ADC Provides Updated Third Quarter Guidance and Announces $50 Million Per Quarter in Additional Cost Reductions Beginning in its Fiscal Fourth Quarter.

Business Editors & Technology Writers

MINNEAPOLIS--(BUSINESS WIRE)--Aug. 1, 2001

Completed and Planned Cost Reduction Actions to Result in Future

Annual Operating Savings of Up to $450 Million

ADC (Nasdaq:ADCT, www.adc.com) today announced its third quarter pro forma EPS results would be at or close to a loss per share of $0.05, which is the low end of its previously stated guidance for the quarter ending July 31, 2001, and that its revenue for the third quarter would not meet previously stated guidance. The company also stated that it intends to reduce its operating expenses by an additional $50 million per quarter ($200 million annualized) through actions to be implemented beginning in its fiscal fourth quarter ending October 31, 2001.

The cost reduction actions will include further workforce reductions, the divestiture of additional non-strategic product lines, spending cuts and the consolidation and closure of certain facilities. On an annualized run-rate basis, ADC's completed and planned actions are expected to result in a cumulative reduction of annual operating expenses of up to $450 million.

Outlook

"For our fiscal third quarter, we expect that our pro forma loss per share will be around the low end of our previous guidance. However, we do not expect to reach the $600 million low-end of our previously stated guidance for third quarter revenue," said Rick Roscitt, chairman and CEO of ADC. "In looking forward, we are ahead of plan in our overall cost reductions to date and have made enormous progress in our goal to return to profitability and positive cash flow. However, given the slow industry wide recovery of revenue growth, we do believe that it is prudent to remove additional costs from our operations in the fourth quarter and beyond."

The company's third and fourth quarter results will include non-recurring and restructuring charges related to these actions, the amount of which has not yet been determined. The estimated pro forma EPS does not include such charges. The company's liquidity position, net of debt, remains strong with approximately $575 million in cash, marketable securities and unused lines of credit, as of July 31, 2001.

"We have made good progress in solidifying and improving our liquidity and expect that cash flow from operations, before capital expenditures, will be positive for the quarter," said Bob Switz, chief financial officer of ADC. "Through these cost reduction actions and the cash obtained through the sale of non-strategic business lines, we are strengthening our liquidity during this tough economic downcycle."

Cost Reduction Actions

Roscitt said ADC is expanding its cost reduction efforts in response to continued weakness in spending on equipment and services for broadband communications networks. "Our customers continue to hold their capital spending to levels below those of the prior year and we are currently seeing few commitments to increased spending near term," said Roscitt.

"Long-term, we are confident that low penetration rates of broadband services combined with strong demand for broadband services by businesses and consumers will drive our customers to return to higher levels of investment in deploying broadband networks," said Roscitt. "In the meantime, to remain competitive, increase cash flow, improve profit margins, and position ADC's earnings to accelerate out of this downturn once it ends, we will cut costs further, exit additional non-strategic product lines and consolidate or close some of our facilities. Unfortunately, these actions will result in additional reductions in our workforce. While painful for our people, these actions are necessary to ensure ADC's competitive strength and prosperity long-term," said Roscitt.

Since joining ADC in February 2001, Roscitt has led an effort to refocus the company on targeted, high-growth broadband access technologies and its core broadband connectivity and systems integration services businesses amidst a sharp downturn in the telecommunication industry's capital spending. "Current conditions demand that we focus our resources even more sharply on opportunities where we have sustainable advantages and attractive growth potential," said Roscitt. "We will continue to remove non-strategic products from our portfolio and drive down our costs so that ADC emerges from this current downturn a stronger, more focused and more competitive company."

The cost reduction measures announced today include the elimination of approximately 2,500 positions in addition to the 7,000 positions the company has eliminated through voluntary and involuntary reductions and planned divestitures since November 2000. By October 31, 2001, ADC estimates its worldwide employment will be reduced by approximately 40% since November 2000.

ADC continues to identify and eliminate product lines that are not integral to its focus on high-growth opportunities in broadband access technologies and to its core broadband connectivity and systems integration businesses. Earlier this year, ADC announced the sale of its Broadband Communications Division to C-Cor.net for $32 million. The sale is expected to close later this month. Additional product line sales are currently pending and the company has expanded the range of product lines it will consider for divestiture.

ADC today also announced that it has entered into an agreement to sell the assets of its Access Products Division and Broadband Wireless Group to Platinum Equity, LLC, a privately held firm specializing in mission critical technology companies. The terms of the agreement were not disclosed. ADC will use the proceeds of the sale to further strengthen its financial position. The transaction is expected to close at the end of August.

The sale of these two units includes ATM access concentrators and multiplexers, service delivery units (ServicePoint), and data service units/channel service units (DataSMART/FrameVision) as well as broadband wireless access systems (Axity) and broadcast television transmission systems. Approximately 350 employees are affected by the sale. Also included in the sale are facilities located in Portland, Ore. and McMurray, Pa.

The elimination of additional product lines and the overall effort to align operations with anticipated customer demand is expected to result in the closure of additional facilities. ADC has determined that it will close facilities or curtail operations in Copenhagen, Denmark and El Paso, Texas. The company has also halted construction and development of manufacturing facilities in Shakopee, Minn.; Juarez, Mexico; and Glenrothes, Scotland.

"I am proud of the swift and surgical response of the people of ADC to this prolonged industry downturn," added Roscitt. "In every area of the world and in every function, ADC people have executed difficult strategic choices with remarkable vigor."

ADC will discuss these cost reduction measures and its third quarter financial performance in its quarterly earnings conference call on Thursday, August 23, at 5:00 p.m. EST. The conference call can be accessed by dialing 800.399.7506 for domestic callers and 706.634.2489 for international callers.

About ADC

ADC is The Broadband Company(TM). ADC's fiber optics, network equipment, software and integration services make broadband communications a reality worldwide by enabling communications service providers to deliver high-speed Internet, data, video and voice services to consumers and businesses. ADC (Nasdaq:ADCT) is a Fortune 500 company with sales into nearly 100 countries. Learn more about ADC Telecommunications, Inc. at www.adc.com.

Cautionary Statement Under the Private Securities Litigation Reform Act of 1995

All forward looking statements contained herein, particularly those pertaining to ADC's expectations regarding future operating results, product divestitures and facilities consolidation, reflect management's current expectations or beliefs and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. ADC Telecommunications cautions readers that future actual results could differ materially from those in forward-looking statements depending on the outcome of certain factors. All such forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, negotiation of divestiture transactions and facilities closures with third parties on favorable terms; overall demand for ADC's products or services; the demand for particular products or services within the overall mix of products sold, as our products and services have varying profit margins; changing market conditions and growth rates either within ADC's industry or generally within the economy; volatility in the stock market; new competition and technologies; increased costs associated with protecting intellectual property rights; retention of key employees; pressures on the pricing of the products or services ADC offers; and other risks and uncertainties, including those identified in Exhibit 99-a to ADC's Report on Form 10-K for the fiscal year ended October 31, 2000. ADC disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.