Dear Avaya Shareholder,

On October 26th, we accounced our fiscal quarter and year-end results. These results cap a year of substantial accomplishment and progress as we executed against our plan to build value for shareholders.

At the beginning of FY2004, we said we planned to capture growth opportunities resulting from the technology transition occurring in enterprises worldwide. The transition to IP telephony is well underway, and its pace has increased in key markets, such as the U.S. We have maintained our strong leadership position amidst this technology transition. Our sales of servers, software and gateways continued to show robust growth this quarter, compared to the third quarter and year-ago quarter. According to Synergy Research, we are the leader in enterprise IP telephony revenue and IP telephony ports shipped.*

During the year we worked hard to improve our operations and create a business model scaled to deliver sustainable improvements in profitability. With our improved operating leverage, higher sales led to substantially higher profitability, and we posted our first annual profit since becoming an independent company four years ago. We are enjoying significant momentum in the marketplace, and we are converting that momentum into increased profitability and financial strength.

Underlying this momentum are Avaya's strategic advantages. Our clear focus on the enterprise, significant voice expertise, comprehensive suite of applications, and end-to-end portfolio of services offerings enable us to give our large installed customer base — and new customers — a real choice when they migrate to IP telephony.

Strategic acquisitions and divestitures throughout the year — including the sale of our Connectivity business and key acquisitions in India, Europe and the U.S. — will further strengthen our competitive position in the market.

Our 2004 fiscal year confirmed our ability to deliver on our strategic goals and objectives. Going forward, we are committed to building on these successes as we work to drive value for shareholders.

I invite you to review our 4th quarter earnings press release and accompanying presentation in the Investor Events section of the site. You may also be interested in learning about our plans for FY2005, which we presented last week at our investment community meeting.

Donald K. Peterson
Chairman and Chief Executive Officer