Agere Systems to reduce expenses

September 29, 2004 – Agere Systems has announced plans to reduce expenses by eliminating 500 employees and ceasing operations at its Orlando, FL, facility by the end of 2005 if a sale cannot be arranged by that time. Agere said that it is aligning its cost structure to match current revenue expectations and to improve profitability.

The eliminated employees will come from across the business, including administrative functions, sales, marketing, and product development.

With these actions, the company will lower both its costs and operating expenses. The company expects to reduce its quarterly research and development and selling, general and administrative expenses to approximately $170 million to $175 million by the 3QFY05, beginning in April. In the quarter ended June 30, the company had reported $195 million in these expenses.

In addition, Agere announced that it would cease operations in its wafer manufacturing facility in Orlando, Fla., by the end of 2005, if a sale of the facility cannot be arranged by that time. In 2002, the company had announced plans to sell this facility as an ongoing operation, but has not yet found a suitable buyer. The facility currently employs approximately 600 people.The company expects cost benefits from the facility closing to begin accruing in FY06.

The company expects to take total restructuring charges and expenses in the range of $340 million to $360 million associated with these actions, with approximately $130 million to $140 million to be recorded in the 4QFY04, ending September 30, and the remainder to be incurred in subsequent quarters.

Agere also reaffirmed that revenues in the September quarter are still expected to be in the range of $420 million to $445 million, which was the guidance provided in July.

“While our actions to reduce the workforce are clearly very difficult for employees, they were absolutely necessary to align our expenses with our revenues,” said John Dickson, president and CEO, Agere Systems. “The issues we faced with three major customers now seem to have broadened into an industry-wide inventory correction, as reflected by a spate of earnings warnings from most companies in our industry. Agere Systems has a strong balance sheet, exceptional relationships with our customers, and we are confident that the improved cost structure, coupled with sharply focused R&D investments will drive profitable growth as we move through 2005.”


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