantly limit its ability to utilize its federal and state deferred tax assets and expects to impair the carrying value of its deferred tax assets and change the amount of the Company’s unrecognized tax benefits. As the federal and state deferred tax assets are fully reserved, the Company does not expect this ~~operating~~impairment to have an impact on its current year ~~segment~~financial position or results of operations. However, the limitation on the use of the Company’s NOLs, credits and amortization which resulted from the ownership changes could adversely impact its future operating results and financial condition.

In addition, the Company can within nine and a half months of the Merger elect under Section 338 of the Internal Revenue Code to treat the Merger as if it were an asset purchase for federal income tax purposes. If the Company makes a Section 338 election, generally the Company’s tax basis of its assets will equal the fair market value at the ~~Recently Adopted~~time ~~Accounting~~of ~~Pronouncements~~the Merger, the intangible assets would be deductible over 15 years under IRC Section 197 and the net operating losses, federal credits and remaining deferred taxes would be eliminated. The Company’s financial position and results of operations and cash flows could materially change if the Company makes a Section 338 election.

OnConcentrations ~~October 3,~~— ~~2009,~~Financial ~~the~~instruments ~~Company~~that ~~adopted~~potentially ~~accounting~~subject ~~guidance for~~the ~~convertible~~Company ~~debt~~to ~~instruments~~concentration ~~that~~of ~~may~~credit berisk ~~settled~~consist principally inof cash ~~upon~~ ~~conversion~~and ~~(including~~cash ~~partial~~equivalents, ~~cash~~marketable ~~settlement)~~securities, ~~which requires~~and ~~the~~trade ~~issuer~~accounts toreceivable. ~~separately~~The ~~account~~Company ~~for~~invests ~~the~~its ~~liability~~cash ~~and equity~~balances ~~components~~through ofhigh-credit ~~convertible~~quality ~~debt~~financial ~~instruments~~institutions. The Company places its investments in ainvestment-grade ~~manner~~debt ~~that~~securities ~~reflects~~and ~~the~~limits ~~issuer’s~~its ~~hypothetical~~exposure ~~nonconvertible~~to ~~debt borrowing~~any ~~rate~~one issuer. The ~~guidance~~Company’s ~~resulted~~trade inaccounts ~~the~~receivable ~~Company~~primarily ~~recognizing higher~~are ~~interest~~derived ~~expense~~from insales ~~the~~to ~~statement~~manufacturers of ~~operations~~communications ~~due~~products, ~~to amortization~~consumer ofproducts ~~the~~and ~~discount~~personal ~~that~~computers ~~results~~and ~~from~~distributors. ~~separating the~~Management ~~liability~~believes ~~and~~that ~~equity~~credit ~~components.~~risks ~~The~~on ~~provisions~~trade ofaccounts ~~the accounting~~receivable ~~guidance~~are ~~were~~moderated ~~retrospectively~~by ~~applied,~~the ~~and~~diversity ~~all~~of ~~prior period~~its ~~amounts~~products ~~have~~and ~~been~~end ~~adjusted~~customers. toThe ~~apply~~Company ~~the~~performs ~~new~~ongoing ~~method~~credit evaluations of ~~accounting.~~ ~~The~~its ~~Company~~customers’~~s Form 8-K filed~~ onfinancial ~~February 8,~~condition ~~2010~~and ~~gave~~requires ~~effect~~collateral, tosuch ~~the retrospective~~as ~~application~~letters of ~~this~~credit ~~accounting~~and ~~standard~~bank guarantees, whenever deemed necessary.

At September 30, 2011 and October 1, 2010, the Company had one customer that owed 17% and 13%, respectively, of net accounts receivable. In the successor fiscal period from April 20, 2011 through September 30, 2011 and the predecessor period from October 2, 2010 through ~~Recently Issued~~April 19, ~~Accounting~~2011, ~~Pronouncements~~there was one distributor that accounted for 14% of net revenues. In the predecessor fiscal year ended October 1, 2010 and 2009, there was one distributor that accounted for 13% and 23% of net revenues, respectively.

