It seems like there are only three types of news announcements coming out of technology companies these days: earnings warnings, layoffs, or withdrawn public offerings. Any one of the trio is equally depressing in and of itself, but all three from one company is too much for investors to stomach.

Unfortunately for Conexant Systems (Nasdaq: CNXT) stockholders, the company pulled the triple play on consecutive days. After re-revising financial estimates for the March quarter on Monday, Conexant officials followed with news that the company was cutting 1,500 jobs, or 20 percent of its workforce, and that plans to spin off its Internet infrastructure business through an IPO had been shelved. The news sent Conexant shares tumbling 20.8 percent since last Friday to a current level of $8.81.

And while it might seem that the stock couldn't go any lower -- the shares are off a staggering 91.5 percent from their high of $105.93 last year -- Conexant is hardly an investment for the faint of heart. "I don't want any grandmothers in this [stock]," says T. Peter Andrew, an analyst with A.G. Edwards, who has an Accumulate rating on the stock and recommends purchase only by speculative investors.

Still, Mr. Andrew's long-term prognosis suggests Conexant is extremely undervalued on a sum-of-the-parts analysis, which shows the company is worth between $27 and $30 per share. Nevertheless, that does not negate the problems that it needs to work through. As a result, he has resisted tagging a Buy rating on the stock as other analysts have done.

TIME FOR A CHANGE Conexant's revenues for the March quarter are expected to be down 35 to 40 percent from the $410 million reported in December. That's far more than the prior guidance, which called for a 20 percent decline. More specifically, personal networking revenue, which accounts for about 60 percent of overall revenues, is expected to drop 25 to 30 percent due to deterioration in the digital cell phone and set-top box markets. And the remaining revenues from the Internet infrastructure division are expected to fall 45 to 50 percent sequentially as a result of slowing demand from networking companies such as Cisco Systems and Nortel Networks. The net result, according to Mr. Andrew, is an earnings per share (EPS) loss of 35 to 40 cents for the quarter.

On the bright side, however, Conexant has identified its problems and is aggressively working to align its cost structure for leaner times ahead. Part of the turnaround equation lies in separating its Internet infrastructure operations. While plans for an IPO have been abandoned, management expects to complete the separation of the business, to be known as Mindspeed Technologies, by spinning off the subsidiary directly to stockholders by September.

Although this alternative won't allow Conexant to take in the $100 million it had originally hoped to get from the IPO, management had little choice but to achieve the separation in this market. "The appetite for this type of investment on the Street is nonexistent," says Mr. Andrew. "So a spin-off was really the only thing they could do to get it out there on its own." The separation will likely mean that Conexant will reach profitability in the middle of 2002, rather than the first quarter of 2002.

COSTLY CUTS Without cutting costs, however, the restructuring will do little more than reconfigure the problems into a new mixture. As such, the layoffs that are scheduled to occur over the next six months are targeted at reducing operating costs by $200 million a year.

In addition to slicing upper management salaries by 10 percent, the company will begin temporarily shutting down its wafer-fabrication facilities in Newport Beach and Newbury Park, California, as well as an assembly plant in Mexicali, Mexico. "They have to severely cut costs," says Mr. Andrew. "Typically, cutting people and fabrication is something that you don't want to do, but it's something that they have to aggressively pursue."

And while many of its competitors are facing similar problems, Mr. Andrew says that Conexant is more exposed because of its reliance on the consumer market through its personal networking business. Companies like PMC-Sierra (Nasdaq: PMCS) and Vitesse Semiconductor (Nasdaq: VTSS) don't have any consumer business whatsoever. Because Conexant's infrastructure unit also is lagging, analysts agree that both ends of its business are pointed downward.

By breaking up the company, Conexant management believes each entity will be much more focused on addressing its unique needs. "Personal networking needs a lot of marketing and hot new products, but low costs," says Mr. Andrew. "But Internet infrastructure needs no marketing, rather high R&D content, and tight integration of the products."

At the end of the day, the restructuring process may not be as sexy as an IPO. But if it helps the company's long-term health, Conexant shareholders won't be complaining one bit.