Agere Systems Acquires 3G/UMTS Processor Developer Modem-Art

Allentown, PA -- Agere Systems today announced that it has acquired Modem-Art Ltd., a privately held developer of advanced processor technology for 3G/UMTS mobile devices. With this acquisition, which complements Agere's existing products, Agere is further enhancing its ability to address rapidly evolving cellular technologies with integrated chips and software for today's 3G market and widely anticipated future demand for HSDPA (High Speed Downlink Packet Access) technology. To date, Agere and Modem-Art have already secured multiple 3G/UMTS designs with leading wireless device manufacturers for phones and PC card applications.

Agere acquired the Israel-based company for $145.1 million, consisting of cash and stock. Agere will pay $30.5 million in cash and will issue approximately 70.3 million shares of its Class A common stock in the acquisition, valued at about $114.6 million based on the closing price of $1.63 for Agere Class A common stock on March 7, 2005. The company expects that it will record a one-time charge for purchased in-process research and development expenses related to the acquisition in the quarter ending March 31, 2005. The amount has not yet been determined. Excluding the in-process research and development charges and amortization of acquired intangibles, the impact of the acquisition on fiscal 2005 earnings per share is expected to be minimal.

Enabling mobile data at up to 384 kilobits per second (kbps), 3G technology delivers the increased bandwidth needed to support such feature-rich applications as real-time audio and video streaming. Service providers will rely on phone makers and solutions suppliers that are able to provide this technology as they look to maintain and increase average revenue per user.

"Modem-Art adds best-in-class UMTS physical layer technology to our portfolio with the evolutionary flexibility that will help us to continue delivering reliable products as network technologies advance for many years to come," said Luc Seraphin, VP of Agere's Mobility Division. "This acquisition is a milestone in an 18-month relationship from which we have already successfully launched a proven silicon and software solution that is receiving widespread market acceptance."

Last month, Agere announced broad sampling of its first 3G standard product, Sceptre HPU (see related story), which delivers W-EDGE capability by combining Agere's proven dual-mode protocol stack and EDGE capabilities with Modem-Art's programmable processing technology. This acquisition allows Agere to bring Modem-Art's unique, programmable processor technology in-house, obtaining this intellectual property for the broad deployment of its W-EDGE products, as well as securing an accelerated path as networks are upgraded to HSDPA connections supporting data transmissions of up to 14 megabits per second (Mbps). It also enables broader market deployment for Modem-Art's product.

"Over the years, Modem-Art has set itself apart as a developer of leading-edge technology with programmable modem engines demonstrating our clear understanding of ever-changing cellular market requirements," said Shlomo Gadot, co-CEO of Modem-Art. "We are pleased to take this formal step which combines two highly gifted and familiar development teams focused on delivering reliable, system-level solutions."

"We are joining forces at a pivotal moment in the evolution of mobile communications, and together Agere and Modem-Art are aiming to provide unmatched solutions that will help speed mass market adoption of new and exciting wireless applications," Dr. Yossi Kofman, Modem-Art co-CEO, added

All 40 Modem-Art employees will join Agere and be based in Raanana, Israel.

Source: Agere Systems