Acquisition will allow Agere to quickly provide leading PHY solutions for delivery of GbE speeds to enterprises over existing copper networks

ALLENTOWN, Pa. -- Agere Systems (NYSE: AGR.A, AGR.B) today announced that it has acquired Massana Ltd., a privately held developer of Gigabit Ethernet-over-copper physical layer device (PHY) technologies. With this acquisition, Agere expects to quickly deliver industry-leading Gigabit Ethernet (GbE) chips to address the transition of enterprise networks from Fast Ethernet to Gigabit Ethernet speeds.

Agere acquired the Irish company in a stock transaction for approximately 9.1 million shares of Agere Class A common stock, valued at about $26.2 million, based on the closing price of $2.88 for the Agere Class A common stock on August 22, 2003. Agere expects the acquisition to have minimal impact on its earnings in the current quarter, and for the full fiscal 2004, to be dilutive to earnings by $0.01 to $0.02 per share.

Today, enterprise networks typically run at speeds of 10/100 megabits-per-second over the current installed base, which consists mostly of copper networks. GbE-over-copper PHY technology can deliver 10 times that speed to businesses over the same copper networks. Agere will supply GbE PHYs to Ethernet switch providers as well as PC and server OEMs, as these manufacturers migrate their products to GbE to take advantage of the faster speeds at minimal additional costs.

"We believe that the transition to GbE represents a major opportunity for Agere," said Sohail Khan, executive vice president of Agere's Infrastructure Systems Group. "Our customers need GbE-over-copper technology to cost-effectively deliver faster speeds to the desktop, to the server, and in the wiring closet. The acquisition of Massana, which is one of the few companies in the world with a working GbE PHY, will allow us to address the emerging GbE market quickly, with the right feature set, at the right price points."

Market research firm IDC estimates that the Ethernet IC total available market in 2005 will be $2.5 billion. The GbE silicon segment of the Ethernet IC market is expected to have a compound annual growth rate of 37 percent from 2002 to 2005.

Agere already offers custom solutions for Ethernet applications. The company will now utilize Massana's established PHY technology to deliver a range of GbE products, from single to octal ports into network interface cards and LAN-on-motherboard devices for computers and servers, as well as Ethernet switches. Massana is sampling a GbE PHY today. With the acquisition, Agere plans to deliver a next-generation 0.13 micron single PHY product in early 2004 and an octal in mid-2004.

Massana's PHY device has been tested and validated by the University of New Hampshire.

In an effort to complete the rollout of 1000 Base-T compliance tests, we are pleased to have partnered with Massana to develop additional physical layer test methods. The tests will benefit the entire Gigabit Ethernet industry and consumers by ensuring interoperability among vendors and full compliance to the IEEE 802.3 standards," said Bob Noseworthy of the university's InterOperability Laboratory.

"Massana stood out in the GbE field because of its superior smart math architecture, which delivers better signal-to-noise ratio and lower power consumption, enabling more efficient multiport solutions," said Ed Roberts, vice president and general manager of Agere's new Ethernet Division. "With Massana's technology and talent, we now own ground-breaking intellectual property that will enable us to succeed in the Gigabit Ethernet market moving forward."

Approximately 45 Massana employees will join Agere.

Agere Systems is a premier provider of advanced integrated circuit solutions for wireless data, high-density storage and multiservice networking applications. Agere's wireless data portfolio enables seamless network access and Internet connectivity through its GPRS offering for data-capable cellular phones, as well as Wi-Fi/802.11 solutions for wireless LANs and computing applications. The company is the market leader in providing integrated circuits for the hard disk drive market, with number one positions in sales of system-on-a-chip solutions and preamplifiers. Agere also provides custom and standard multiservice networking solutions to move information across wired, wireless and enterprise networks. Agere's customers include the leading PC manufacturers, wireless terminal providers, network equipment suppliers and hard-disk drive providers. More information about Agere Systems is available from its web site at http://www.agere.com

Source: Agere Systems