Agere Systems Reports Results for Fourth Fiscal Quarter 2001

Company meets revenue and beats pro forma EPS guidance; on track with restructuring program

ALLENTOWN, PA. Agere Systems (NYSE: AGR.A), the world leader in communications components, today reported that revenues for its fourth fiscal quarter, ended September 30, 2001, were $600 million, down approximately 35 percent from the June quarter, within the guidance provided by the company in July.

Pro forma net loss, which excludes purchased in-process research and development, amortization of goodwill and acquired intangibles, restructuring and separation charges, and impairment of goodwill and acquired intangibles, was $393 million or $0.24 per share for the September quarter, better than the guidance provided by the company in July. Pro forma net loss for the June quarter was $492 million, or $0.30 per share. Pro forma EPS assumes that 1.635 billion shares of common stock were outstanding for all periods.

"We have made significant progress on our restructuring program and will continue to take steps to create a cost structure consistent with business needs," said John Dickson, president and CEO, Agere Systems. "We have lowered costs and expenses, as well as reduced our capital expenditures by approximately one-third from the June quarter. As a result, we exited fiscal 2001 with more than $3 billion in cash. These actions demonstrate that we are focused on strengthening Agere in every way as we navigate challenging market conditions."

Reported net loss for the September quarter was $3.4 billion or $2.05 per share, and reflects all the items excluded from pro forma net loss, including approximately $153 million in restructuring and separation charges, and $2.7 billion in impairment of goodwill and acquired intangibles primarily associated with the acquisition of Ortel Corporation in April 2000. Reported net loss for the June quarter was $1.1 billion, or $0.68 per share, which included restructuring and separation charges of $462 million, as well as an inventory write-down of $270 million.

For fiscal year 2001, total revenues were $4.1 billion, compared to revenues of $4.7 billion in fiscal year 2000. Pro forma net loss for fiscal 2001 was $779 million or $0.48 per share, while pro forma net income for fiscal 2000 was $553 million or $0.34 per share. Reported net loss for fiscal 2001 was $4.6 billion, or $3.46 per share, while reported net loss was $76 million, or $0.07 per share for fiscal 2000.

The company announced a series of business restructuring initiatives in June, and is on track with the implementation of those measures. The company has discontinued operations of its plant in Madrid, Spain, and has signed an agreement with BP, a leading energy supplier, for its sale. Earlier this year, Agere announced workforce reductions of 6,000 employees and has completed the reduction of approximately 4,300 employees, resulting in a workforce of approximately 14,300 employees currently. The company expects the majority of the remaining 1,700 employees to leave the business by the end of the calendar year. In early October, the company also repaid $1 billion to reduce its credit facility from $2.5 billion to $1.5 billion, and extended the maturity date of the reduced facility from February 21, 2002, to September 30, 2002.

RESULTS BY SEGMENT: Integrated Circuits The Integrated Circuits division reported revenues of $469 million during the fourth fiscal quarter, down from $650 million in the June quarter. The decline was across the division, with the exception of revenues from storage products, which were slightly up from the prior quarter.

In the fourth quarter, the Integrated Circuits division: · Signed an agreement with Huawei Technologies of China to provide programmable network processors and switch fabric products for optical networks. · Introduced a new GPRS solution for wireless handsets that nearly quadruples Internet data rates, reduces electronics components by half and allows customers to decrease time-to-market by up to one year, compared with the wireless handset platforms currently in the market. · Announced that Maxtor selected custom-designed system-on-a-chip solutions for its ATA/133 desktop PC disk drives. · Unveiled the industry s first SONET/SDH add-drop multiplexer system-on-a-chip solution that integrates a full cross-connect, data engine and pointer processor. · Gained five customers for its IP Phone-On-A-Chip™ solution for Internet telephones, including Avaya, Masterpoint, Philips, Tenovis and Tone Commander.

Optoelectronics The Optoelectronics division reported revenues of $131 million during the fourth fiscal quarter, down from $277 million in the June quarter, as the optical networking industry experienced further deterioration. In the fourth quarter, the Optoelectronics division: · Introduced the industry s first 10 gigabit-per-second (Gbit/s) integrated laser for optical networking systems designed for 80-kilometer network spans. · Signed an agreement with Siemens to provide custom-designed optical amplifiers for use in their new DWDM system. · Developed the industry s lowest-loss multiplexer/demultiplexer passive component for 2.5 and 10 Gbit/s systems. · Introduced laser modules with integrated wavelength lockers for 10 Gbit/s optical networking systems. · Announced a new family of high-performance transceivers and receivers for 2.5 and 10 Gbit/s systems.

Outlook Agere expects revenues in the first fiscal quarter of 2002 to be down approximately 10 percent from the September quarter. The company expects pro forma net loss per share to be in the range of $0.22 to $0.23 for the quarter.

"We are building our business through strategic customer engagements and industry-leading product introductions in both integrated circuits and optoelectronics," said Dickson. "Although market conditions remain uncertain, we continue to be focused on laying a solid foundation for future growth."

Earnings Webcast Agere Systems will host an earnings conference call today at 8:30 a.m. EDT. To listen to the conference call via the Internet, visit www.agere.com/investor/webcast. Subsequent to the conference call, a replay will be available for seven days at www.agere.com/investor/webcast.

Agere Systems is the world s No.1 provider of components for communications applications with leadership in optical components and integrated circuits. This dual capability uniquely positions Agere to deliver integrated solutions that form the building blocks for advanced wired, wireless, and optical communications networks. Agere also designs and manufactures a wide range of semiconductor solutions for communications-related devices used by consumers such as cellular phones, modems, and hard disk drives for personal computers and workstations. In addition, the company supplies complete wireless computer networking solutions through the ORiNOCO™ product line. More information about Agere Systems is available from its Web site at www.agere.com.

Click for Financial Statements of Fourth Quarter 2001

This release contains forward-looking statements based on information available to Agere as of the date hereof. Agere s actual results could differ materially from the results stated or implied by such forward-looking statements due to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, completion of the distribution of Agere stock by Lucent Technologies Inc., customer demand for our products and services, control of costs and expenses, timely completion of employment reductions and other restructuring activities, price and product competition, keeping pace with technological change, dependence on new product development, reliance on major customers and suppliers, availability of manufacturing capacity, components and materials, general industry and market conditions and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further discussion of these and other risks and uncertainties, see the prospectus filed by Agere with the Securities and Exchange Commission on March 28, 2001, and Agere s subsequent reports on Form 10-Q. Agere disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contacts: Vibha Agrawal Tel: 908-508-8638 (office) vagrawal@agere.com or JoAnna Schooler 908-508-8234 (office) jschooler@agere.com