Lucent Technologies Reports Sequential Improvement For Second Fiscal Quarter 2001

- Sequentially, pro forma revenues from continuing operations increased

36% and pro forma loss per share from continuing operations improved 5%

- Restructuring charge increased to $2.7 billion

- Company reports significant progress with seven-point restructuring

program



Apr 24, 2001, 01:00 ET from Lucent Technologies

    MURRAY HILL, N.J., April 24 /PRNewswire Interactive News Release/ --
 Lucent Technologies (NYSE:   LU) today announced that, on a sequential basis,
 pro forma(1) revenues from continuing operations for the second fiscal quarter
 of 2001 increased 36 percent to $5.9 billion and the pro forma loss per share
 from continuing operations improved 5 percent from a loss of 39 cents(2) to a
 loss of 37 cents.  These results exclude Lucent's business restructuring and
 one-time charges of $2.7 billion and Agere.
     The company's results were significantly impacted by Winstar and the
 writedowns of certain equity investments, which totaled 15 cents per share in
 the quarter.  Lucent said that it has fully reserved for its loans to Winstar,
 which recently announced that it is seeking protection under the U.S.
 Bankruptcy Code.
     In addition, the company announced significant progress with its
 comprehensive business restructuring plan to streamline its operations, reduce
 its cost structure and improve working capital.
     "Lucent delivered much-improved performance in the quarter, despite
 continued softness in several key markets worldwide," said Lucent Technologies
 Chairman and Chief Executive Officer Henry Schacht.  "We saw particular
 strength from large service providers around the world.  We continue to
 aggressively execute on our comprehensive business restructuring program,
 which, coupled with the continued positive momentum we are seeing in revenues,
 is a major step forward in Lucent's turnaround."
     Compared with the second fiscal quarter of 2000, pro forma revenues from
 continuing operations declined 17 percent to $5.9 billion and pro forma
 earnings per share from continuing operations declined 53 cents.
 
     A review of second fiscal quarter performance
 
     "These results confirm that we know what we have to do, and we're doing
 it," said Lucent Chief Financial Officer Deborah Hopkins.  "We saw sequential
 improvement in both the top and bottom lines despite the adverse impact of
 Winstar, and our business restructuring program is generating significant
 positive results for the business.  For example, to date, our aggressive
 management of accounts receivable has resulted in a reduction of more than
 $700 million in past due receivables and a 62-day improvement in days sales
 outstanding (the number of days required to collect a receivable) on a
 sequential basis."
     During the quarter, the company also made progress with its strategy to
 move from a multidivisional company to one that is totally focused on the
 service provider market.  The initial public offering of Agere Systems Inc.,
 formerly Lucent's microelectronics business, closed April 2, 2001, and the
 completion of the spinoff is expected by Sept. 30, 2001.  Additionally, the
 company announced its plans to pursue strategic alternatives for its optical
 fiber business and is currently reviewing several bids.
 
     Progress on the seven-point restructuring program
 
     During the quarter, Lucent made significant progress with its
 comprehensive seven-point restructuring program to drive costs out of the
 business and put Lucent back on track.
     1) In the second fiscal quarter, Lucent recorded a $2.7 billion business
        restructuring and other one-time charges, which exceed the range
        of $1.2 billion to $1.6 billion that was originally anticipated, due to
        more aggressive product rationalization and the associated asset
        write-offs.  Lucent will continue to review its internal processes and
        product portfolio throughout fiscal year 2001, which may result in
        additional cost structure improvements and associated restructuring
        charges.
     2) Lucent is aggressively working to reduce its annual expenses by
        $2 billion through headcount reductions, product rationalizations,
        reduced financing costs and decreased discretionary spending.  During
        the quarter, excluding vendor financing costs, Lucent reduced its
        operational expenses by approximately $75 million ($300 million on an
        annualized basis).  The company expects these savings to accelerate in
        the third and fourth quarters when the impacts of the headcount
        reductions and the product rationalizations are fully realized.  Lucent
        believes it is on target to achieve the $2 billion annualized savings,
        excluding further significant vendor financing reserves.
     3) Lucent's work force reduction plans are on track.  Of the planned work
        force reduction of 10,000, approximately 2,000 employees have already
        been removed from Lucent's payroll and an additional 8,000 will be off
        payroll by our July earnings announcement.  These force reductions are
        primarily related to duplication in marketing, sales and corporate
        center functions, pruning of the product portfolio and reduced volume
        in certain manufacturing locations and Lucent's services business.  In
        addition, 2,200 contractor positions have been eliminated.
     4) The company is on track with its contract manufacturing plans and has
        received bids for its manufacturing operations in Oklahoma City and
        Columbus, Ohio.  In addition, the company is expanding the scope of its
        plans to include locations outside the United States.
     5) During the quarter, Lucent improved its working capital performance by
        $1.5 billion excluding the business restructuring charges and other
        inventory reserves.  Lucent appointed an executive, who reports to
        Deborah Hopkins, Lucent's chief financial officer, to lead a
        company-wide program to reduce working capital through aggressive
        management of inventory and accounts receivable across all product
        units.  The company has also engaged outside consultants to accelerate
        the effort.  Because of the success that was achieved in the quarter,
        the company is considering increasing the target for working capital
        improvement for the year.
     6) For the second fiscal quarter, Lucent reduced its capital spending
        $100 million more than was originally planned.  The company is on track
        to reduce its fiscal-year capital spending by $400 million from
        previously planned levels.
     7) In February, Lucent completed negotiations for $6.5 billion in credit
        facilities to provide the financial resources and the financial
        flexibility to successfully execute its comprehensive turnaround.  As
        part of the Agere initial public offering (IPO), Agere Systems Inc.
        assumed $2.5 billion of the facilities, as planned.  In early April,
        the overallotment option associated with the Agere IPO was exercised,
        which further reduced Lucent's debt by $519 million.
 
