Agere Systems Acquires TeraBlaze, A Leading Developer of High-Density Gigabit Ethernet Switching Solutions

Agere acquired the Silicon Valley company in a stock transaction for approximately 6.92 million shares of Agere Class A common stock, valued at about $21 million based on the closing price of $3.05 for an Agere Class A common stock on December 31, 2003. Excluding the impact of approximately $12-14 million for in-process R&D charges, the acquisition is expected to have a minimal impact on earnings of less than $0.005 per share for the full fiscal year 2004 that will be offset by cost reductions already underway.

In August 2003, Agere acquired Massana, a privately held provider of GbE physical layer device (PHY) solutions. Based on the TruePHY(TM) technology Agere developed through this acquisition, the company is also announcing the availability of its Gigabit Ethernet single port device, the 0.13-micron ET1011, the lowest-power PHY in the industry. With today's acquisition, Agere will combine TeraBlaze's technology with its TruePHY family of GbE products and deliver highly integrated PHY and switch solutions.

"The acquisition of TeraBlaze advances our strategy to take share in the fast-growing Gigabit Ethernet market," said Sohail A. Khan, executive vice president of Agere's Infrastructure Systems Group. "TeraBlaze together with TruePHY technology is a very powerful combination, which gives us early mover advantage in bringing integrated GbE switch and PHY solutions to this market."

Market research firm Dell'Oro Group estimates that the Gigabit Ethernet switch market, into which Agere will sell the new single chip switching solutions, will total approximately $12 billion in 2004. IDC estimates that the Gigabit Ethernet switch ASIC/ASSP market will see revenue greater than $500 million in 2004, and more than $850 million in 2007. Agere is capitalizing on this market opportunity with competitive PHY and switch-on-a- chip solutions for client and enterprise networking equipment manufacturers.

"The surge in Gigabit Ethernet-over-copper PHY shipments in the client device market will drive a rapid deployment of Gigabit Ethernet switches in 2004 and 2005," said Ed Roberts, vice president and general manager of Agere's Ethernet Division. "We now have the core technology to deliver a broad family of PHY and switch solutions that scale from SOHO all the way to 48-port enterprise applications. Our architecture and integration capabilities will enable system manufacturers to offer the most competitive price per port GbE products in the market."

Agere expects to deliver switch solutions bundled with multi-port TruePHY products in the second half of 2004.

All 16 TeraBlaze employees will join Agere, including TeraBlaze founder and CEO Shankar Mukherjee.

"The TeraBlaze design team jumped several important hurdles to develop very high-density switching solutions with integrated memory, enhanced network security and an integrated stacking bus," said Mukherjee. "I'm delighted that these solutions will now benefit from all the market and business advantages that come from being a part of one of the world's foremost communications semiconductor companies."

About Agere Systems

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 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/.

This release contains forward-looking statements based on information available to Agere as of the date hereof. Agere's actual results could differ materially from the results stated or implied by such forward-looking statements due to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the impact of any global or regional health epidemic, such as severe acute respiratory syndrome, keeping pace with technological change, dependence on new product development, price and product competition, availability of manufacturing capacity, customer demand for our products and services, general industry and market conditions, limits on our ability to issue equity to raise capital and reliance on major customers and suppliers. For a further discussion of these and other risks and uncertainties, see our annual report on Form 10-K for the fiscal year ended September 30, 2003. Agere disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: Media, Vibha Agrawal, +1-610-712-1737, or mobile,
+1-908-256-6234, vagrawal@agere.com, or Investors, Dave Longfellow,
+1-610-712-7695, dlongfellow@agere.com, both of Agere Systems

Web site: http://www.agere.com/