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Avaya Comments on Outlook for Fiscal Years 2005 and 2006

10-29-2004

Avaya Inc. (NYSE:AV), a leading global provider of business communications software, systems and services, today provided an outlook for fiscal year 2005 and 2006 operational goals during its annual investment community meeting.

Avaya Inc. (NYSE:AV), a leading global provider of business communications software, systems and services, today provided an outlook for fiscal year 2005 and 2006 operational goals during its annual investment community meeting.

Avaya said its operating margin goal for fiscal year 2005 is between 8.5 percent and 9 percent on fiscal 2005 revenues that are expected to grow by between 25 percent to 27 percent compared to fiscal year 2004 revenues of $4.055 billion.* Operating margin for fiscal year 2004 was 7.6 percent.* Avaya said the expected growth in fiscal 2005 revenues will come from its existing businesses and the impact of its acquisition of Spectel, its majority interest in Avaya GobalConnect (formerly Tata Telecom), and assuming a Jan. 1, 2005 close of its pending acquisition of Tenovis.

For fiscal year 2006 the company has an operating margin goal of between 10 percent and 12 percent.

Avaya reiterated its existing balance sheet goals of maintaining a strong net cash position and keeping debt at a level no higher than its debt level prior to the planned acquisition of Tenovis. The company also said its longer-term goals of improving its credit rating to investment grade, opportunistically deleveraging its balance sheet and maintaining a cash position of approximately one billion dollars remain.

The company also said beginning with the first fiscal quarter of 2005 it will report product revenues in a single segment called products and applications. Avaya's services segment reporting will remain unchanged.

About Avaya
Avaya Inc. designs, builds and manages communications networks for more than one million businesses worldwide, including over 90 percent of the FORTUNE 500®. Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol telephony systems and communications software applications and services.

Driving the convergence of voice and data communications with business applications — and distinguished by comprehensive worldwide services — Avaya helps customers leverage existing and new networks to achieve superior business results. For more information visit the Avaya Web site: http://www.avaya.com

This news release contains forward-looking statements regarding the company's outlook for operating results based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to, general industry market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations and the economic, political, and other risks associated with international sales and operations, U.S. and foreign government regulation, price and product competition, rapid technological development, dependence on new product development, the successful introduction of new products, the mix of our products and services, customer demand for our products and services, the ability to successfully integrate acquired companies, control of costs and expenses, the ability to implement in a timely manner our restructuring plans, and the ability to form and implement alliances.

For a further list and description of such risks and uncertainties, see the reports filed by Avaya with the Securities and Exchange Commission. Avaya disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

* Avaya's reported fiscal year 2004 revenues of $4.069 billion included $14 million as a result of the fourth fiscal quarter reversal of a reserve for sales returns and allowances. Avaya based its fiscal 2005 revenue goal on fiscal 2004 revenue, net of the $14 million. Fiscal 2004 operating margins exclude $12 million from the reversal.

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