     "As we've said, fiscal year 2001 is a transition and rebuilding year for
 Lucent," said Schacht.  "Despite market conditions, we expect modest
 sequential improvement on the top line and, as we've said previously, we
 expect greater sequential improvement on the bottom line from the 37 cents pro
 forma loss per share we reported this quarter, as we feel the full impact of
 the business restructuring program in the third and fourth fiscal quarters of
 2001."
 
     Results on an as-reported basis
 
     On an as-reported basis, revenue from continuing operations for the second
 fiscal quarter of 2001 declined 18 percent to $5.9 billion compared with
 $7.2 billion in the year-ago quarter.
     After including the $2.7 billion business restructuring and one-time
 charges, as well as amortization of goodwill and other acquired intangibles
 and a loss from discontinued operations, Lucent's as-reported results for the
 quarter were a net loss of $3.7 billion, or a loss of $1.08 per basic and
 diluted share, compared with net income of $755 million, or 23 cents per
 diluted share, in the year-ago quarter.
 
     REVIEW OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001(3)
 
     Lucent Products
 
     Revenues were $4.8 billion, an increase of 42 percent sequentially and a
 decline of 19 percent compared with the year-ago quarter when overall market
 conditions were much more robust.  Revenues were primarily driven by sales to
 large service providers in North America and Europe.  On a sequential basis,
 revenues increased across all product lines during the quarter with especially
 strong improvements in optical, switching, data and wireless.
     Within the U.S., revenues increased 68 percent sequentially, despite the
 industry-wide slowdown in capital spending and a significant decline in the
 competitive local exchange carrier market.  Compared with the year-ago
 quarter, U.S. revenues declined 15 percent.
     Revenues outside the U.S. increased 4 percent sequentially and declined 28
 percent compared with the year-ago quarter.  Non-U.S. revenues represented 30
 percent of Lucent's total product sales.
 
     Recent Product highlights include:
 
     * A $5 billion, three-year contract with Verizon Wireless to supply
       wireless systems, software and services for Verizon's wireless network
       in the United States.  The contract positions Lucent to become the
       largest supplier of Verizon Wireless' third-generation (3G) high-speed
       mobile network infrastructure.  Lucent also announced a letter of intent
       with Verizon Communications naming Lucent the supplier of optical
       systems, data products, software and services for Verizon's global
       telecommunications network.
 
     * Two multimillion-dollar agreements for Lucent's new, carrier-grade,
       second-generation Softswitch.  Softswitch was chosen by BT Ignite to
       enhance its voice-over-IP service for consumers and by NTT
       Communications for a next-generation network deployment that will
       support Internet-based and multimedia services.
 
     * The NX64000 Multi-Terabit router is in trials with more than 20
       customers.  When combined with Lucent's high-speed optical transmission
       systems, the NX64000 enables service providers to transmit Internet
       traffic across high-bandwidth optical networks.
 
     * A multi-year contract to supply Deutsche Telekom with Lucent's
       WaveStar(TM) OLS 400G and WaveStar ADM 16/1 transmission systems and
       other equipment for its Telekom Global Net optical backbone network,
       which will extend from Germany to Austria, the Netherlands, the U.K.,
       France, Italy, Switzerland, Belgium and Eastern European countries.
 
     * The deployment of a leading-edge optical networking system for NTT
       Communications of Japan, which will enable NTT to dramatically increase
       network capacity by transmitting information through a wavelength range
       in its fiber that it could not previously use.
 
     * A multimillion-dollar contract with Nextel Communications to provide
       5ESS(R) Wireless Gateway Switches to help Nextel meet the growing
       demands of its digital wireless network.
 
