Ladies and Gentlemen, thank you for standing by. Welcome to the Agere Systems Investor Relations Conference Call. (Operator instructions). As a reminder this conference is being recorded. I would like to turn the conference call over now to your host, Sujal Shah, Vice President of Investor Relations and Corporate Communications at Agere Systems. Please go ahead.

Good morning and thank you for joining us. With me today are Rick Clemmer, President and Chief Executive Officer, and Peter Kelly, Executive Vice President and Chief Financial Officer. They will discuss highlights of Agere's results for first quarter of fiscal 2007. Then we'll open the call for your questions. Copies of our press release and other supporting financial data are available on our website. All income statement measures on this call, with the exception of revenues will be non-GAAP measures unless we indicate otherwise. Today's earnings release describes the differences between our non-GAAP and GAAP reporting. You can find reconciliations on our non-GAAP financial measures to corresponding GAAP amounts on our website at www.agere.com/webcast. A replay of today's call will be available on our website. I also want to remind you that today's remarks will include forward-looking statements. Our actual results could differ materially from those suggested by the statements made today. Information about factors that could affect our future results is contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2006. Now I will turn the call over to Rick Clemmer.

Good morning and welcome. This morning I will begin with the progress report on our announced merger with LSI Logic. Afterwards Peter Kelly will share with you a detailed look at the quarter’s result and I will finish up with an update on the progress in each of our three businesses. Since our investor call in December to discuss the LSI merger, we have made considerable headway on our merger plans. Abhi Talwalker and I have met with key customers, major shareholders, and the employees of both Agere and LSI. And I am pleased to say the reactions to the merger have been favorable. With our complementary product offerings and greater resources to invest in our businesses, to combine Agere and LSI, we will be better positioned to drive sustainable revenue growth than either company could only tell. [Magician], the combination should generated substantial cost savings in the current year as well as in fiscal 2008, when we estimate that savings will be at least a $125 million. We expect the combination to be meaningfully accretive to LSI’s non-GAAP EPS in 2008. Moreover the combined balance sheet of the two companies will be stronger, and our revenue will be spread over more diverse base of customers. For these reasons, the logic for this merger is compelling. I would like to provide a brief update on the timeline of the merger. The US anti-trust filing was submitted on December 18, and the applicable waiting period expired on January 17 without the US anittrust authorities raising any objections to the merger. On December 22, LSI Logic filed a registration statement containing a preliminary joint proxy statement and prospectus with the SEC, and we will hold our shareholder meeting on March 29. We expect to close shortly thereafter assuming all regulatory approvals are obtained. Now I’ll turn the call over to Peter who will review our results.

