Agere stays buoyant during restructuring

Agere Systems has reported that revenues for the third quarter of fiscal 2005, ended 30th June, were $433 million, at the high end of the guidance range provided by the company in April.

Agere Systems has reported that revenues for the third quarter of fiscal 2005, ended 30th June, were $433 million, at the high end of the guidance range provided by the company in April.

The company's revenues have grown from $417 million in the March quarter and $410 million in the December quarter.

The company reported GAAP gross profit of $185 million or 43% of revenue, GAAP operating income of $3 million or 1% of revenue and GAAP net income of $120 million or $0.66 per share.

GAAP net income includes a $120 million benefit resulting from the reversal of a tax contingency and $38 million in restructuring related costs included in gross profit - primarily additional depreciation related to the planned closure of the Orlando facility.

It also includes $8 million in net restructuring and other nonrecurring charges, $1 million of amortisation of acquired intangible assets and a $4 million gain on the sale of operating assets.

In the March quarter, Agere reported GAAP gross margins of 37%, a GAAP operating loss of $79 million and a GAAP net loss of $68 million, or $0.38 per share.

The GAAP net loss in the March quarter included purchased in-process R and D charges of $55 million related to the acquisition of Modem-Art, $33 million in net restructuring charges and related costs, and a $22 million benefit resulting from the reversal of a tax contingency.

All per-share amounts reflect the 1-for-10 reverse stock split and share reclassification that the company completed on 27th May 2005.

On a pro forma basis, the company exceeded its long-term operating model in the June quarter by achieving a pro forma gross margin of 52%.

In addition, pro forma operating income was $46 million or 11% of revenue, and pro forma net income was $43 million or $0.24 per share, which is equal to 10% of revenue.

In the March quarter, the company reported a pro forma gross margin of 44%, pro forma operating income of $10 million and a pro forma net loss of $1 million, or break even per share.

Pro forma financial measures exclude gain or loss from the sale of, and income or loss from, discontinued operations; restructuring-related charges included in costs - primarily increased depreciation; certain other noncash charges including equity compensation; net restructuring and other charges; purchased in-process research and development charges, amortisation of acquired intangible assets, net gain or loss from the sale of operating assets, certain tax adjustments, cumulative effect of accounting changes, and certain nonrecurring charges.

The company's cash flow from operating activities, less capital expenditures, was a net outflow of $4 million.

Cash in excess of total debt was $250 million, which is an increase of $6 million from the March quarter.

In the June quarter, the company repaid $55 million of debt including the repurchase of $38 million of outstanding convertible notes.

As of the end of June, Agere's cash balance was $626 million, with $376 million in total debt.

In addition, Agere is announcing plans to complete the closure of its Orlando wafer fabrication facility by 30th September 2005.

Previously, the company had announced its intention to close the facility by 31th December 2005, as part of its business restructuring measures.

At present, 545 employees work in the facility.

"Our results this quarter are a significant step toward achieving our operating model goals as we achieved a quarterly pro forma gross margin of 52% and operating income margin of 11%", said John Dickson, President and CEO, Agere Systems.

"The closure of our facility in Orlando represents the last major step in the restructuring efforts we have undertaken".

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