Agere Systems Reports Results for the Fourth Quarter and Fiscal Year 2005; Appoints New CEO

- Board of Directors authorizes repurchase of up to $200 million of common stock

ALLENTOWN, Pa., Oct. 26 /PRNewswire-FirstCall/ -- Agere Systems (NYSE: AGR) today reported its financial results for the fourth quarter and fiscal year 2005. In a separate release, the company announced that Richard L. Clemmer, a member of its board of directors, has been appointed as its new president and chief executive officer, effective immediately, replacing John T. Dickson, who has decided to retire.

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

For the quarter ended on September 30, Agere posted net income of $7 million or $0.04 per share on a GAAP basis, compared to the year-ago net loss of $127 million or $0.74 per share, and net income of $120 million or $0.66 per share in the June quarter.

GAAP net income for the fourth quarter includes $31 million in net restructuring charges and related costs, and for the June quarter, included a $120 million benefit resulting from the reversal of a tax contingency. The fourth quarter GAAP gross margin as a percent of sales was 45 percent.

For the full fiscal year 2005, the company posted a GAAP net loss of $8 million or $0.04 per share, compared to a net loss of $90 million or $0.52 per share for fiscal year 2004.

On a pro forma basis, the company reported net income of $38 million or $0.21 per share in the September quarter, compared to net income of $43 million, or $0.24 per share in the June quarter, and net income of $6 million or $0.04 per share in the year-ago quarter. The company's pro forma gross margin was 52 percent in the September quarter, exceeding the company's long- term operating model.

For the fiscal year, the company posted pro forma net income of $72 million, or $0.41 per share, compared to pro forma net income of $49 million, or $0.28 per share in fiscal 2004.

Pro forma financial measures, which are non-GAAP measures, exclude 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 including equity compensation; 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 accounting changes; and certain nonrecurring charges.

The company's revenues for the fourth quarter were $416 million, compared to $433 million in the June quarter and $439 million in the year-ago quarter. For the full fiscal year 2005, the company reported revenues of $1.68 billion, compared to $1.91 billion for fiscal year 2004.

"The company made great strides in fiscal 2005 by improving earnings per share, pro forma gross margin and the balance sheet," said Clemmer, president and CEO, Agere Systems. "The key challenge for 2006 is driving revenue growth. We are absolutely committed to doing what it takes over the coming months to achieve growth and enhance shareholder value."

Authorization of Share Repurchase

In addition, the company announced that its board of directors has authorized the repurchase of up to $200 million of its outstanding common stock. Based on Agere's closing stock price on October 25, 2005, $200 million represents approximately 12 percent of the company's total outstanding shares. As of September 30, Agere had cash and cash equivalents of approximately $698 million.

Outlook

In the December quarter, the company expects to report revenues in the range of $390 million to $410 million. The company expects a GAAP net loss of $0.13 to $0.19 per share. Pro forma net income is expected to be in the range of $0.03 to $0.09 per share.

    Revenue by Operating Segment

                                Quarter Ended          Year Ended
                            Sep 30,     Jun 30,    Sep 30,      Sep 30,
                             2005        2005       2005         2004

    Storage                  $158        $146       $620         $635
    Mobility                   92         100        364          496
    Enterprise & Networking   101         118        436          513
    Consumer Enterprise
     Segment                  351         364      1,420        1,644
    Telecommunications
     Segment                   65          69        256          268
                             $416        $433     $1,676       $1,912

Each operating segment includes revenue from the licensing of intellectual property.


    Product and Customer Highlights

    Recent company highlights include:
    -- Selection of the Advanced PayloadPlus(R) APP300 series of network
       processors for ZTE Corporation's DSL access platforms and for Zhone
       Technologies' Multi-Access Line Concentrator product.

    -- Announcement of the Vision(TM) X115 chipset solution providing cinema-
       quality video and CD-quality audio capabilities for mainstream EDGE
       feature phones and Smartphones.  The multi-processor solution, which is
       expected to be in production before the end of the fourth calendar
       quarter of 2005, is the first product based on the Vision mobile
       handset architecture.

    -- Introduction of the company's first standard-product storage system-on-
       a-chip for portable consumer disk drives.  Agere's SC1200 will enable
       12 gigabytes of storage in 1.0-inch disk drives, which are expected to
       hit the market in 2006.

    -- Agreement with QLogic Corp. to supply ASICs and storage area networking
       chips for QLogic's SANblade 2400 series of 4 gigabit-per-second Fibre
       Channel products.

    -- Shipment of SMC Networks' first TigerSwitch(TM) 1000 product based on
       Agere's ET4K and Octal TruePHY(TM) 1081 chips.  The TigerSwitch 1000
       solution is SMC's newest line of gigabit workgroup switches.

    Earnings Webcast

Agere Systems will host a conference call today at 8:30 a.m. EDT 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 .

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