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Capitalizing on Conexant

Cramer takes a look at the company's credit line to June spinoff Mindspeed.
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Dear Action Alerts PLUS Subscriber,

Conexant Systems (CNXT) is continuing its torrid run today, up another 9% to $2.79 a share. The company said this morning that it expects the Mindspeed spin to close on June 27, ahead of prior expectations. At that time, Conexant investors will receive one share of Mindspeed for every three Conexant shares they hold.

Conexant will capitalize the fiber optics business with $100 million in cash and offer Mindspeed a $50 million revolving credit line. These numbers haven't changed, and as much as I'd rather see Conexant repurchase some more of its own debt with these funds, this is a necessary evil to take the cash-draining division off the P&L.

Even so, I don't want to take any profits just yet. I think Conexant can keep moving upward of $3 in the near term, and potentially even higher when the core chip business proves it can sustain profitability on its own.

Regards,

James J. Cramer

DISCLOSURE: At the time of publication, Cramer was long Conexant. ********************************************************* READ MORE CRAMER Stay in tune with Cramer's thinking throughout the trading day by reading his columns on RealMoney. Click here to subscribe:

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