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.ANYSE: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) http://www.newscom.com/cgi-bin/prnh/20040618/AGERELOGO http://photoarchive.ap.org/ DATASOURCE: Agere Systems CONTACT: JoAnna Schooler, +1-610-712-1746, or +1-908-283-4060 (cellular), , or Investor: Sujal Shah, +1-610-712-5471, , both of Agere Systems Web site: http://www.agere.com/

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