Agere Systems Reports Results for the First Quarter of Fiscal Year 2005

Agere Systems Reports Results for the First Quarter of Fiscal Year 2005

-- Revenues increase sequentially in Storage, with strong shipments of read channels for small-form-factor drives and system-on-a-chip solutions for PC and consumer electronics applications -- Company reports sixth consecutive quarter of positive cash flow from operations

ALLENTOWN, Pa., Jan. 25 /PRNewswire-FirstCall/ -- Agere Systems (NYSE:AGR.A)(NYSE:AGR.B) today reported that revenues for the first quarter of fiscal 2005, ended December 31, 2004, were $410 million, at the high end of the guidance range provided by the company in October. The company's revenues were $439 million in the September quarter and $516 million in the year-ago quarter.

(Logo: http://www.newscom.com/cgi-bin/prnh/20040618/AGERELOGO )

The company reported a GAAP net loss of $67 million, or $0.04 per share, including $60 million in net restructuring charges and related costs. For the September quarter, Agere reported a GAAP net loss of $127 million, or $0.07 per share, including $132 million in net restructuring and other charges. In the year-ago quarter, the company reported a GAAP net loss of $39 million, or $0.02 per share.

Pro forma net loss was $8 million, or breakeven per share, in the December quarter, better than guidance, compared to pro forma net income of $6 million, or breakeven per share, in the September quarter, and pro forma net income of $28 million, or $0.02 per share, in the year-ago quarter.

Pro forma net income excludes gain or loss from the sale of, and income or loss from, discontinued operations; restructuring-related charges included in costs, primarily increased depreciation; certain other non-cash charges; net restructuring and other charges; purchased in-process research and development charges; amortization of acquired intangible assets; net gain or loss from the sale of operating assets; certain tax adjustments; cumulative effect of an accounting change and certain non-recurring charges.

The company posted cash flow from operations, less capital expenditures, of $10 million, its sixth consecutive positive quarterly result. During the quarter, the company repaid an accounts receivable securitization facility that matured in October. Cash and cash in trust, less total debt, improved by $26 million to a total of $256 million from the September quarter, reflecting positive cash flow.

"We achieved strong design win momentum in all areas of the business and we are pleased by our continued strength in storage where we increased shipments of read channels and system-on-a-chip solutions to key customers targeting PC and consumer electronics applications," said John Dickson, president and CEO, Agere Systems. "Overall, we have positioned ourselves for future growth and we expect to increase revenues and improve profitability as we move beyond the March quarter into the second half of fiscal 2005."

Revenue by Segment
Quarter Ended
Dec 31 Sep 30 Dec 31
2004 2004 2003

Consumer Enterprise segment:
Storage $166 $155 $176
Mobility 83 100 146
Enterprise and Networking 104 120 134
Consumer Enterprise segment 353 375 456
Telecommunications segment 57 64 60
$410 $439 $516

Each segment includes revenue from the licensing of intellectual property.

Product and Customer Highlights

Recent company highlights include:
-- Introduction of the industry's first complete storage chip set for
portable consumer electronics disk drives. The TrueStore(R) CE
family includes a read channel, preamplifier, motor controller and
hard disk controller optimized for the development of small, ultra-
low-power, high-capacity drives used in media players, mobile
phones, digital cameras and other handheld devices.

-- Announcement of the general availability of a dual-mode, W-EDGE
baseband chip set and software combining 3G/UMTS and EDGE
technologies for mass-market multimedia mobile phones. The
Sceptre(R) HPU solution, which was sampled to lead customers last
July, enables the continuous delivery of 3G services to consumers
even when outside of UMTS network coverage.

-- Introduction of a Unified Media Framework that supports the rapid
development across all platforms of mass-market, multimedia mobile
phones capable of digital photo imaging, MPEG-4 video playback, and
MP3 music without requiring an additional multimedia co-processor.
Complete solutions are now available for customer samples.

-- Shipments to several original design manufacturers of the
industry's first single-chip, 48-port Gigabit Ethernet switching
solution and the lowest power physical layer (PHY) device for
enterprise networks.

-- Announcement of a new multi-standard platform for high-speed serial
interfaces in storage and enterprise network products. This new
serializer-deserializer (SerDes) platform, which supports 90
nanometer designs operating at 6.25 gigabits per second, enables
manufacturers to create interface solutions across any serial
standard, including Serial ATA, Serial-Attached SCSI (SAS), Fibre
Channel and PCI Express.

-- Agreement with Digital 5, a leading provider of software for
streaming multimedia, to deliver next-generation digital media
server and network-attached storage solutions for the emerging
digital home. These solutions will be available for customer
samples this quarter.

