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

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.

Agere and Sceptre are registered trademarks, and Agere Systems, the Agere Systems logo, W-EDGE and TrueAdvantage are trademarks of Agere Systems Inc.

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, and our quarterly report on Form 10-Q for the quarter ended December 31, 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     Six Months Ended
                                     Mar 31  Dec 31  Mar 31  Mar 31  Mar 31
                                      2005    2004    2004    2005    2004

  Revenue                             $417     $410    $462    $827    $978
  Costs                                263      274     254     537     539
  Gross profit - $                     154      136     208     290     439
  Gross profit - %                   36.9%    33.2%   45.0%   35.1%   44.9%
  Operating Expenses
  Selling, general
   and administrative                   60       55      70     115     146
  Research and development             113      119     128     232     247
  Amortization of acquired
   intangible assets                     3        1       1       4       3
  Purchased in-process research
   and development                      55        -       -      55      13
  Restructuring and
   other charges - net                   4       14       7      18      54
  (Gain) Loss on sale of
   operating assets - net               (2)      (2)      1      (4)      -
  Total operating expenses             233      187     207     420     463
  Operating Income (Loss)              (79)     (51)      1    (130)    (24)
  Other income (expense) - net           3       (2)      4       1       5
  Interest expense                       8        8      10      16      22
  Income (Loss) before
   income taxes                        (84)     (61)     (5)   (145)    (41)
  (Benefit) Provision
   for income taxes                    (16)       6     (79)    (10)    (76)
  Net Income (Loss)                   $(68)    $(67)    $74   $(135)    $35

  Basic and diluted income
   (loss) per share                 $(0.04)  $(0.04)  $0.04  $(0.08)  $0.02
  Weighted average shares
   outstanding - basic
   (in millions)                     1,754    1,731   1,711   1,742   1,704
  Weighted average shares
   outstanding - diluted
   (in millions)                     1,754    1,731   1,734   1,742   1,727


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

                                                                                    Quarter  Ended          Six  Months  Ended
                                                                        Mar  31      Dec  31    Mar  31    Mar  31      Mar  31
                                                                          2005          2004        2004        2005          2004
    Revenue:
      Consumer  Enterprise:
        Storage                                                      $150          $166        $171        $316        $347
        Mobility                                                        89              83            96          172          242
        Enterprise  and  Networking                    113            104          132          217          266

      Consumer  Enterprise                                  352            353          399          705          855
      Telecommunications                                      65              57            63          122          123
        Total  Revenue                                            417            410          462          827          978

    Pro  Forma  Gross  Profit  -  $
      Consumer  Enterprise                                  137            140          164          277          358
      Telecommunications                                      46              42            45            88            88
    Pro  Forma  Gross  Profit  -  $                      183            182          209          365          446

    Pro  Forma  Gross  Profit  -  %
      Consumer  Enterprise                              38.9%        39.7%      41.1%      39.3%      41.9%
      Telecommunications                                70.8%        73.7%      71.4%      72.1%      71.5%
    Pro  Forma  Gross  Profit  -  %                  43.9%        44.4%      45.2%      44.1%      45.6%

    Operating  Expenses  Included  in
      Pro  Forma  Results
    Selling,  general  and
      administrative                                              60              55            70          115          146
    Research  and  development                          113            119          128          232          247
    Total  Pro  Forma  Operating  Income
      (Loss)                                                              10                8            11            18            53
    Other  income  (expense)  -  net                      3              (2)            4              1              5
    Interest  expense                                              8                8            10            16            22
    Pro  Forma  provision  for  income
      taxes                                                                  6                6          -                12              3
    Pro  Forma  Net  Income  (Loss)                    $(1)          $(8)          $5          $(9)        $33
    Pro  Forma  Net  Income  (Loss)  per
      share                                                        $(0.00)    $(0.00)    $0.00    $(0.01)    $0.02
    Weighted  average  shares
      outstanding  -  basic  (in  millions)  1,754        1,731      1,711      1,742      1,704
    Weighted  average  shares
      outstanding  -  diluted  (in
      millions)                                                  1,754        1,731      1,734      1,742      1,727

    Reconciliation  of  Pro  Forma  Gross
      Profit-$  to  Gross  Profit-$
    Pro  Forma  Gross  Profit-$                        $183          $182        $209        $365        $446
    Restructuring  related  charges,
      including  increased  depreciation          29              46              1            75              7
    Gross  Profit-$                                            $154          $136        $208        $290        $439

    Reconciliation  of  Pro  Forma  Gross
      Profit-%  to  Gross  Profit-%
    Pro  Forma  Gross  Profit-%                      43.9%        44.4%      45.2%      44.1%      45.6%
    Restructuring  related  charges,
      including  increased  depreciation    (7.0)%    (11.2)%    (0.2)%    (9.0)%    (0.7)%
    Gross  Profit-%                                          36.9%        33.2%      45.0%      35.1%      44.9%

    Reconciliation  of  Pro  Forma
      Operating  Income  (Loss)  to
      Operating  Income  (Loss)
    Pro  Forma  Operating  Income  (Loss)        $10              $8          $11          $18          $53
    Restructuring  related  charges,
      including  increased  depreciation          29              46              1            75              7
    Amortization  of  acquired
      intangible  assets                                          3                1              1              4              3
    Purchased  in-process  research  and
      development                                                    55                -              -            55            13
    Restructuring  and  other  charges  -
      net                                                                      4              14              7            18            54
    (Gain)  loss  on  sale  of  operating
      assets  -  net                                                  (2)            (2)            1            (4)            -
    Operating  Income  (Loss)                          $(79)        $(51)          $1      $(130)      $(24)