     Lucent Services
 
     Revenues were $1.1 billion, an increase of 20 percent sequentially and
 essentially flat compared with the year-ago quarter.  Within the U.S.,
 revenues rose 12 percent sequentially and declined 6 percent compared with the
 year-ago quarter.  Revenues outside the U.S. increased 38 percent on a
 sequential basis reflecting growth in all regions, and 11 percent
 year-over-year, reflecting growth in the Asia/Pacific region and Canada.
 Revenues outside the U.S. represented approximately 35 percent of total
 Services sales.
 
     Recent Services highlights include:
 
     * Engineering, installing and integrating Lucent's latest optical systems,
       including the new ultra-high capacity Lucent WaveStar OLS 1.6T, in Time
       Warner Telecom's western region network.
 
     * Ireland's mobile operator, Meteor Mobile Communications, not only turned
       to Lucent for a GSM network, but also is relying on Lucent Worldwide
       Services for network planning, design, technical expertise, and
       maintenance as part of the $70 million Lucent deal.
 
     * Four new mobile services to help accelerate deployment of 3G wireless
       networks in the EMEA region, including Mobile Internet Services,
       Integration Services for 3G Networks, Wireless Network Performance
       Optimisation Services, and ASP Wireless Application Design and
       Management Services.
 
     GROSS MARGIN
 
     The pro forma gross margin for the quarter represented 17 percent of
 revenues from continuing operations, a sequential increase of two points and a
 decline of 23 points compared with the year-ago quarter.  Gross margin
 continues to be constrained by product mix, including the introduction of
 newer products with lower margins, and the costs associated with an
 infrastructure built for a larger revenue base.  In this quarter, gross margin
 was also impacted by the writedowns related to obsolete inventory and contract
 settlements.
 
     EXPENSES
 
     On a pro forma basis, selling, general and administrative (SG&A) expenses
 rose $671 million, up 55 percent from the year-ago quarter, with the increase
 primarily related to Winstar.
     Research and development spending decreased 4 percent sequentially.
 Compared with the year-ago quarter, R&D spending rose 16 percent, driven by
 new product development, particularly in Internet infrastructure, optical
 networking and next-generation wireless.
     Other income includes losses of approximately $145 million related to
 writedowns of certain equity investments.
 
     DISCONTINUED OPERATIONS
 
     By Sept. 30, 2001, Lucent expects to complete the spinoff of Agere Systems
 Inc., formerly the microelectronics business, and has accounted for the
 financial results of that business as discontinued operations.  In the
 quarter, Lucent recorded a net loss from discontinued operations of
 $308 million.  The net loss is composed of the loss from Agere's operations
 for the second fiscal quarter, estimated costs directly associated with the
 disposition and Lucent's share of the estimated future net losses of the
 microelectronics business through the planned spin date, partially offset by
 an extraordinary gain associated with Lucent's debt exchange on April 2, 2001.
     Lucent's financial information for discontinued operations will differ
 from the information reported by Agere Systems due to different assumptions
 and allocations required to be made by the two companies.  For more
 information on Agere Systems' second fiscal quarter results, see its press
 release issued today.
     The quarterly earnings conference call will take place today at 10 a.m.
 (EDT) and be broadcast live over the Internet at
 http://www.lucent.com/investor/conference/webcast.  It will be maintained on
 the site for replay through May 1, 2001.
 
     Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs and
 delivers the systems, software and services for next-generation communications
 networks for service providers and enterprises. Backed by the research and
 development of Bell Labs, Lucent focuses on high-growth areas such as
 broadband and mobile Internet infrastructure; communications software;
 Web-based enterprise solutions that link private and public networks; and
 professional network design and consulting services. For more information on
 Lucent Technologies, visit its Web site at http://www.lucent.com.
 
     This news release contains forward-looking statements 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 price and product competition, dependence on
 new product development, reliance on major customers and suppliers, customer
 demand for our products and services, the ability to successfully integrate
 acquired companies, availability of manufacturing capacity, components and
 materials, control of costs and expenses, international growth, credit
 concerns in the emerging service provider market, our credit rating and
 ability to provide customer financing when appropriate, compliance with the
 covenants and restrictions of our bank credit facilities, the timely
 completion of the expected distribution of Agere shares to Lucent
 shareholders, the timely implementation of our restructuring and financial
 plans, general industry and market conditions and growth rates and general
 domestic and international economic conditions including the global economic
 slowdown and interest rate and currency exchange rate fluctuations.  For a
 further list and description of such risks and uncertainties, see the reports
 filed by Lucent with the Securities and Exchange Commission.  In addition, see
 the prospectus filed by Agere with the SEC for a further list and description
 of risks and uncertainties related to Agere.  Lucent disclaims any intention
 or obligation to update or revise any forward-looking statements, whether as a
 result of new information, future events or otherwise.
     Earnings per share reported in this release for the three months ended
 March 31, 2001 represent basic and diluted loss per share.  As a result of the
 loss reported from continuing operations for the three months ended March 31,
 2001, potentially dilutive securities have been excluded from the calculation
 of earnings (loss) per share because their effect would reduce the loss.
 Earnings per share reported in this release for the three months ended March
 31, 2000 represents diluted earnings per share.
 
