3G shortfall leads to Q2 pessimism

Agere Systems has updated its outlook for the second quarter of fiscal 2004 as a result of lower-than-expected shipments of 3G chipsets for mobile phones.

Agere Systems has updated its outlook for the second quarter of fiscal 2004 as a result of lower-than-expected shipments of 3G chipsets for mobile phones.

The company now expects GAAP earnings to increase to approximately $0.04 to $0.05 per share, including a tax-related benefit of approximately $80 million.

Pro forma earnings per share are expected to be $0.04 to $0.05 including the tax benefit, and breakeven to $0.01 excluding the tax benefit.

Pro forma net income excludes gain or loss from the sale of, and income or loss from, discontinued operations; net restructuring and other charges; purchased in-process research and development charges related to acquisitions; amortisation of acquired intangible assets; net gain or loss from the sale of operating assets and cumulative effect of an accounting change.

As indicated during the January earnings conference call, the company had expected delays in 3G deployment to impact sales of 3G chipsets in the March quarter.

Based on recent customer input, the company now expects that shipments of 3G chipsets will be down approximately $50 million from the December quarter, significantly more than previously expected.

As a result, total company revenues in the second fiscal quarter are expected to be between $465 million and $475 million, below the previous guidance.

The company's Infrastructure Systems segment is strengthening, and is expected to grow more than 10% from the December quarter, better than guidance, with strength across wireless, wireline and enterprise applications.

Excluding 3G chipset shipments, revenues for the company's Client Systems segment are expected to be slightly down due to seasonal factors in the segment's end markets.

Gross margin is expected to increase in the quarter, consistent with previous guidance.

In the current quarter, the company reached a favourable resolution with Lucent Technologies regarding various tax audit issues that were covered by the company's tax sharing agreement with them.

The tax benefit resulting from this agreement is expected to be approximately $80 million.

In the third fiscal quarter, ending 30th June, the company expects revenues to increase to over $500 million, and expects shipments of 3G chipsets to begin to recover.

The company will provide an updated revenue view and detailed guidance for the June quarter when it releases its second quarter financial results on 27th April.

The company remains confident that it will meet its previously stated financial goals for the end of the fiscal year: gross margins at the high end of the target range of 45 to 50%, and operating margins approaching 15%.

Back to top