Agere Systems Announces World's Fastest Network Processor Integrating Four Chips Into One

Breakthrough System Chip Reduces Development Costs by 50 Percent

ALLENTOWN, Pa. - February 17, 2003 – Agere Systems (NYSE: AGR.A, AGR.B) today announced the world's fastest network processor that integrates four separate chips into one. This next generation network processor, called the PayloadPlus® APP540, makes possible revolutionary improvements in product development costs, service revenue capabilities, and reliability of communications network equipment for the next several years. Agere's new chip can reduce product development costs--a critical metric in the current cash-constrained market--by at least 50 percent compared with the nearest contending chips.

Korea-based Electronics and Telecommunications Research Institute (ETRI), one of the world's leading information technology research and development organizations, has selected Agere's new APP540 network processor as the key engine for creating Korea Telecom's country-wide next generation network. ETRI, which has a long-standing relationship with Agere, has been instrumental in enabling Korea to achieve the highest percentage of broadband connections to citizens of any country in the world.

Agere's key technical breakthrough centers on integrating four separate devices--programmable traffic manager, multi-field classifier search engine, network processor, and Ethernet media access controller (MAC)--into a single device capable of processing information at speeds of 5 gigabits per second (Gbits/s). Competing products require at least two chips, and in several cases three or more, to perform these four different functions at comparable speeds. Using fewer chips decreases electronics costs, power consumption, and equipment size, as well as increases reliability.

Classification, traffic management, and network processing function like three different traffic police officers working in unison with separate yet inter-dependent functions. The classifier determines what should be done with the voice, data, or video information entering communications equipment. The network processor obeys processing and forwarding directions the classifier gives it. Robust traffic management helps control the flow of information exiting the network processor to most efficiently use the available bandwidth. Robust traffic management, which supports true bandwidth and delay guarantees to 8,192 queues or more of individually scheduled streams of traffic, is important to support high-value service-level agreements for telecom carriers. The Ethernet MAC allows direct connection to Ethernet, the world's most popular form of data communications.

Roughly one-fourth the size of a credit card, Agere's APP540 chip is part of Agere's growing family of integrated PayloadPlus network processors, traffic management and system software solutions used in communications equipment platforms. The PayloadPlus family has been selected for use in more than 70 system designs, more than half of which are top-tier manufacturers of communications equipment. In the multi-service equipment chip business, Agere possesses greater than 50 percent market share of the top-tier customers.

"Now more than ever, the communications equipment and service markets care about reducing capital and operations costs, rapidly and easily deploying new revenue generating services, and offering quick, simple, and flexible access to services over current and future networks," said Linley Gwennap, principal analyst with The Linley Group, a California-based semiconductor technology research company. "Agere's new highly integrated solution offers substantial cost reduction and programmability benefits that will maximize the value service providers can extract from their network investments.

"Agere is a leader in traffic management, having developed several generations of successful products," Gwennap added. "This technology puts the company in a strong position as traffic management becomes integrated into the network processor." According to Ryan, Hankin, and Kent, a market research company, Agere ranks first in the world in sales of traffic management chips.** "Building chips that do network processing but not traffic management is like building a road system without traffic signals such as stoplights and yield signs," said John Rolfe, marketing manager with Agere Systems.

"Recognizing the challenging environment in the communications market, Agere has been investing in advanced system chips targeted at platforms that can be consolidated and re-used across various equipment," said Mark Pinto, vice president of Agere's network processor business. "Our customers keep coming back to us with the same messages: cost reduction, multi-service revenue generation, and better reliability--all provided in fewer and more flexible platforms. That's what this new integrated chip is all about."

Agere's PayloadPlus chips are used in various types of corporate office building and telecommunications central office equipment. Such equipment includes multi-service provisioning platforms and switches, routers, data center switches, 2.5-generation and third-generation wireless equipment, Ethernet over Synchronous Optical Network (SONET)/Synchronous Digital Hierarchy (SDH) add/drop multiplexers, and SONET transmission systems.

"There is some ambiguity in the industry around what exactly is a network processor," said Agere's Pinto. "Some think it's a general purpose microprocessor with networking interfaces and large data buffers. Some call it a look-up engine. Others a traffic manager. Still others consider it a segmentation and reassembly controller engine. Agere Systems believes network processors require the interworking of all of the above, as embodied in the single chip APP540.

"As an alternative, the industry could define the collection of chips, that perform traffic management, classification, and other network processor functions, required in a given system as traffic processors," Pinto added. "Because that's what the chips do, process traffic. The APP500 family offers the full range of these functions in single chips, thereby lowering development costs, power and size of equipment."

Agere's APP540 chip uses external dynamic random access memory (DRAM) chips to house classification tables and rules. Competitors use content addressable memory (CAM) or static random access memory (SRAM) chips. In a cost per information bit comparison, CAMs are more than 100 times more expensive and consume more power than DRAMs. Agere didn't just integrate four devices and memory on a single chip. Rather, it developed an architecture that takes advantage of all the various functions and inter-dependencies of those functions onto a single device.

As part of Agere's broad portfolio of network processor-based solutions, Agere also provides a high-level, application-oriented software programming environment. This environment, which can reduce both the complexity and size of software code required by a factor of 25 or more, is included in Agere's Festino™ comprehensive hardware and software development platform. Equipment makers using Festino can deliver their product to market several months faster and accomplish in days what would normally take them months using alternative technologies. Furthermore, the reduction in software complexity and size can save millions of dollars in software-related costs over the life of the equipment.

Agere Systems is also announcing today the PayloadPlus APP520 chip, which is essentially the same device as the APP540 yet targeted at lower-cost applications. Agere's two new chips are completely designed and ready for manufacturing now. They are scheduled to start sampling to customers in April. In quantities of 10,000, the chips are priced at $295 and $195 respectively.

For more product information, customers may call the Agere Systems Customer Response Center, 1-800-372-2447, Dept. B02 (in Canada, 1-800-553-2448, Dept. B02, fax number 1-610-712-4106, especially for callers outside of North America) or write to Agere Systems, Room 10A-301C, 1110 American Parkway NE, Lehigh Valley Central Campus, Allentown, Pa. 18109. Customers may also go to the following web site: www.agere.com or email: docmaster@agere.com.

Agere Systems is a premier provider of advanced integrated circuit solutions that access, move and store network information. Agere's access portfolio enables seamless network access and Internet connectivity through its industry-leading WiFi/802.11 solutions for wireless LANs and computing applications, as well as its GPRS offering for data-capable cellular phones. The company also provides custom and standard multi-service networking solutions, such as broadband Ethernet-over-SONET/SDH components and wireless infrastructure chips, to move information across metro, access and enterprise networks. Agere is the market leader in providing integrated circuits such as read-channel chips, preamplifiers and system-on-a-chip solutions for high-density storage applications. 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 www.agere.com.

Agere's Forward-Looking Statements
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, 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, timely completion of employment reductions and other restructuring and consolidation activities, 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, 2002. 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.

* ETRI

** Ryan, Hankin, and Kent