Agere to exit opto; cut 4,000 jobs

14 August 2002 -- Agere Systems is to cut its workforce by 36% by the end of December and exit the optoelectronics sector by June 2003 to focus on IC solutions.

14 August 2002 -- Agere Systems Inc is to cut its workforce by 36% (from 11,200 to 7,200) by the end of December and exit the optoelectronics sector - which focuses mainly on the hard-hit long-distance segment ? by June 2003 to focus on IC solutions for computing, storage, wireless handset and wireless local area networking (LAN) applications.

"Spending constraints, excess capacity and delays in deployment of higher-speed technologies have caused demand for optoelectronics components to drop considerably," it says. Optoelectronics (which includes equipment for optical communications networks) contributed about 10% of Agere's fiscal Q3 revenue (to end-June). Agere also warned that Q4 revenue would be about 5% down on Q3.

After laying off almost 7,000 staff last year and announcing the closure of two factories in Pennsylvania in January, Agere will discontinue or sell operations at facilities in Dallas, TX, Alhambra and Irwindale, CA, and Matamoros, Mexico by end-June 2003. It will also consolidate US manufacturing by moving its remaining IC wafer fabrication line in Allentown, PA to Orlando, FL, USA by end-September 2003.

Agere is looking to sell the Orlando plant as an ongoing operation, allowing the continued sourcing of products from this facility. If it doesn't find a buyer, it will operate the facility at least through September 2004.

Agere says it will use foundries for standard process technologies, continue its IC assembly and test operations in Singapore and Thailand, and maintain its wafer manufacturing joint venture with Chartered Semiconductor. The company's central campus will remain in Allentown, PA where its two sites will house R&D, operations, marketing, sales and other corporate functions.

"We believe the optoelectronics business has changed fundamentally for the long term," says president and chief operating officer John Dickson. "The signs of it getting better over the next two years we think are limited."

Agere says that the cost-cutting steps will lower its quarterly revenue break-even from USD700m to USD500m in second-half 2003.

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