    Reconciliation  of  Pro  Forma
      provision  for  income  taxes  to
      (Benefit)  provision  for  income
      taxes
    Pro  Forma  provision  for  income
      taxes                                                                $6              $6        $-              $12            $3
    Reversal  of  tax  contingencies                  22            -                79            22            79
    (Benefit)  provision  for  income
      taxes                                                            $(16)            $6        $(79)      $(10)      $(76)

    Reconciliation  of  Pro  Forma  Net
      Income  (Loss)  to  Net  Income
      (Loss)
    Pro  Forma  Net  Income  (Loss)                    $(1)          $(8)          $5          $(9)        $33
    Restructuring  related  charges,
      including  increased  depreciation          29              46              1            75              7
    Amortization  of  acquired
      intangible  assets                                          3                1              1              4              3
    Purchased  in-process  research  and
      development                                                    55                -              -            55            13
    Restructuring  and  other  charges  -
      net                                                                      4              14              7            18            54
    (Gain)  loss  on  sale  of  operating
      assets  -  net                                                  (2)            (2)            1            (4)            -
    Reversal  of  tax  contingencies                  22                -            79            22            79
    Net  Income  (Loss)                                      $(68)        $(67)        $74      $(135)        $35


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

                                                                                                      Mar  31                        Dec  31
                                                                                                        2005                            2004
    ASSETS
    CURRENT  ASSETS
              Cash  and  cash  equivalents                                          $675                            $686
              Cash  held  in  trust                                                              6                                  6
              Trade  receivables                                                            209                              205
              Inventories                                                                        123                              147
              Other  current  assets                                                        40                                50
                        TOTAL  CURRENT  ASSETS                                        1,053                          1,094
    Property,  plant  and  equipment  -  net                                  577                              621
    Goodwill                                                                                        196                              119
    Acquired  intangible  assets  -  net                                          11                                  5
    Other  assets                                                                                141                              153
                        TOTAL  ASSETS                                                      $1,978                        $1,992

    LIABILITIES  AND  STOCKHOLDERS'  EQUITY
    CURRENT  LIABILITIES
              Accounts  payable                                                            $178                            $167
              Short-term  debt                                                                  16                                19
              Other  current  liabilities                                            438                              472
                        TOTAL  CURRENT  LIABILITIES                                  632                              658
    Long-term  debt                                                                            415                              417
    Other  liabilities                                                                      516                              552
                        TOTAL  LIABILITIES                                              1,563                          1,627

    STOCKHOLDERS'  EQUITY                                                                415                              365
    TOTAL  LIABILITIES  AND  STOCKHOLDERS'  EQUITY              $1,978                        $1,992


                                                        Agere  Systems  Inc.
                                              Unaudited  Cash  Flow  Measures
                                        Three  Months  Ended  March  31,  2005
                                                                (Millions)


                                                                                                          Restructuring
                                                                                      Ongoing        and  Related
                                                                                  Operations      Activities        TOTAL

    OPERATING  ACTIVITIES
    Gross  profit  (loss)                                              $183                  $(29)              $154
    Total  operating  expenses                                      229                        4                  233
    Other  income  -  net                                                      3                        -                      3
    Interest  expense  and  income
      tax  (benefit)  provision                                        (8)                      -                    (8)
    Net  income  (loss)                                                    (35)                  (33)                (68)

    Adjustments  to  reconcile  net  income
      (loss)  to  net  cash  provided  (used)  by
      operating  activities:
    Restructuring  expense  -  net
      of  cash  payments                                                        -                    (13)                (13)
    Depreciation  and  amortization                              45                      29                    74
    Other  operating  activities                                    48                        -                    48
    NET  CASH  PROVIDED  (USED)
      BY  OPERATING  ACTIVITIES                                        58                    (17)                  41

    INVESTING  ACTIVITIES
    Capital  expenditures                                              (25)                    (1)                (26)
    Other  investing  activities                                  (23)                      -                  (23)
    NET  CASH  USED  BY  INVESTING  ACTIVITIES            (48)                    (1)                (49)

    FINANCING  ACTIVITIES
    Other  financing  activities                                    (3)                      -                    (3)
    NET  CASH  USED  BY  FINANCING  ACTIVITIES              (3)                      -                    (3)

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

    Net  increase  (decrease)  in
      cash  and  cash  equivalents                                      7                    (18)                (11)

    Cash  and  cash  equivalents
      at  beginning  of  period                                                                                          686

    Cash  and  cash  equivalents
      at  end  of  period                                                                                                    $675


    Net  Cash  provided  (used)
      by  Operating  Activities                                      $58                  $(17)                $41
    Capital  Expenditures                                              (25)                    (1)                (26)
    Net  Cash  provided  (used)  by  Operating
      Activities  and  Capital  Expenditures              $33                  $(18)                $15


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

                                                                                                                      Quarter  Ending
                                                                                                                              Jun  30
                                                                                                                                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)                            $0.02
    Pro  Forma  Net  Income  (Loss)  (Low  End  of  Range)                              $0.00

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

                                                                                                                                0.02

    Net  Income  (Loss)  (High  End  of  Range)                                                $0.00
    Net  Income  (Loss)  (Low  End  of  the  Range)                                        ($0.02)

    *    All  per  share  information  shown  is  on  a  pre-reverse  stock  split  basis.
 





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