Agere's Samsung Boost

Agere Systems' (NYSE: AGR/A) $150 million deal to supply handset manufacturer Samsung Electronics Co. Ltd. (Korea: SEC) with GPRS chipsets for a year is a good indication of the direction the battered wireless chipmaker wants to take in 2003.

Over the last couple of years, Samsung has emerged as the third largest handset manufacturer in the world. So, on the back of this flagship contract with Samsung, Agere says it can go touting for more Asian customers.

The Lucent Technologies Inc. (NYSE: LU) spinoff is particularly targeting emerging handset manufacturers, especially the original device manufacturers (ODMs) to which many big-name vendors outsource their production.

"Sure, we'd always like to do business with Nokia Corp. or Motorola Inc.," says Tony Grewe, director of strategic marketing for Agere's client systems group. "However, we've been working very hard to court ODMs in both Taiwan and China." He feels the Samsung deal should help with those efforts.

The deal will also be a proving ground for Agere's 2.5G GPRS chipsets. "We did analog [ed note: back in the day with Lucent] and then we jumped to 2.5G," says Grewe. "We didn't really have a 2G [GSM] platform."

Agere's chipset sales started to pick up steam late in 2002, Grewe says. "We see strengths going into 2003 and on into 2004."

Certainly, the Samsung deal is a big deal for the struggling chipmaker. It's "a significant amount of revenue for us," says Grewe. Agere made total revenues of $529 million in its last reported quarter.

Agere's shares, which have been languishing around -- and even below -- the $1 mark for months, responded appropriately. They had risen 9.15% to $1.55 a share by the end of trading on Wednesday.

— Dan Jones, Senior Editor, Unstrung
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