     (1) The pro forma results from continuing operations for the March 31,
         2001 quarter excludes Agere, the business restructuring and one-time
         charges of $2.7 billion and amortization of goodwill and other
         acquired intangibles of  $249 million.  The pro forma results from
         continuing operations for the March 31, 2000 quarter excludes Agere,
         Power Systems, Avaya, amortization of goodwill and other acquired
         intangibles of $43 million and the results of Lucent's remaining
         consumer products business, which was sold during the quarter ended
         March 31, 2000.  Income taxes are reflected on a pro forma stand-alone
         basis and exclude the effect of tax benefits associated with
         discontinued operations and the pro forma adjustments noted above.
 
     (2) When Lucent reported its results for the first fiscal quarter of 2001,
         the company reported a pro forma loss from continuing operations of
         30 cents per share.  Those results included Agere.  Without Agere, the
         pro forma loss from continuing operations would have been 39 cents per
         share.
 
     (3) With this earnings announcement, Lucent's reporting segments have
         changed.  Results for Agere are included in discontinued operations.
         Results for Lucent's remaining businesses appear under "products" and
         "services."
 
                    Pro Forma Results from Continuing Operations
           (Unaudited; Amounts in Millions, except per share amounts)
 
 
                                       Three Months Ended
                       As Reported               Pro Forma*
                       03/31/01  03/31/01 12/31/00 Change** 03/31/00   Change**
     Revenue           $5,915     $5,915  $4,354    35.9%    $7,154     (17.3%)
     Costs              5,416      4,880   3,672    32.9%     4,247      14.9%
     Gross margin         499      1,035     682    51.8%     2,907     (64.4%)
      Selling, general
       and administrative,
       before amortization
       of Goodwill and other
       acquired
       intangibles       1,899     1,899    1594    19.1%     1,228      54.6%
      Amortization of
       goodwill and
       other acquired
       intangibles         249        --       --       NA       --        NA
      Selling, general
       and administrative
       (SG&A)            2,148     1,899    1,594    19.1%    1,228      54.6%
      Research and
       development         970       970    1,012    (4.2%)     839      15.6%
      Business restructuring
       charges and related
       Asset impairment  2,174        --       --       NA       --        NA
 
     Total operating
      expenses           5,292     2,869    2,606    10.1%    2,067      38.8%
     Operating income
      (loss)           (4,793)    (1,834)  (1,924)    4.7%      840        NM
     Other expense, net   (77)       (77)     (40)  (92.5%)     (32)       NM
     Interest expense     153        153      127    20.5%       81      88.9%
     Income (loss) from
      continuing operations
      before (benefit)
      provision for income
      taxes            (5,023)    (2,064)  (2,091)   (1.3%)     727        NM
 
     (Benefit) provision
       for income
       taxes           (1,643)      (802)    (782)    2.6%      218        NM
     Income (loss) from
      continuing
      operations       (3,380)    (1,262)  (1,309)    3.6%      509        NM
     Earnings (loss) per
      share from continuing
      operations***     (0.99)     (0.37)   (0.39)    5.1%     0.16        NM
     Effective tax rate
      (%) - continuing
      operations         32.7%     38.9%    37.4%     1.5 pts  30.0%   8.9 pts
     Loss from discontinued
      operations, net    (308)       --       --       --        --        NA
     Loss per share from
      discontinued
      operations***     (0.09)       --       --       --        --        NA
     Net loss          (3,688)       --       --       --        --        NA
     Loss per share***  (1.08)       --       --       --        --        NA
     Weighted average
      shares***         3,400.8   3,400.8  3,387.2      NA     3,273.7     NA
 
 
     The accompanying notes are an integral part of the financial statements.
     Certain prior period amounts have been reclassified to conform to the
     current period presentation.
     *  The pro forma results from continuing operations exclude the results of
        Agere, amortization of goodwill and other acquired intangibles and
        business restructuring charges and related asset impairments.  Asset
        impairments include inventory writedowns of $536 million, which are
        recorded as a component of costs.  In addition, the pro forma results
        from operations for the three months ended March 31, 2000 exclude
        Avaya, Lucent's Consumer Products business which was sold in March
        2000, and the results of the power business which was sold in December
        2000.
     ** Change between the pro forma 3-month periods ended 03/31/01 and
        12/31/00, and 03/31/01 and 03/31/00.
     *** As a result of the loss reported from continuing operations for the
         three months ended March 31, 2001 and December 31, 2000, potentially
         dilutive securities have been excluded from the calculation of loss
         per share because their effect would offset the loss. Represents
         diluted earnings per share for March 31, 2000.
     NA - not applicable
     NM - not meaningful
 