-- Selection by Samsung for its Most Valued Partner Award during its
Telecom Partner Day held in December. This is the third
consecutive year that Samsung has named Agere as a top supplier.

Outlook


In the March quarter, the company expects to report revenues in the range of $400 million to $420 million. The company expects GAAP net loss to be in the range of $0.03 to $0.05 per share, including restructuring-related items. Pro forma net loss is expected to be in the range of breakeven to a loss of $0.02 per share.

Earnings Webcast

Agere Systems will host a conference call today at 8:30 a.m. EST to discuss its financial results and outlook. To listen to the conference call via the Internet, visit http://www.agere.com/webcast. Subsequent to the conference call, a replay will be available at the same web address. Supplemental financial information is also available on the company's website at http://www.agere.com/webcast.

Agere Systems is a global leader in semiconductors for storage, wireless data, and public and enterprise networks. The company's chips and software power a broad range of computing and communications applications, from cell phones, PCs, PDAs, hard disk drives and gaming devices to the world's most sophisticated wireless and wireline networks. Agere's customers include top manufacturers of consumer electronics, communications and computing equipment. Agere's products connect people to information and entertainment at home, at work and on the road -- enabling the connected lifestyle.

This release contains forward-looking statements based on information currently available to Agere. Agere's actual results could differ materially from the results stated or implied by those forward-looking statements due to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, our reliance on major customers and suppliers, our ability to keep pace with technological change, our dependence on new product development, price and product competition, availability of manufacturing capacity, customer demand for our products and services, and general industry and market conditions. For a further discussion of these and other risks and uncertainties, see our annual report on Form 10-K for the fiscal year ended September 30, 2004. Agere disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Agere Systems Inc.
Unaudited Condensed Consolidated Statements of Operations
(Dollars in millions except per share amounts)


Quarter Ended
Dec 31 Sep 30 Dec 31
2004 2004 2003

Revenue $410 $439 $516
Costs 274 240 285
Gross profit - $ 136 199 231
Gross profit - % 33.2% 45.3% 44.8%
Operating Expenses
Selling, general and administrative 55 62 76
Research and development 119 118 119
Amortization of acquired intangible
assets 1 2 2
Purchased in-process research and
development - - 13
Restructuring and other charges - net 14 132 47
Gain on sale of operating assets -
net (2) (1) (1)
Total operating expenses 187 313 256
Operating Income (Loss) (51) (114) (25)
Other income (expense) - net (2) 4 1
Interest expense 8 10 12
Income (loss) before provision
for income taxes (61) (120) (36)
Provision (benefit) for income taxes 6 7 3
Net Income (Loss) $(67) $(127) $(39)

Basic and diluted income (loss) per
share $(0.04) $(0.07) $(0.02)
Weighted average shares outstanding--
basic (in millions) 1,731 1,723 1,697
Weighted average shares outstanding--
diluted (in millions) 1,731 1,723 1,697



Agere Systems Inc.
Unaudited Pro Forma Results of Operations
(Dollars in millions except per share amounts)

Quarter Ended
Dec 31 Sep 30 Dec 31
2004 2004 2003

Revenue:
Consumer Enterprise:
Storage $166 $155 $176
Mobility 83 100 146
Enterprise and Networking 104 120 134
Consumer Enterprise 353 375 456
Telecommunications 57 64 60
Total Revenue 410 439 516

Pro Forma Gross Profit - $
Consumer Enterprise 140 154 194
Telecommunications 42 45 43
Pro Forma Gross Profit - $ 182 199 237

Pro Forma Gross Profit - %
Consumer Enterprise 39.7% 41.1% 42.5%
Telecommunications 73.7% 70.3% 71.7%
Pro Forma Gross Profit - % 44.4% 45.3% 45.9%

Operating Expenses Included in Pro
Forma Results
Selling, general and administrative 55 62 76
Research and development 119 118 119
Total Pro Forma Operating Income
(Loss) 8 19 42
Other income (expense) - net (2) 4 1
Interest expense 8 10 12
Provision for income taxes 6 7 3
Pro Forma Net Income (Loss) $(8) $6 $28
Pro Forma Net Income (Loss) per share $0.00 $0.00 $0.02
Weighted average shares outstanding--
basic (in millions) 1,731 1,723 1,697
Weighted average shares outstanding--
diluted (in millions) 1,731 1,723 1,697


Reconciliation of Pro Forma Gross
Profit-$ to Gross Profit-$
Pro Forma Gross Profit-$ $182 $199 $237
Restructuring related charges,
including increased depreciation 46 - 6
Gross Profit-$ $136 $199 $231

