Update: Conexant Surges on Announcement of Spinoff - TheStreet

Update: Conexant Surges on Announcement of Spinoff

The company will spin off its fast-growing Internet infrastructure division early next year.
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Updated from 5:56 p.m. EDT

Conexant Systems

(CNXT) - Get Report

, a leading communications chipmaker, announced Wednesday that it would split in half, spinning off its fast-growing Internet infrastructure division in an

initial public offering early next year.

The Newport Beach, Calif.-based company will combine its wireless communications, digital infotainment, personal imaging and personal computing divisions into a second company focused on developing semiconductor equipment for mobile communications and broadband digital products.

Wall Street welcomed the proposed split-up, which was announced after the stock market closed. Shares of Conexant surged $5.69, or 15%, at $42.75 in after-hours trading, according to

Instinet

. Shares had already risen $3.31, or 10%, in the regular session to close at $37.06, with most of that gain coming in the last two hours of trading.

Conexant expects to spin off its

Network Access Division

, which makes semiconductors and software products that help run the Internet, in an initial public offering in January 2001. By next June, it plans to distribute the remaining shares to Conexant shareholders, contingent upon receiving

IRS

approval for a tax-free distribution.

Conexant's Internet infrastructure products are expected to account for 30% of total revenue in the current fiscal year, which ends Sept. 29. The Internet infrastructure business has doubled annually for the past two years, and could approach $1 billion in sales in 2001.

"We believe that separating our Internet infrastructure and personal networking business into two independent entities will allow each company to sharpen its customer focus, enhance its competitive position, and realize its full growth potential," Dwight Decker, Conexant chairman and chief executive, said in a statement.

The two companies will continue to share resources for the next several years through a technology and marketing alliance, said company officials.

In a conference call with analysts, company officials said

Cisco

(CSCO) - Get Report

will be the new company's largest networking customer, followed by

Lucent

(LU)

and

Nortel

(NT)

.