• Revenues Increase 5.9 Percent Over Year Ago Period To $1
• BillionGross Margin Increases To 47 Percent From 44 Percent Compared To Second Fiscal Quarter 2003
• Operating Cash Flow From Continuing Operations For The First Six Months of Fiscal 2004 is $121 Million
  

FOR IMMEDIATE RELEASE: 28 April, 2004

Sydney, Australia – Avaya Inc., (NYSE:AV) a leading global provider of communications networks and services for businesses, reported second fiscal quarter income from continuing operations of $103 million or earnings of 22 cents per diluted share for the second quarter of fiscal 2004.
These results include:

• a $21 million loss related to the redemption of senior secured notes, and a $5 million loss on a sale of CommScope common shares, which are included in income from continuing operations before income taxes; and
• an $89 million benefit included in income taxes related to the favourable settlement of certain tax matters.

Highlights From The Quarter
Avaya introduced new products and announced several customer wins in the quarter including the following:

Morgan Stanley selected Avaya to provide voice networking and contact center solutions to its offices around the globe, including Morgan Stanley’s Institutional Securities Group in twenty countries, Discover Card in the U.S. and Morgan Stanley’s credit card business in the U.K. Avaya Global Services will be Morgan Stanley’s single-point of contact for implementation, monitoring and maintenance of voice networking and contact center solutions around the globe. The implementation of Avaya voice networking marks a shift away from traditional site-based PBX communications to a distributed, IP architecture that gives the company more mobility, flexibility and enhances customer service.

The Boston Red Sox have boosted customer service for their fans and communications capabilities for the team using Avaya IP telephony and contact center solutions. Fans will have easier access to ticket sales with new skills-based routing technology sending each call to an ideally matched agent. During spring training, Avaya IP Softphone provided staff members with the features of their Boston-based business phones through their laptop computers.

Kenneth Cole Productions deployed Avaya Enterprise Branch Connect Solution with Avaya IP Office systems in the company's 82 retail locations across the US. Kenneth Cole's wide area network now links all the stores to its NY Metro-area headquarters and IT center. The solution simplifies management, reduces voice and data-related costs and provides more information on local operations directly to the centralised IT department and headquarters.

Atento Peru, a leading customer service outsourcer, selected Avaya contact center solutions to enhance customer service while reducing operating costs. Atento's new "El Naranjal" Contact Center will have more than 550 agents responding to customers from throughout the Southern Cone. With the Avaya Customer Interaction Suite, customers can now contact the company anytime, anywhere, and use any means (e-mail, Web, or telephone) to access information.

Korea’s Induk Institute of Technology will use the Avaya Wireless AP-3 wireless local area network (WLAN) solution for its next-generation wireless project. Induk will be the first Korean campus to deploy the 802.11g standard WLAN for more than 7,000 students, faculty and staff.

Avaya deployed an Avaya IP Office™ communications system for Horsham District Council in Sussex in the south of England. The new system will enable a faster, more effective response to enquiries from over 121,000 of the district's residents and help Horsham District Council meet the UK government objectives of delivering services electronically by 2005.

The company introduced Avaya Network Bandwidth Optimisation, a service that can create more capacity on a company's communications network and more than double data transmission speeds without investing in hardware-based bandwidth compression systems or network upgrades. The service manages information and data traffic, enabling workers to download data and access the Internet more quickly, regardless of whether they access the corporate network in the office or over a dial-up modem.

Avaya integrated Session Initiation Protocol — an industry standard that enables users to conduct multimedia communications sessions — into its portfolio of IP-based MultiVantage™ Communications Applications. The integration allows for new converged communications solutions bringing Internet applications, such as instant messaging, together with voice and telephone features such as conferencing, voice-mail and "click-to-dial" capabilities. This capability allows individuals and teams across many locations to easily collaborate with the right person, using the right device, at the right time.

About Avaya

Avaya Inc. designs, builds and manages communications networks for more than one million businesses worldwide, including more than 90 percent of the 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 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 website: 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.

*Net cash is defined as cash and cash equivalents less total debt outstanding. At March 31, 2004, this amount is calculated as cash and cash equivalents of
$1,516 million less total debt of $729 million. Net debt is defined as total debt outstanding less cash and cash equivalents. At March 31, 2003, this amount is calculated as total debt of $886 million less cash and cash equivalents of $724 million. Management believes that the presentation of net cash and net debt provides useful information to investors about the company’s ability to satisfy its debt obligation with currently available funds.

Avaya Inc. and Subsidiaries Statements of Operations Three and Six Months Ended March 31, 2004 and 2003 (Unaudited; Dollars and Shares in Millions, except per share amounts)     For the three months ended   For the six months ended   March 31,   March 31,   2004 2003(a)   2004 2003(a)   $ $   $ $ REVENUE              Products 495 471 977 930    Services 511 479 1,000 966   1,006 950 1,977 1,896 COST    Products 236 230 458 468    Services 299 302 600 614   535 532 1,058 1,082 GROSS MARGIN 471 418 919 814   OPERATING EXPENSES    Selling, general and administrative 328 317 641 651    Research and development 83 88 166 174 TOTAL OPERATING EXPENSES 411 405 807 825   OPERATING INCOME (LOSS) 60 13 112 (11) Other expense, net (19) (57) (13) (54) Interest expense (19) (17) (40) (36)   INCOME (LOSS) FROM CONTINUING OPERATIONS    BEFORE INCOME TAXES 22 (61) 59 (101)   Provision (benefit) for income taxes (81) (6) (74) 79 INCOME (LOSS) FROM CONTINUING OPERATIONS 103 (55) 133 (180)   DISCONTINUED OPERATIONS Income from discontinued operations (including gain on sale of discontinued operations of $81 for the three and six months ended March 31, 2004) 21(b) 15 3(b) 21    Provision (benefit) for income taxes (1) 1 1 3 INCOME FROM DISCONTINUED OPERATIONS 22 14 2 18   NET INCOME (LOSS) 125 (41) 135 (162)   EARNINGS (LOSS) PER SHARE - BASIC    Earnings (Loss) per share from continuing operations 0.24 (0.15) 0.31 (0.49)    Earnings per share from discontinued operations 0.05 0.04 - 0.05 EARNINGS (LOSS) PER SHARE 0.29 (0.11) 0.31 (0.44)   EARNINGS (LOSS) PER SHARE - DILUTED    Earnings (Loss) per share from continuing operations 0.22 (0.15) 0.30 (0.49)    Earnings per share from discontinued operations 0.05 0.04 0.05 EARNINGS (LOSS) PER SHARE 0.27 (0.11) 0.30 (0.44)   BASIC SHARES 435 375 428 371 DILUTED SHARES 473 375 466 371   (a) Certain prior amounts have been reclassified to conform to the current year presentation. (b) Income from discontinued operations includes: (i) a gain of $81 million on the sale of Connectivity Solutions (January 2004); (ii) a $24 million pension and postretirement curtailment loss and a $24 million settlement loss recognised upon the transfer of pension and postretirement benefit assets and liabilities to CommScope, Inc.; and (iii) the results of operations from Connectivity Solutions and the portion of the Expanets, Inc. business that distributed other vendors' offerings. (i) a gain of $81 million on the sale of Connectivity Solutions (January 2004);