Thanks Rick. This morning we reported grossly net income of $32 million or $0.19 per share. Our revenues were at $372 million, with Seagate and Samsung the 10% customers. Our product revenues, the storage and networking were as we expected and we continue to show considerable strength in mobility. However, our revenues from IP were only $21 million which was well below our guidance strengths. We believe that this reduction in IP revenue is a direct result of the uncertainty created by the merger announcement. [While we still] have an impact to our IP revenues and EPS in the first quarter, we see this only as a temporary delay and expect to fully recover these revenues and delivering our forecast in 2007. The $21 million of IP revenue was attributed to the operating segments as follows: Storage $2 million, mobility $13 million, and networking $6 million. Operating segment revenues including IP were as follows: Storage a $128 million, mobility a $123 million, and networking a $121 million. Excluding IP, Storage product revenues were $126 million down 7% from the September quarter and inline with our expectations. The decrease was due to lower shipments from Maxtor legacy platforms, we do not expect to ship any more of these products as we go forward. Excluding IP, mobility product revenues were $110 million, a very strong performance and up 16% on the previous quarter. This strength was driven by increase shipments to Samsung of GPRS solutions. In addition we continue to benefit from the success of Samsung's ultra thin edition phones, where we have a growth footprint. Excluding IP, networking product revenue of $115 million was down 8% as we expected with an inventory burn from a key customer. Our gross profit as a percent of sales was 47% lower than expected as a direct result of the lower IP revenues. Our operating expenses were $139 million in the December quarter and our continued excellence expense control will allow us to hold our expenses roughly flat as we go forward for the rest of the year. Our operating profit of $36 million was 10%. In the quarter taxes were $3 million, interest expense was $6 million, another income was $5 million. On a GAAP basis we delivered net income of $16 million or $0.09 per share. During the quarter we recorded $4 million of GAAP restructuring charges and related cost including $2 million of merger related expenses. Last quarter we indicated that we had entered into an agreement to sell our Orlando facility. However, the buyer was not able to complete his transaction and we now expect to complete the sell of this facility by the end of the year. Turning now to the balance sheet. Inventory closed at $81 million down from $116 million in the previous quarter. This represents a major milestone as we delivered our model target of 8-10s. Next quarter we would expect the absolute dollars of inventory to increase as we position for third quarter revenue growth. Receivables were $242 million and accounts payable were $127 million. I continue to be very pleased with our working capital management. During the quarter our cash balance increased by $50 million to $456 million. We did not buyback any stock during the quarter due to the pending merger. We paid $11 million in restructuring and spend $10 million on capital expenditures. Our total debt all of which is convertible notes during 2009 remains at $362 million. Depreciation and amortization expense for the December quarter was $25 million all of which was related to ongoing operations. CapEx spends related to equity compensation was $11 million in the December quarter. Due to the pending merger we will not be providing detailed guidance for the March quarter. However, at a total at Agere level we expect revenues and EPS in the March quarter to be roughly flat for the December quarter and don't expect any major changes to the business as we work to close the transaction. We continue to expect to be on target for Phase III of the Agere turnaround with revenue growth beginning in the June quarter. Over the past 15 months, we’ve made significant improvements in our operating income on appropriate company on a cost to competitive levels of profitability. I am very pleased that we have executed swiftly and effectively from the turnaround plan we originally outlined for the company. Now let me turn the call back over to Rick.

