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Avaya's Fourth Fiscal Quarter Revenue Increases 4 PercentSequentially From Third Fiscal Quarter

  • Company Reports Net Income Of $66 Million; Company Earns 15Cents Per Diluted Share In Fourth Fiscal Quarter On A GAAP Basis;Cash Balance Increases For Fifth Straight Quarter To $1.192Billion, Putting Company In Net Cash* Position For First Time

Avaya Inc., (NYSE:AV) a leading global provider of communicationsnetworks and services for businesses, today reported fourth fiscalquarter net income of $66 million or earnings of 15 cents perdiluted share for the fourth fiscal quarter ended Sept. 30, 2003.

Avaya Inc., (NYSE:AV) a leading global provider ofcommunications networks and services for businesses, today reportedfourth fiscal quarter net income of $66 million or earnings of 15cents per diluted share for the fourth fiscal quarter ended Sept.30, 2003.

These results compare to net income of $8 million or earnings of2 cents per diluted share in the third fiscal quarter of 2003.

Fourth fiscal quarter revenue of $1.118 billion was 4.3 percenthigher than third fiscal quarter revenue of $1.072 billion.

These results are reported in accordance with U.S. generallyaccepted accounting principles (GAAP).

Avaya noted its cash balance increased for the fifth straightquarter to $1.192 billion, giving the company a net cash* position,for the first time since its inception, of $239 million. Selling,general and administrative expenses declined $30 millionsequentially from the third fiscal quarter and operating income forthe fourth fiscal quarter was $87 million, an increase of $70million from the third fiscal quarter.

In the fourth fiscal quarter of 2002, Avaya reported a net lossof $544 million or a loss of $1.50 per diluted share on revenue of$1.152 billion.

CEO Comments
"As I review the fiscal year just completed, I see Avaya in asubstantially different position from where we were at our spin-offthree years ago and compared to where we were just 12 months ago,"said Don Peterson, chairman and CEO, Avaya. "Today, we areprofitable, with a proven financial discipline that has helpedprovide us with a strengthened financial position. We have ascalable business and financial model that allows us to competeeffectively for the opportunity in our marketplace. We are themarket leader in IP telephony, with solution and services offerscustomers can use to extend their existing technology investmentsto improve operational performance. We'll continue to focus onthree themes: performance, potential and positioning Avaya forprofitable revenue growth."

Fiscal 2003 Results
Revenue for fiscal 2003 was $4.338 billion compared to revenue of$4.956 billion for fiscal 2002, a decline of 12.5 percent.

The company had a net loss of $88 million or a loss of 23 centsper diluted share for fiscal 2003, compared to a net loss of $666million or a loss of $2.44 per diluted share for fiscal 2002.

Company Comments On Presentation Of SignificantEvents
Avaya has provided information about significant quarterly eventsin a table, along with the dollar value of the events. Beginningthis quarter, however, the company will not provide the net pershare effect of the events on quarterly earnings. Investors andothers interested in the company will be able to use theinformation about such events to make their own assessment of theper share effect of the significant events on earnings.

Among the significant events included in this quarter's resultsis a gain of $46 million as a result of curtailing pension andpost-retirement plans.

Business Highlights
Since the end of the last quarter Avaya has made a number of keyannouncements, including:

Grupo Santander, Spain's largest financial service group, willimplement an Avaya converged communications network to support itsnew financial campus in Madrid. The 12-building facility willaccommodate up to 5,000 people connected by the Avaya network andwill centralize virtually all of Santander's IP telephonyservices.

Mobistar, Belgium's second largest mobile network operator, willuse Avaya's MultiVantage™ Communication Applications-basedsolution to IP-enable its contact centers and eight Mobistar sites.The network will support 1,700 Mobistar employees, includingMobistar representatives at major client sites. The IPfunctionality lets Mobistar people work remotely at customer siteswhere they will be able to easily log onto the Mobistar network andhave the same access to features and information as if they werephysically in the office.