                             Consolidated Balance Sheet
               (Unaudited; Millions of Dollars, except share amounts)
 
                                     3/31/01        12/31/00       9/30/00
     ASSETS
     Cash and cash equivalents        $1,402          $3,814        $1,467
     Receivables, less allowance of
      $588, $535 and $479              6,136           6,612         8,782
     Inventories, net                  6,119           6,391         5,100
     Contracts in process, net         1,572           1,691         1,881
     Deferred income taxes, net        1,623           1,109         1,101
     Other current assets              1,967           1,900         1,575
     Net current assets from
      discontinued operations             --             394           634
     Total current assets             18,819          21,911        20,540
     Property, plant, and equipment,
      net                              5,078           5,144         5,046
     Prepaid pension costs             6,486           6,220         6,238
     Goodwill and other acquired
      intangibles, net                 5,123           6,206         6,463
     Other assets                      3,260           3,748         3,593
     Net assets from discontinued
      operations                       5,361           5,495         5,632
     Total Assets                   $ 44,127        $ 48,724       $47,512
 
     LIABILITIES
     Accounts payable                 $2,055          $2,302        $2,583
     Payroll and benefit-related
      liabilities                      1,318           1,011         1,010
     Debt maturing within one year     2,314           5,015         3,468
     Other current liabilities         4,256           3,625         3,099
     Net current liabilities from
      discontinued operations          2,101              --            --
     Total current Liabilities        12,044          11,953        10,160
     Post-retirement and
      post-employment benefit
      Liabilities                      5,140           5,060         5,395
     Long-term debt                    3,056           3,050         3,030
     Deferred income taxes, net          324           1,017         1,203
     Other liabilities                 1,503           1,896         1,552
     Total liabilities                22,067          22,976        21,340
 
     SHAREOWNERS' EQUITY
     Common stock*                        34              34            34
     Additional paid-in capital       20,599          20,490        20,390
     Guaranteed ESOP obligations         (3)             (9)          (16)
     Retained earnings                 1,912           5,668         6,129
     Accumulated other comprehensive
      income (loss)                    (482)           (435)         (365)
     Total shareowners' equity        22,060          25,748        26,172
 
     Total liabilities and
      shareowners' equity            $44,127        $ 48,724       $47,512
 
     * $0.01 per share par value; 10,000,000,000 authorized shares;
       3,401,539,700 issued and outstanding shares on 03/31/01. 3,391,491,521
       outstanding shares on 12/31/00.   3,384,332,104 outstanding shares on
       9/30/00.
 
     For a discussion of the balance sheet and related items, refer to Lucent's
 Investor Highlights document, available on our Web site at
 http://www.lucent.com.
 
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SOURCE Lucent Technologies
    MURRAY HILL, N.J., April 24 /PRNewswire Interactive News Release/ --
 Lucent Technologies (NYSE:   LU) today announced that, on a sequential basis,
 pro forma(1) revenues from continuing operations for the second fiscal quarter
 of 2001 increased 36 percent to $5.9 billion and the pro forma loss per share
 from continuing operations improved 5 percent from a loss of 39 cents(2) to a
 loss of 37 cents.  These results exclude Lucent's business restructuring and
 one-time charges of $2.7 billion and Agere.
     The company's results were significantly impacted by Winstar and the
 writedowns of certain equity investments, which totaled 15 cents per share in
 the quarter.  Lucent said that it has fully reserved for its loans to Winstar,
 which recently announced that it is seeking protection under the U.S.
 Bankruptcy Code.
     In addition, the company announced significant progress with its
 comprehensive business restructuring plan to streamline its operations, reduce
 its cost structure and improve working capital.
     "Lucent delivered much-improved performance in the quarter, despite
 continued softness in several key markets worldwide," said Lucent Technologies
 Chairman and Chief Executive Officer Henry Schacht.  "We saw particular
 strength from large service providers around the world.  We continue to
 aggressively execute on our comprehensive business restructuring program,
 which, coupled with the continued positive momentum we are seeing in revenues,
 is a major step forward in Lucent's turnaround."
     Compared with the second fiscal quarter of 2000, pro forma revenues from
 continuing operations declined 17 percent to $5.9 billion and pro forma
 earnings per share from continuing operations declined 53 cents.
 