Thanks Peter. Turning to our businesses each core businesses turned in solid performance in the quarter. Now in our Storage business, we continue to expand our footprint for SOC and preamps. Agere recently announced the industries first single platter 60 gigabyte 1.8 inch hard drive and Agere's SOCs and preamps are used in this program. In addition we are seeing strong acceptance at Seagate, Samsung and Western Digital for our preamps targeted at 160 and 250 gigabyte per platter desktop drives. We also secured key design wins at major customers in 120 and 160 gigabyte per platter mobile drives. Our storage business made recent headlines when we announced the BluOnyx mobile content server. This is a new consumer product category that enables users to store, stream and share music, videos and documents among different devices including cell phones, PC, digital cameras and camcorders. We see it's potential to bring people especially young people together to share content including music, game and video in a social setting. We are currently in active discussions with a variety of consumer electronic device makers and service providers to get the product to market before the end of the year. Perhaps the most important aspect of the BluOnyx device is what it says about how Agere has changed. BluOnyx [wasn’t] years in the making and didn’t require millions of dollar in R&D investment. What it did require was some creative thinking and teamwork. BluOnyx went from concept to product in just five months, [incorporating] existing IP from all three businesses to address an adjacent market opportunity. Similar to our TrueONE development approach, we are identifying additional ways to create added value from existing IP. Turning to mobility, our strategy of focusing on the sweet spot of the cell phone market is allowing us to gain share and grow revenue. The fact that we posted revenue growth in December quarter, which has historically been our lower sales quarter for our mobility business, signifies our strength in this market. During the quarter, we announced our TrueNTRY X122 platform, which is lower cost version of Agere’s X125 platform. Like the X125 for EDGE application, the X122 for GPRS makes possible CD-quality music on entry level cell phones. During the quarter, Samsung rolled out is Ultra Music F-300 mobile phone that uses our baseband solution. The cell phone integrates a complete music player with superb sound quality and offers a dedicated music touch screen interface, that makes it easy to navigate through you music content. The broad -- the product also has all the extra features consumers have come to expect including a 2 megapixel camera and long lasting battery life. Meanwhile, we continue to benefit from Samsung success in their Ultra Edition phone series. The XA20 and DA-30 models are being promoted by Samsung as the world’s thinnest mobile phones in the respective bar and flip phone form factors. These phones use Agere’s innovative package-on-package design, which enables the phones to so thin. Turning to networking; we continue to make tremendous progress with our TrueONE system level solutions that enable delivery of higher revenue generating, carrier class services based on superior packet processing technology. We continue to win key sockets, [exploit] major incumbents at top networking accounts and expand our served available market. As an example, this past quarter, we were able to expand our business with new design wins at Ericsson across wireless and wireline platforms, leveraging a number of our TrueONE technologies. These wins for us are led by our DSP technology, as well as network processors in framing and mapping IC. We consider this to be a significant win with one of the leading wireline -- wireless infrastructure company. And we expect the platforms incorporating our technology to start shipping it later this year. During the quarter we reinforced our presence in the digital home, with our announcement that Samsung has chosen our TrueONE residential solutions for it's new home media servers and gateway, that enabled mobile and broadband in the home and drew a high level of interest at CES. With these applications, Agere provides a complete system solution including software. The TrueONE residential offering for Samsung includes the bulk of IC content-per-platform including network processors, Network Attached Storage, DSP, Gigabit Ethernet Bus and USB chips. This solution delivers more HDTV channels and a higher quality video in the homes in competing products, thanks to our QoS technology. It also enables up to 4 terabytes of multimedia storage capability. These combined features make it one of the highest performing, most reliable, and most scalable solutions for the digital home entertainment market, enabling service providers to generate new revenues from innovative and sticky services and dramatically increase their return of investments. We expect these platforms to ramp in to production in late 2007. This win makes Samsung a customer of all three of Agere businesses; mobility, storage and now networking. We expect this to be Agere’s last Earnings Call before our merger with LSI. In my 15 months as CEO, Agere’s made tremendous stride as we executed on our three phase turnaround plan. In Phase 1, we energized our three businesses through new leadership, and developed a corporate vision and strategy. In Phase II, we narrowed our investments, focused our resources on the markets where we have the technology and customers to win. And implemented and executed on the process to reduce cost throughout our businesses. As a result, we have improved profitability, and have a solid baseline of products and design wins to, and as we have said before, generate future revenue growth for Phase III and beyond beginning in the June quarter. Our customers and our shareholders, and our employees have all benefited from this hard work. Our customers are confident in our ability to deliver on our commitment. As a result, we have grown shares at major accounts. Our shareholders enjoy the company’s first full year of GAAP profitability as a public company, and its significant increase in shareholder value. And our employees are confident in the company’s future. The validation of everyone’s hard work was our merger agreement with LSI. Abhi Talwalker and his team recognize the tremendous value we had created, and also agreed that a combined Agere LSI would be a powerhouse in the marketplace. I would like to now take this opportunity to thank all my friends and associates at Agere for their tremendous effort to make this turnaround an outstanding success and to express my true appreciate to our investors for their support and encouragement along the way. I would like to now turn the call back to Sujal.

Thank you, Rick. At this point, we will begin the Q&A portion of the call. Kelly will you please give the instructions for the Q&A session.

(Operator Instructions). Our first question comes from Charlie Glavin from Needham & Company. Sir, your line is open.

Thanks and thanks guys. I guess a couple of housekeeping, I know you guys aren’t giving the exclusive guidance. But Peter, in terms of the IP and you mentioned a possible disruption relative to the merger and given the implied guidance. Is this going to be a multi quarter situation that Agere and LSI will need to resolve or has it really already been resolved in terms of the financial impact?

I think in Q1, Charlie, we are in the situation where as you always all with these kinds of things. If you have some people who maybe try and take advantage of you and I really think I am mistaken in this case. So, I think we have one or two people who are waiting until a the market closes, so yes it could possibly have an impact in Q2, but personally I think financially this will work out quite well for us.

So there would be probably retro payments as well?

Definitely, Charlie, so I guess one of the things that’s important is, as we talked about we still believe where the same kind of IP revenue for the year obviously after the merger with the combined company. I think one of the things that Abhi and his team has been looking at is the significant number of patents they have in their IP portfolio and I know they are very anxious to look at the combined activity following the merger and see how they can actually monetize and create the value from that. So I am really encouraged about the opportunity to take the team that we have in place that’s done an excellent job of generating real revenue from their intellectual property portfolio we have with nearly doubling the number of patents as they have it and they are disposable to go out and talk to the licensees associated with it. So we are very encouraged about the opportunity that’s created there and certainly wait for the year that they will be on track.