Reconciliation of Pro Forma Gross
Profit-% to Gross Profit-%
Pro Forma Gross Profit-% 44.4% 45.3% 45.9%
Restructuring related charges,
including increased depreciation (11.2)% (0.0)% (1.1)%
Gross Profit-% 33.2% 45.3% 44.8%

Reconciliation of Pro Forma Operating
Income (Loss) to Operating Income
(Loss)
Pro Forma Operating Income (Loss) $8 $19 $42
Restructuring related charges,
including increased depreciation 46 - 6
Amortization of acquired intangible
assets 1 2 2
Purchased in-process research and
development - - 13
Restructuring and other charges - net 14 132 47
(Gain) loss on sale of operating
assets - net (2) (1) (1)
Operating Income (Loss) $(51) $(114) $(25)


Reconciliation of Pro Forma Net
Income (Loss) to Net Income (Loss)
Pro Forma Net Income (Loss) $(8) $6 $28
Restructuring related charges,
including increased depreciation 46 - 6
Amortization of acquired intangible
assets 1 2 2
Purchased in-process research and
development - - 13
Restructuring and other charges - net 14 132 47
(Gain) loss on sale of operating
assets - net (2) (1) (1)
Net Income (Loss) $(67) $(127) $(39)



Agere Systems Inc.
Unaudited Condensed Consolidated Balance Sheets
(Millions)

Dec 31 Sep 30
2004 2004

ASSETS
CURRENT ASSETS
Cash and cash equivalents $686 $778
Cash held in trust 6 19
Trade receivables 205 285
Inventories 147 150
Other current assets 50 41
TOTAL CURRENT ASSETS 1,094 1,273
Property, plant and equipment - net 621 682
Goodwill 119 119
Acquired intangible assets - net 5 6
Other assets 153 192
TOTAL ASSETS $1,992 $2,272

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $167 $195
Short-term debt 19 147
Other current liabilities 472 524
TOTAL CURRENT LIABILITIES 658 866
Long-term debt 417 420
Other liabilities 552 565
TOTAL LIABILITIES 1,627 1,851

STOCKHOLDERS' EQUITY 365 421
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,992 $2,272

Agere Systems Inc.
Unaudited Cash Flow Measures
Three Months Ended December 31, 2004
(Millions)

Ongoing Restructuring
Operations and Related
Activities TOTAL

OPERATING ACTIVITIES
Gross profit (loss) $182 $(46) $136
Total operating expenses 173 14 187
Other income (expense) - net (2) - (2)
Interest expense and
income tax provision 14 - 14
Net loss (7) (60) (67)

Adjustments to reconcile net
loss to net cash provided (used) by
operating activities:
Restructuring expense
- net of cash payments - (15) (15)
Depreciation and amortization 48 35 83
Other operating activities 29 10 39
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 70 (30) 40

INVESTING ACTIVITIES
Capital expenditures (28) (2) (30)
Other investing activities 15 - 15
NET CASH USED BY INVESTING
ACTIVITIES (13) (2) (15)

FINANCING ACTIVITIES
Other financing activities (118) - (118)
NET CASH USED BY
FINANCING ACTIVITIES (118) - (118)

Effect of exchange rate
changes on cash and
cash equivalents 1 - 1

Net decrease in cash
and cash equivalents (60) (32) (92)

Cash and cash equivalents
at beginning of period 778

Cash and cash equivalents
at end of period $686

Net Cash provided (used)
by Operating Activities $70 $(30) $40
Capital Expenditures (28) (2) (30)
Net Cash provided (used)
by Operating Activities
and Capital Expenditures $42 $(32) $10


Agere Systems Inc.
Unaudited Net Income (Loss) Per Share Guidance

Quarter Ending
Mar 31
2005

Reconciliation of Pro Forma Net
Income (Loss) Per Share to Net Income (Loss)
Per Share
Pro Forma Net Income (Loss) (High
End of Range) $0.00
Pro Forma Net Income (Loss) (Low End of
Range) ($0.02)

Less: Restructuring related charges
included in costs, primarily
increased depreciation 0.02
Restructuring and other charges - net 0.01
Amortization of acquired intangible
assets 0.00
(Gain) loss on sale of operating
assets - net 0.00

0.03

Net Income (Loss) (High End of Range) ($0.03)
Net Income (Loss) (Low End of the Range) ($0.05)


Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20040618/AGERELOGO
AP Archive: http://photoarchive.ap.org/
PRN Photo Desk, photodesk@prnewswire.com
Source: Agere Systems

CONTACT: JoAnna Schooler, +1-610-712-1746, or +1-908-283-4060
(cellular), jschooler@agere.com, or Investor: Sujal Shah, +1-610-712-5471,
sujal@agere.com, both of Agere Systems

Web site: http://www.agere.com/


-------
Profile: intent