The University of South Florida has upgraded its communicationsnetwork with a converged Avaya Internet Protocol (IP) telephonysolution. The new converged network is enhancing services andlowering operational costs for university faculty, staff and over40,000 students. The upgrade to a converged voice and data networkallowed school officials to reuse nearly 95 percent of its existingnetwork infrastructure to support more than 16,000 IP, digital andanalog phones. Avaya Global Services provided design andimplementation services for the new network, including extensiveproject management to ensure that the large voice and data networkwould perform at optimal levels.

Avaya acquired service delivery technologies and two businessunits from VISTA Information Technologies Inc. The acquisitionsenhance Avaya Global Services' delivery of end-to-end design,implementation and management services for converged, multi-vendornetworks and advanced multimedia contact centers. The acquiredsoftware tools will help streamline integration of complexmulti-channel, multi-vendor contact center networks and enhanceremote network management capabilities.

The Avaya Customer Interaction Suite extends Avaya's patentedpredictive routing technology to contact center customers who cometo the center via e-mail or the Web. Previously, this capabilitywas only available when a customer called the contact center on atelephone. This new capability enables businesses to serve a largernumber of customers more effectively. The suite also helps ensurecontact centers comply with updated state and national regulatoryrules, including "Do Not Call" registries. The suite helps contactcenters manage business priorities while adhering to new regulatoryrequirements, and provides tools to generate a consolidatedcompliance report.

About Avaya
Avaya Inc. designs, builds and manages communications networks formore than 1 million businesses worldwide, including 90 percent ofthe FORTUNE 500®. Focused on businesses large to small,Avaya is a world leader in secure and reliable Internet Protocol(IP) telephony systems and communications software applications andservices.

Driving the convergence of voice and data communications withbusiness applications — and distinguished bycomprehensive worldwide services — Avaya helps customersleverage existing and new networks to achieve superior businessresults. For more information visit the Avaya Web site:

This news release contains forward-lookingstatements regarding the company's outlook for operating resultsand future cash needs based on current expectations, forecasts andassumptions that involve risks and uncertainties that could causeactual outcomes and results to differ materially. These risks anduncertainties include, but are not limited to, general industrymarket conditions and growth rates and general domestic andinternational economic conditions including interest rate andcurrency exchange rate fluctuations and the economic, political,and other risks associated with international sales and operations,U.S. and foreign government regulation, price and productcompetition, rapid technological development, dependence on newproduct development, the successful introduction of new products,the mix of our products and services, customer demand for ourproducts and services, the ability to successfully integrateacquired companies, control of costs and expenses, the ability toimplement in a timely manner our restructuring plans, and theability to form and implement alliances. For a further list anddescription of such risks and uncertainties, see the reports filedby Avaya with the Securities and Exchange Commission. Avayadisclaims any intention or obligation to update or revise anyforward-looking statements, whether as a result of new information,future events or otherwise.

* Net cash is defined as cash and cash equivalents less totaldebt outstanding

Management believes that the presentation of net cash providesuseful information to investors about the company's ability tosatisfy its debt obligations with currently available funds. Inaddition, because management reported to investors at the beginningof fiscal 2003 that strengthening the company's balance sheet andenhancing its liquidity was a key goal for the fiscal year,disclosing net cash provides useful information that enablesinvestors to assess whether the company achieved this key goal.

NOTE: Avaya will host a conference call with alisten-only Q&A session to discuss these results at 5:00 p.m.EDT on Tuesday, Oct. 21, 2003. To ensure you are on the call fromthe start, we suggest you access the call 10-15 minutes early bydialing:

Within and outside the United States: 706-634-2454

For those unable to participate, there will be a playbackavailable from 8:00 p.m. EDT, Oct. 21, through Oct. 28, 2003. Forthe replay, if you are calling from within the United States,please dial 800-642-1687. If you are calling from outside theUnited States, please dial 706-645-9291. The passcode for thereplay is 3009779.

WEBCAST Information: Avaya will Webcast this conferencecall live, with a listen-only Q&A session. To ensure that youare on the Webcast, we suggest that you access our Web site ( minutes prior to the start. Slides accompanying theconference call are available at the same location. Following thelive Webcast, a replay will be available on our archives at thesame Web address.

Click here for the earnings statement.

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