And the whole objective of trying to target particularly the 802.11 legacy patents, that hasn't changed including with Abhi?

There hasn't been any changes at this point in time we are still focused on the portfolio that we have as we go through the merger obviously there will be discussions and opportunities that will be evaluated but there is not anything that we can talk about at this point.

Rick -- I would just say Charlie what's interesting really is if we haven't have this say this people about, I think they foolishly trying to take advantage of us. We probably would have come in at about $0.25 for the quarter in fact it was a pretty good quarter really if you think about mobility had a great quarter, networking is being a lot of discussion in the marketplace, but really that was elementary shifts we discussed earlier. And Storage I think we said on the last call that Maxtor will drop about 25 to 5, so about $20 million drop that’s what happened. So if it wasn’t for Maxtor our Storage revenue would have grown by about 10%. So it really has a very strong underlying business I think. And as I said -- to say and we have this impact, but i.e. we have to confess or feel very confidence about our future.

Either if I --

I think some of those people that have waited when we have more patents to come after and actually may end up costing more after the end of the transaction.

It's either -- just a clarification on that, if you back out the Maxtor though the $20 million it's another second year original guidance was down 5% to 10% and given the recent results from Seagate and no surprising that this was a little weaker even beyond the Maxtor. Was there anything else or is it just?

As on the reserve we could Charlie, I think we had backed on Maxtor. You were talking specifically about storage right?

Yes, Storage and versus the original guidance. I believe the original guidance.

We are talking Storage product revenue, I mean, we are talking Storage product revenues. Our product revenues were down about 8% I think. We took our Maxtor would have been up 10% and maybe you are including the IP the other thing I was kind of slightly add on IP this quarter is most of our IP licenses at the moment relates to process technologies and allocated pretty generically across the businesses. Every year -- every now and again though we have a quarter where there is a specific license that is attributable to one business. So I think you probably have noticed that IP revenues allocated to storage were relatively low and to networking was relatively low and to mobility was relatively high and that was just a function of one of the deals we [haven’t] close is very specific to wireless technology this quarter.

Great. Thanks guys.

Thanks, Charlie.

Thank you, Charlie. Can we have the next question, please.

Yes. Our next question is Mark Edelstone from Morgan Stanley. Your line is open.

Hi. Thanks a lot guys, its been a lot of fun. Just had the follow-up question on the IP situation, can you just give us some kind of -- or a magnitude of how many people paid you during the quarter and how many of the potential licensees were unwilling to step forward?

We don’t disclose how many licensees we close each quarter, Mark. But the number that didn’t close was actually quite small.

Okay. And it sounds like Peter, from your comments that this would have been a $0.25 quarter, so just that your belief was that it was about a $10 million miss from what you think you were entitled to?

Exactly, Mark.

Okay, fantastic. And then, what kind of inventory build are you planning here for the current quarter?

I think it could be up to may be 20 million.

Okay, great.

And that Mark that’s clearly just to be in a position to support the revenue growth that we have been talking about for the second half of the fiscal year.

We would expect turns to stay at 8, 8.5.

Okay, looking forward to the growth. Thanks a lot guys.

Thanks Mark.

Thanks Mark. Can we have the next question, please?

The next question is Seogju Lee from Goldman Sachs. Your line is open.

Fine, thank you. Just, if we could look at the revenue and just by end market standpoint for the outlook. If you could just give us some view in terms of how you expect the end markets are shaping up for the March quarter? Thanks.

Well. I think the -- we have talked about relatively flat. Our mobility business was strong in December, so we would expect to go through more of a seasonal adjustment in March, more like what the industry has experienced in our recent track records based on the strength that we had in the December quarter. We would expect our networking business to be roughly flat, really in the next quarter waiting for the growth in the second half that we have from to design wins that we have in place, and the storage business to be flat to up slightly based on Seagate’s commentary that you probably heard earlier this week. Intellectual property will continue to have some puts and takes due to the situation associated with the merger, but overall we expect total revenues to be roughly flat with the December quarter. And then we continue feel very comfortable with the design wins and business we have in place for the growth in the second half the year that we continued to outlined, associated with the total business.

