Agere to exit optoelectronics, cut 4000 staff

14 August 2002 -- Agere Systems is to redefine its business to focus on providing integrated circuit solutions - and exit optoelectronics.

- to exit optoelectronics by June 2003
- to cut total workforce by about 4,000

14 August 2002 -- Agere Systems, Allenstown, PA, US, today announced that it would redefine its business to focus on providing integrated circuit solutions that access, move and store network information.

The company will exit its optoelectronics business, which represented about 10 percent of total revenues in the June quarter of 2002. Agere is seeking a buyer for all or parts of this business, but will discontinue optoelectronics operations no later than June 30, 2003.

With the dramatic changes in the telecommunications industry, including capital spending constraints, excess capacity in the core network and significant delays in deployment of higher-speed technologies, demand for optoelectronics components has decreased considerably.

According to market research company RHK, optoelectronics components industry revenues will decline from approximately USD7bn in 2000 to about USD2.3bn in 2002, a 67 percent drop. This decrease was driven by weakness in the long-haul segment, an area where Agere's optoelectronics solutions were primarily focused.

"We are redefining Agere as a premier provider of integrated circuit solutions to target the communications and computing opportunities that present the best long-term potential," said John Dickson, president and CEO. "As we exit our optoelectronics business, our first priority will be to ensure that we fully support our opto customers during the transition and meet our commitments to them."

Agere will continue to deliver advanced integrated circuits for wireless data and storage applications, as well as multi-service networking solutions for segments such as metro, access and enterprise.

For the networking equipment market, which is served by the company's Infrastructure Systems Group, Agere will provide processing, aggregation, framing, switching and physical layer solutions, as well as application-specific integrated circuits (ASICs) for enterprise, access, metro and wireless networking systems.

For the end-user market, which is served by Agere's Client Systems Group, the company will continue to provide IC solutions for computing, storage, wireless handset and wireless local area networking (LAN) applications. The Client Systems Group represented almost 60 percent of Agere's revenues in the June quarter.

Consolidation and Workforce Update
With the planned exit of the optoelectronics business, the company will discontinue or sell operations in its facilities in Dallas, Texas; Alhambra and Irwindale, Calif.; and Matamoros, Mexico.

In addition, as a result of this exit and the previously announced sale of the analog line card business, the company no longer needs to move manufacturing operations from its Reading and Breinigsville, Pa., facilities to the Allentown, Pa., facility. As announced in January this year, the company intends to sell the Reading and Breinigsville properties once it discontinues those operations.

The company will move its remaining IC wafer fabrication line in Allentown to Orlando, Fla., by the end of September 2003. This move will allow the company to consolidate all of its U.S. manufacturing operations in one facility, resulting in significant reduction in manufacturing space and costs.

Agere continues to seek a buyer for the Orlando operations and intends to sell the plant as an ongoing operation, allowing the company to continue sourcing products from this facility. If the company does not identify a buyer, it plans to operate that facility at least through September 2004.

Agere expects that today's initiatives will allow it to achieve its target cost and expense structure, enabling the company to further reduce its quarterly operating income revenue breakeven point from the current $700 million level to $500 million during the second half of the calendar year 2003.

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