Agere Finally Posts Profit in Q4

ALLENTOWN, Pa. -- Agere Systems (NYSE: AGR.A - News, AGR.B - News) today reported that revenues for its fourth quarter of fiscal 2003, ended September 30, 2003, were $504 million, up 11 percent from revenues in the June quarter, and up 3 percent from revenues in the year-ago quarter. The revenue increase was driven by an 18 percent sequential growth in the company's Client Systems business, with strength in sales of chips for cell phones, hard disk drives and other PC-related applications. For the full fiscal year 2003, Agere reported revenues of $1.84 billion, exceeding the company's July guidance. The company's revenues in fiscal 2002 were $1.92 billion.

The company reported its first profit since its IPO, with earnings of $11 million or $0.01 per share on a GAAP basis for the September quarter, compared with a loss of $78 million, or $0.05 per share in the June quarter, and a loss of $885 million, or $0.54 per share in the year-ago quarter. For the full fiscal year 2003, the company reported a net loss of $338 million, or $0.20 per share, compared to fiscal 2002 net loss of $1.81 billion, or $1.11 per share.

The company also reported its first quarter of positive cash flow from operations, less capital expenditures, of $17 million. The company improved cash and cash in trust by $16 million sequentially to $765 million, the company's third consecutive quarterly increase.

"We are very pleased to report the strongest quarter in our history as a public company," said John Dickson, president and CEO, Agere. "We met or exceeded every financial target we set, including achieving profitability and positive cash flow. With the completion of our manufacturing consolidation, we significantly improved our gross margins, which exceeded 40 percent for the first time since our IPO.

"At the same time, our sharpened focus on areas such as cell phones, storage and PC-related applications enabled us to increase our revenues both sequentially and year-over-year. We are investing strategically to expand our market opportunities: in 2003, we introduced a portfolio of RF transistor products targeting a $500 million opportunity, and made our first acquisition to address the projected $1 billion Gigabit Ethernet IC market.

"With our strong financial performance, a focused product investment strategy and deep relationships with leading customers, we are building an exciting future for Agere," added Dickson.

The company was also profitable on a pro forma net income basis, with earnings of $47 million, or $0.03 per share in the September quarter, compared to a pro forma net loss of $74 million, or $0.04 per share in the June quarter, and pro forma net loss of $39 million, or $0.02 per share in the year-ago quarter. For the full fiscal year 2003, the company reported a pro forma net loss of $253 million, or $0.15 per share, compared to a pro forma net loss of $565 million or $0.35 per share in fiscal 2002.

Pro forma net income excludes gain or loss from the sale of, and income or loss from, discontinued operations; net restructuring and other charges; amortization of goodwill and other acquired intangibles; net gain or loss from the sale of operating assets and cumulative effect of an accounting change.

Results by Segment

The Client Systems Group reported revenues of $381 million for the September quarter, up 18 percent sequentially, and up 15 percent over year-ago quarter revenues of $330 million, driven by growth in chips for cell phones, hard disk drives and other PC-related applications.

The Infrastructure Systems Group reported revenues of $123 million, down 7 percent from revenues of $132 million in the June quarter, related to continuing softness in the telecommunications networking market. The group posted revenues of $161 million in the year-ago quarter.

Outlook

The company expects revenues in the December quarter to be in the range of $500 million to $510 million, with growth of about 5 percent in the Client Systems Group, offset by lower revenues in the Infrastructure Systems Group and a seasonal drop in intellectual property (IP) licensing.

The company expects pro forma (non-GAAP) net income to be breakeven, plus or minus $0.01 per share in the December quarter. On a GAAP basis, the company expects net loss to be in the range of $0.01 to $0.04 per share, including restructuring costs related to the decommissioning of Agere's facilities in Pennsylvania.

The company notes that its board of directors has decided not to pursue a reverse stock split.

Agere Systems Inc.