     A review of second fiscal quarter performance
 
     "These results confirm that we know what we have to do, and we're doing
 it," said Lucent Chief Financial Officer Deborah Hopkins.  "We saw sequential
 improvement in both the top and bottom lines despite the adverse impact of
 Winstar, and our business restructuring program is generating significant
 positive results for the business.  For example, to date, our aggressive
 management of accounts receivable has resulted in a reduction of more than
 $700 million in past due receivables and a 62-day improvement in days sales
 outstanding (the number of days required to collect a receivable) on a
 sequential basis."
     During the quarter, the company also made progress with its strategy to
 move from a multidivisional company to one that is totally focused on the
 service provider market.  The initial public offering of Agere Systems Inc.,
 formerly Lucent's microelectronics business, closed April 2, 2001, and the
 completion of the spinoff is expected by Sept. 30, 2001.  Additionally, the
 company announced its plans to pursue strategic alternatives for its optical
 fiber business and is currently reviewing several bids.
 
     Progress on the seven-point restructuring program
 
     During the quarter, Lucent made significant progress with its
 comprehensive seven-point restructuring program to drive costs out of the
 business and put Lucent back on track.
     1) In the second fiscal quarter, Lucent recorded a $2.7 billion business
        restructuring and other one-time charges, which exceed the range
        of $1.2 billion to $1.6 billion that was originally anticipated, due to
        more aggressive product rationalization and the associated asset
        write-offs.  Lucent will continue to review its internal processes and
        product portfolio throughout fiscal year 2001, which may result in
        additional cost structure improvements and associated restructuring
        charges.
     2) Lucent is aggressively working to reduce its annual expenses by
        $2 billion through headcount reductions, product rationalizations,
        reduced financing costs and decreased discretionary spending.  During
        the quarter, excluding vendor financing costs, Lucent reduced its
        operational expenses by approximately $75 million ($300 million on an
        annualized basis).  The company expects these savings to accelerate in
        the third and fourth quarters when the impacts of the headcount
        reductions and the product rationalizations are fully realized.  Lucent
        believes it is on target to achieve the $2 billion annualized savings,
        excluding further significant vendor financing reserves.
     3) Lucent's work force reduction plans are on track.  Of the planned work
        force reduction of 10,000, approximately 2,000 employees have already
        been removed from Lucent's payroll and an additional 8,000 will be off
        payroll by our July earnings announcement.  These force reductions are
        primarily related to duplication in marketing, sales and corporate
        center functions, pruning of the product portfolio and reduced volume
        in certain manufacturing locations and Lucent's services business.  In
        addition, 2,200 contractor positions have been eliminated.
     4) The company is on track with its contract manufacturing plans and has
        received bids for its manufacturing operations in Oklahoma City and
        Columbus, Ohio.  In addition, the company is expanding the scope of its
        plans to include locations outside the United States.
     5) During the quarter, Lucent improved its working capital performance by
        $1.5 billion excluding the business restructuring charges and other
        inventory reserves.  Lucent appointed an executive, who reports to
        Deborah Hopkins, Lucent's chief financial officer, to lead a
        company-wide program to reduce working capital through aggressive
        management of inventory and accounts receivable across all product
        units.  The company has also engaged outside consultants to accelerate
        the effort.  Because of the success that was achieved in the quarter,
        the company is considering increasing the target for working capital
        improvement for the year.
     6) For the second fiscal quarter, Lucent reduced its capital spending
        $100 million more than was originally planned.  The company is on track
        to reduce its fiscal-year capital spending by $400 million from
        previously planned levels.
     7) In February, Lucent completed negotiations for $6.5 billion in credit
        facilities to provide the financial resources and the financial
        flexibility to successfully execute its comprehensive turnaround.  As
        part of the Agere initial public offering (IPO), Agere Systems Inc.
        assumed $2.5 billion of the facilities, as planned.  In early April,
        the overallotment option associated with the Agere IPO was exercised,
        which further reduced Lucent's debt by $519 million.
 
     "As we've said, fiscal year 2001 is a transition and rebuilding year for
 Lucent," said Schacht.  "Despite market conditions, we expect modest
 sequential improvement on the top line and, as we've said previously, we
 expect greater sequential improvement on the bottom line from the 37 cents pro
 forma loss per share we reported this quarter, as we feel the full impact of
 the business restructuring program in the third and fourth fiscal quarters of
 2001."
 
     Results on an as-reported basis
 
     On an as-reported basis, revenue from continuing operations for the second
 fiscal quarter of 2001 declined 18 percent to $5.9 billion compared with
 $7.2 billion in the year-ago quarter.
     After including the $2.7 billion business restructuring and one-time
 charges, as well as amortization of goodwill and other acquired intangibles
 and a loss from discontinued operations, Lucent's as-reported results for the
 quarter were a net loss of $3.7 billion, or a loss of $1.08 per basic and
 diluted share, compared with net income of $755 million, or 23 cents per
 diluted share, in the year-ago quarter.
 