Right, thanks. And then just one question on the IP, you’ve and LSI have talked a little bit about the accounting associated with IP post the transaction. If you could -- if there has been any additional color that you could give in terms of how that accounting impacts the actual revenue and the flow through, it would be very helpful?

I don't think there is any thing new, I think it as [Brian Look] said, through merger accounting any deals that you have already agreed and the deferred revenue you may have on the balance sheet goes to equity during the merger accounting. And I think Brian said that the impact in 2007 would be about $30 million. But clearly you still collect all the cash and you still get the benefits in your retained earnings or equity accounts.

Okay. And the issue with IP now it doesn't impact that?

No, no. In fact it could make that better. You only done a deal and you will be able to recognize it all in the post merger.

Okay, great, thanks. Good luck.

Hey thanks Seogju. We have the next question please.

(Operator Instructions) Our next question comes from the Bill Lewis with JP Morgan. Sir, your line is open.

Great, thank you and good morning. In terms of the guidance for next quarter, I guess just a clarification around margins. You talked about the revenue outline in the different business, but as you also said with the fall of an IP that probably [could use] $0.05 in earnings Operator so. Is your expectation to see a rebound there kind of supporting margins or is it going to continue at these levels?

Well a lot depends on what happens to IP. I think the important thing is to talk about what we expect from a medium term perspective Bill. And what we’ve said in 2007 is we will expect gross margins to be between 49 and 51%, and I see no reason to change that. I think the only thing that’s expected, our margin probably is -- we continue to do extremely well OpEx. The team has just done a fantastic job. We were a 139 this past quarter. We really think going forward that plus or minus a couple of million, that’s a good quarterly number going forward. So, clearly that will help margins as we go through the rest of 2007.

And, then in terms of the growth in the June quarter, are you anticipating sequential growth, annual growth or both?

Both.

And then, last, could you just give us an update on what occurred in the satellite radio business in the quarter?

Satellite radio business is relatively small. I think it’s roughly flat actually.

I don’t think there was any significant change in the quarter, it was roughly flat.

Okay. Great, thanks guys.

Thanks Bill.

Thanks Bill, can we have the next question please.

Yes sir, our next question comes from Suji De Silva from Cathay Financial. Your line is open.

Hi Rick, hi Peter. And it's going to be tough not covering you guys anymore but, couple of question on the 3G landscape, it sounds like, can you give us an update competitively, how things are shaping up there.

We continue to be in really good shape. Our share position that we have in 2.5G and continues to be strong and we don’t see that changing in the near term. Our first 3G handset was qualified with the five major networks and we were doing fine-tuning associated with that, so that we would anticipate that, that actual first handset will be shipping here in a matter of weeks or no more than a couple of months, so, clearly within this quarter. So, I think we continue to be in an excellent position, the relationship is strong, is indicated with the results that we demonstrated in the December quarter with our mobility business and we continue to be very encouraged.

So, 3G revenue in the current quarter there we can accelerate.

There won't be any real significant revenue at all, I mean it I think we talked about it really wouldn’t have any significant impact until very late in fiscal '07.

Sure, and Kelly on the Storage side you can update us on your opportunity of Western Digital beyond that where you are now.

Well we continue to be in an excellent position within on preamps, our next generation rechannel technology which will be at this quarter. We continue to get good positive feedback from all the disk drive manufacturers about the capabilities in the technology and we were positioned to associate with that. So, we continue to have ongoing discussions broadly with virtually all disk drive manufactures associated with that. Even if there is new design win from a new customer associated with it, we wouldn't see any real revenue for a couple of years associated with it. So it's not like it's going to have any significant impact on revenue any time near term, but it's really more about continuing to establish in and regain our leadership from a technology position that would bode well for future revenue growth down the next couple of years and being able to broaden our footprint on the platforms that we cover into a broader space as well as the number of customers that we shift to.

Fair enough thanks and last question guys. I know Rick you and Abhi have been out there talking to the constituencies during the merger integration process that customers have found so forth, can you give us color from those discussions and thanks again guys?

