Comms chips

Agere Soars on Q3 Earnings

Agere Systems Inc. (NYSE: AGR.A) stock rose nearly 25 percent this morning as the company obliterated analysts's estimates with its third-quarter earnings.

The company's revenue dipped from its second-quarter level, but pro-forma earnings per share of 22 cents per share eclipsed the consensus estimate of 16 cents, as tallied by Thomson Financial .

On today's conference call with analysts, Agere officials said its cost-cutting efforts are bearing fruit, as the company has already reached next quarter's goals for reducing operating expenses. Operating profits were 11 percent for the third quarter; Agere eventually hopes to hit 15 percent, which should happen when the company's quarterly revenues reach $425 million, officials said.

Agere shares were up $2.86 (23.8%) to $14.86 by early afternoon.

For its third quarter, which ended June 30, Agere reported revenues of $382 million and net income of $47 million, or 27 cents per share, according to generally accepted accounting principles. That compares with prior-quarter revenues of $397 million and net losses of $21 million, or 11 cents per share.

For its third quarter a year ago, Agere reported revenues of $433 million and net income of $120 million, 65 cents per share.

So, revenues are on a downward track, and that has a chance to continue, as Agere said fourth-quarter revenues would fall between $375 million and $400 million. Among the culprits in the third quarter was the storage business, as sales of chips into disk drives were hurt by a decline in desktop computer demand, Agere officials said.

Effects of the Seagate Technology LLC (Nasdaq: STX) acquisition of Maxtor turned up sooner than expected, Agere officials added. The disk-drive giants were both top-10 customers of Agere's in fiscal 2005, and Agere has been expecting to lose some sales from the May 19 merger as Maxtor products become obsolete. (See Seagate Munches Maxtor.)

Elsewhere in storage, Agere CEO Richard Clemmer told analysts the company recently scored a design win "with a leading Fibre Channel switching vendor," following up on multiple design wins with QLogic Corp. (Nasdaq: QLGC) Agere also said it's selling 12 components into a Nortel Networks Ltd. business gateway, for functions including packet processing and network-attached storage.

While he was at it, Clemmer noted Agere wins in an Ericsson AB (Nasdaq: ERIC) DSLAM and an NEC Corp. (Tokyo: 6701) 3G wireless Node B, among others.

— Craig Matsumoto, Senior Editor, Light Reading

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