     REVIEW OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001(3)
 
     Lucent Products
 
     Revenues were $4.8 billion, an increase of 42 percent sequentially and a
 decline of 19 percent compared with the year-ago quarter when overall market
 conditions were much more robust.  Revenues were primarily driven by sales to
 large service providers in North America and Europe.  On a sequential basis,
 revenues increased across all product lines during the quarter with especially
 strong improvements in optical, switching, data and wireless.
     Within the U.S., revenues increased 68 percent sequentially, despite the
 industry-wide slowdown in capital spending and a significant decline in the
 competitive local exchange carrier market.  Compared with the year-ago
 quarter, U.S. revenues declined 15 percent.
     Revenues outside the U.S. increased 4 percent sequentially and declined 28
 percent compared with the year-ago quarter.  Non-U.S. revenues represented 30
 percent of Lucent's total product sales.
 
     Recent Product highlights include:
 
     * A $5 billion, three-year contract with Verizon Wireless to supply
       wireless systems, software and services for Verizon's wireless network
       in the United States.  The contract positions Lucent to become the
       largest supplier of Verizon Wireless' third-generation (3G) high-speed
       mobile network infrastructure.  Lucent also announced a letter of intent
       with Verizon Communications naming Lucent the supplier of optical
       systems, data products, software and services for Verizon's global
       telecommunications network.
 
     * Two multimillion-dollar agreements for Lucent's new, carrier-grade,
       second-generation Softswitch.  Softswitch was chosen by BT Ignite to
       enhance its voice-over-IP service for consumers and by NTT
       Communications for a next-generation network deployment that will
       support Internet-based and multimedia services.
 
     * The NX64000 Multi-Terabit router is in trials with more than 20
       customers.  When combined with Lucent's high-speed optical transmission
       systems, the NX64000 enables service providers to transmit Internet
       traffic across high-bandwidth optical networks.
 
     * A multi-year contract to supply Deutsche Telekom with Lucent's
       WaveStar(TM) OLS 400G and WaveStar ADM 16/1 transmission systems and
       other equipment for its Telekom Global Net optical backbone network,
       which will extend from Germany to Austria, the Netherlands, the U.K.,
       France, Italy, Switzerland, Belgium and Eastern European countries.
 
     * The deployment of a leading-edge optical networking system for NTT
       Communications of Japan, which will enable NTT to dramatically increase
       network capacity by transmitting information through a wavelength range
       in its fiber that it could not previously use.
 
     * A multimillion-dollar contract with Nextel Communications to provide
       5ESS(R) Wireless Gateway Switches to help Nextel meet the growing
       demands of its digital wireless network.
 
     Lucent Services
 
     Revenues were $1.1 billion, an increase of 20 percent sequentially and
 essentially flat compared with the year-ago quarter.  Within the U.S.,
 revenues rose 12 percent sequentially and declined 6 percent compared with the
 year-ago quarter.  Revenues outside the U.S. increased 38 percent on a
 sequential basis reflecting growth in all regions, and 11 percent
 year-over-year, reflecting growth in the Asia/Pacific region and Canada.
 Revenues outside the U.S. represented approximately 35 percent of total
 Services sales.
 
     Recent Services highlights include:
 
     * Engineering, installing and integrating Lucent's latest optical systems,
       including the new ultra-high capacity Lucent WaveStar OLS 1.6T, in Time
       Warner Telecom's western region network.
 
     * Ireland's mobile operator, Meteor Mobile Communications, not only turned
       to Lucent for a GSM network, but also is relying on Lucent Worldwide
       Services for network planning, design, technical expertise, and
       maintenance as part of the $70 million Lucent deal.
 
     * Four new mobile services to help accelerate deployment of 3G wireless
       networks in the EMEA region, including Mobile Internet Services,
       Integration Services for 3G Networks, Wireless Network Performance
       Optimisation Services, and ASP Wireless Application Design and
       Management Services.
 
     GROSS MARGIN
 
     The pro forma gross margin for the quarter represented 17 percent of
 revenues from continuing operations, a sequential increase of two points and a
 decline of 23 points compared with the year-ago quarter.  Gross margin
 continues to be constrained by product mix, including the introduction of
 newer products with lower margins, and the costs associated with an
 infrastructure built for a larger revenue base.  In this quarter, gross margin
 was also impacted by the writedowns related to obsolete inventory and contract
 settlements.
 