Yes, so I think all the discussions have gone really well, all of our major customers after we have gone through it, clearly on the Storage side the combined entity creates a true power house from the storage industry that has a leadership position that is relatively untouched. I think the opportunity in the networking side to bring together some of the capabilities that LSI has demonstrated in the past to create a very solid and significant competitive growth platform and really drive the packet processing leadership that we've established through our QOS capability and broadened that to the SMP as well as now the high-end consumer access it is very significant. And with the strength of the combined company and the balance sheet to continue to make the investment in a mobility business established a leadership and play out that opportunity more there is. As you know, relatively speaking some confusion relative to the supplier base but the alignment that we’ve been able to achieve in the strong customer base. We think positions the combined company pretty well to take advantage of that mobility. So feedback from customers is being extremely positive you are seeing the feedback from Seagate in the actual announcement associated with it I think on all the Storage price has been positive, the feedback from Samsung is being very positive and so we’ve had nothing but positive feedback from customers. From our supplier base we look forward to the opportunity. We talked about the synergies that they reached $125 million and roughly half of that is coming from cost of goods. So, the additional buying power that the combined entity has to be able to go leverage that and certainly take the internal assembly test capability that we have at Agere and leverage that across the LSI requirements as well is what drives our portion of that synergy. So we continue to be extremely encouraged about the opportunity that’s created and how we can move forward with that.

Thanks again. Good luck to you guys.

Thanks a lot.

Okay thanks, Suji. I guess Kelly could you try one more time to poll to see if there is anymore questions.

(Operator Instructions). Sir we do have a question from Charlie Glavin from Needham & Company. Sir your line is open.

Yeah I didn’t want you guys to feel too lonely in this morning.

Thanks Charlie.

Peter, kind of quietly you guys exceeded your OpEx target yet again. So which I am sure you are going to make the voice over at LSI feel pretty good that you have given them pretty streamline ship, but given feel breeze during our conference you mentioned that it seems as if a lot of the employees are actually jazzed up about the merger and you are still cutting cost. For those who are now looking at the combined entity going forward, it sounds like you feel that this 140 or below is a sustainable rate assuming all restructuring cost and others are aside. Is that the proper way of looking at it?

Yeah. I think so. And its, our headcount only reduced by 1% this quarter, Charlie. So its not just about headcount, it’s also how you negotiate with suppliers. I think Rick has made several comments in the past 15 months about the process we introduced to mange the cost. I think, one of the great things for the combined entity is – this process is very transferable. And, unfortunately some of the synergies will have to come from people of course. You only need one CEO, you only need one CFO. But there is also a lot of fixed cost in the organization that start to disappear. You’ve already cost your filling cost, insurance costs, there’s cost around building. So it’s not just about people. But I think the important thing is we have a really good process that will enable us to mange our cost going forward. And certainly from a gross margin prospective I think our additional buying power will give us lots of opportunities with the various suppliers.

Great. And then Peter that does not mean to end this on kind of a [downer]. But what exactly happened with Orlando? Was that also merger related or --

No, no the buyer just couldn’t get his financing sorted out. So we still further expect to sell that.

You mean the same buyer?

Yes, possibly if he comes back fast enough back with his financing, we will sell it to some of the other people we have been talking to.

It's really transparent it's just when the cash comes in and now it looks like it could be after the close of the merger and later this year so it's still the same potential and nothing really changes significantly associated with it.

Okay well thanks guys we will see you around the call.

Thanks Charlie.

So I guess if there is no other questions at this point I would really like to come back and thank all of you for your support. We have been extremely pleased with the efforts of all the employees as well as our shareholder base in their support as we've gone through the turnaround, the results of this is demonstrated by the increased shareholder value as well as the opportunity to create a very significant company going forward that has opportunity to continue to take an increased position in the marketplace. So thanks a lot for your support and good luck.

Okay, thank you Rick and we wish all of you a nice day, back to you Kelly.

Thank you. Ladies and gentlemen this conference is available for replay starting today at 10 am and running through mid night at on January 31, you may access the replay by dialing 1866-511-5002, international participants may dial 203-369-1952. The call is also available via our webcast replay at http://www.agere.com/webcast. That does conclude your conference for today, thank you for your participation you may disconnect.