InSupplemental ~~June~~Cash ~~2009,~~Flow ~~the~~Information — ~~Financial~~Cash ~~Accounting~~paid ~~Standards~~for ~~Board (“FASB”)~~interest ~~issued~~in ~~revised~~the ~~guidance~~successor ~~for~~fiscal ~~the~~period ~~accounting of~~from ~~transfers~~April 20, of2011 ~~financial~~through ~~assets.~~September 30, ~~This~~2011 ~~guidance~~and ~~improves~~ the ~~relevance,~~ ~~representational~~predecessor ~~faithfulness~~period from October 2, ~~and~~2010 ~~comparability~~through ~~of the~~April 19, ~~information~~2011 ~~that~~was a$9.8 ~~reporting~~million ~~entity~~and ~~provides~~$10.2, inrespectively. ~~its financial~~Cash ~~statements~~paid ~~about~~for ainterest ~~transfer~~was of$17.4 million ~~financial~~and ~~assets;~~$20.3 million during the ~~effects~~ ofpredecessor afiscal ~~transfer~~years onended ~~its financial position~~October 1, ~~financial performance,~~2010 and ~~cash~~2009, ~~flows;~~respectively. ~~and~~Net aincome ~~transferor’s~~taxes ~~continuing involvement,~~paid ~~if any,~~ in ~~transferred~~the ~~financial~~successor ~~assets.~~fiscal ~~This accounting~~period ~~guidance~~from ~~will~~April 20, be2011 ~~effective~~through ~~for~~September 30, ~~financial~~2011 ~~statements issued~~and ~~for~~the ~~fiscal~~predecessor ~~years~~period ~~beginning~~from ~~after November~~October 152, ~~2009,~~2010 ~~and~~through ~~interim~~April 19, ~~periods~~2011 ~~within~~was ~~those~~$0.2 million ~~fiscal~~and ~~years~~$0.3 million, ~~Early adoption is not permitted~~respectively. ~~The~~Net ~~Company~~income ~~does~~taxes ~~not~~paid ~~believe~~were ~~that~~$2.1 million ~~adoption~~and ~~of this~~$1.4 million ~~guidance~~during ~~will~~the ~~have~~predecessor afiscal ~~material~~years ~~impact~~ended onOctober 1, ~~its~~2010 ~~financial position~~ and ~~results~~2009, ~~of operations~~respectively.

InAccumulated ~~June~~Other ~~2009,~~Comprehensive ~~the~~Income — ~~FASB~~Other ~~issued~~comprehensive ~~revised~~income ~~guidance~~includes ~~for~~foreign ~~the accounting~~currency ~~of variable interest entities, which replaces the~~translation ~~quantitative-based~~adjustments ~~risks~~ and ~~rewards~~unrealized ~~approach~~gains ~~with a qualitative approach that focuses~~ on ~~identifying~~marketable ~~which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance~~securities. ~~This~~The ~~accounting~~components ~~guidance also requires an ongoing reassessment~~ of ~~whether~~accumulated another ~~entity~~comprehensive isincome ~~the~~are ~~primary~~as ~~beneficiary~~follows ~~and requires additional disclosures about an enterprise’s involvement~~ (in ~~variable~~thousands): interest entities. This accounting guidance will be effective for financial statements issued for fiscal years beginning after November 15, 2009, and interim periods within those fiscal years. Early adoption is not permitted. The Company does not believe that adoption of this guidance will have a material impact on its financial position and results of operations.

2. Sales of Assets


	Successor		Predecessor
	September 30, 2011		October 1, 2010
Foreign currency translation adjustments	$	195	$	1,193
Unrealized gains on available-for-sale securities		—		13

Accumulated other comprehensive income	$	195	$	1,206

Fiscal 2010

Assets Held for Sale

In November 2009, the Company committed to a plan for the sale of certain of the Company’s property located on Jamboree Road adjacent to its Newport Beach, California headquarters. The property consists of an approximately 25-acre site, including two leased buildings, certain personal property on the site, and all easements and other intangible rights appurtenant to the property. The Company determined that this property met the criteria for “held for sale” in accordance with the accounting guidance for impairment or disposal of long-lived assets. The

~~Company~~Business ~~has~~Enterprise ~~presented~~Segments ~~the cost of respective group of assets classified as held for sale separately on the consolidated balance sheet as of October 1, 2010 (in thousands):~~

	October 1,
	2010
Land	$	1,662
Land and leasehold improvements, net		307
Buildings, net		5,312
Machinery and equipment, net		268
Site development costs		5,510
	$	13,059

The Company operates in one reportable segment — semiconductor system solutions. Public business enterprises report information about operating segments in their annual consolidated financial statements. The Company has one operating segment, comprised of one reporting unit, which was identified based upon the availability of discrete financial information and the chief operating decision makers regular review of the financial information for this operating segment.

~~The~~Recently ~~Company expects that the sale of these assets will be~~Issued ~~completed~~Accounting ~~within~~Pronouncements ~~the first half of fiscal 2011.~~

In June 2011, the Financial Accounting Standards Board, (“FASB”), issued guidance regarding the presentation of comprehensive income. The new standard requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of ~~Fiscal~~comprehensive income or in two separate but consecutive statements. The new standard also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net ~~2009~~income and the components of other comprehensive income are presented. The updated guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance will not have a material impact on the Company’s financial statements.

In ~~August 2009~~May 2011, the ~~Company~~

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Filing Compare · CONEXANT SYSTEMS INC