     EXPENSES
 
     On a pro forma basis, selling, general and administrative (SG&A) expenses
 rose $671 million, up 55 percent from the year-ago quarter, with the increase
 primarily related to Winstar.
     Research and development spending decreased 4 percent sequentially.
 Compared with the year-ago quarter, R&D spending rose 16 percent, driven by
 new product development, particularly in Internet infrastructure, optical
 networking and next-generation wireless.
     Other income includes losses of approximately $145 million related to
 writedowns of certain equity investments.
 
     DISCONTINUED OPERATIONS
 
     By Sept. 30, 2001, Lucent expects to complete the spinoff of Agere Systems
 Inc., formerly the microelectronics business, and has accounted for the
 financial results of that business as discontinued operations.  In the
 quarter, Lucent recorded a net loss from discontinued operations of
 $308 million.  The net loss is composed of the loss from Agere's operations
 for the second fiscal quarter, estimated costs directly associated with the
 disposition and Lucent's share of the estimated future net losses of the
 microelectronics business through the planned spin date, partially offset by
 an extraordinary gain associated with Lucent's debt exchange on April 2, 2001.
     Lucent's financial information for discontinued operations will differ
 from the information reported by Agere Systems due to different assumptions
 and allocations required to be made by the two companies.  For more
 information on Agere Systems' second fiscal quarter results, see its press
 release issued today.
     The quarterly earnings conference call will take place today at 10 a.m.
 (EDT) and be broadcast live over the Internet at
 http://www.lucent.com/investor/conference/webcast.  It will be maintained on
 the site for replay through May 1, 2001.
 
     Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs and
 delivers the systems, software and services for next-generation communications
 networks for service providers and enterprises. Backed by the research and
 development of Bell Labs, Lucent focuses on high-growth areas such as
 broadband and mobile Internet infrastructure; communications software;
 Web-based enterprise solutions that link private and public networks; and
 professional network design and consulting services. For more information on
 Lucent Technologies, visit its Web site at http://www.lucent.com.
 
     This news release contains forward-looking statements 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 price and product competition, dependence on
 new product development, reliance on major customers and suppliers, customer
 demand for our products and services, the ability to successfully integrate
 acquired companies, availability of manufacturing capacity, components and
 materials, control of costs and expenses, international growth, credit
 concerns in the emerging service provider market, our credit rating and
 ability to provide customer financing when appropriate, compliance with the
 covenants and restrictions of our bank credit facilities, the timely
 completion of the expected distribution of Agere shares to Lucent
 shareholders, the timely implementation of our restructuring and financial
 plans, general industry and market conditions and growth rates and general
 domestic and international economic conditions including the global economic
 slowdown and interest rate and currency exchange rate fluctuations.  For a
 further list and description of such risks and uncertainties, see the reports
 filed by Lucent with the Securities and Exchange Commission.  In addition, see
 the prospectus filed by Agere with the SEC for a further list and description
 of risks and uncertainties related to Agere.  Lucent disclaims any intention
 or obligation to update or revise any forward-looking statements, whether as a
 result of new information, future events or otherwise.
     Earnings per share reported in this release for the three months ended
 March 31, 2001 represent basic and diluted loss per share.  As a result of the
 loss reported from continuing operations for the three months ended March 31,
 2001, potentially dilutive securities have been excluded from the calculation
 of earnings (loss) per share because their effect would reduce the loss.
 Earnings per share reported in this release for the three months ended March
 31, 2000 represents diluted earnings per share.
 
     (1) The pro forma results from continuing operations for the March 31,
         2001 quarter excludes Agere, the business restructuring and one-time
         charges of $2.7 billion and amortization of goodwill and other
         acquired intangibles of  $249 million.  The pro forma results from
         continuing operations for the March 31, 2000 quarter excludes Agere,
         Power Systems, Avaya, amortization of goodwill and other acquired
         intangibles of $43 million and the results of Lucent's remaining
         consumer products business, which was sold during the quarter ended
         March 31, 2000.  Income taxes are reflected on a pro forma stand-alone
         basis and exclude the effect of tax benefits associated with
         discontinued operations and the pro forma adjustments noted above.
 
     (2) When Lucent reported its results for the first fiscal quarter of 2001,
         the company reported a pro forma loss from continuing operations of
         30 cents per share.  Those results included Agere.  Without Agere, the
         pro forma loss from continuing operations would have been 39 cents per
         share.
 
     (3) With this earnings announcement, Lucent's reporting segments have
         changed.  Results for Agere are included in discontinued operations.
         Results for Lucent's remaining businesses appear under "products" and
         "services."
 
                    Pro Forma Results from Continuing Operations
           (Unaudited; Amounts in Millions, except per share amounts)
 
 
                                       Three Months Ended
                       As Reported               Pro Forma*
                       03/31/01  03/31/01 12/31/00 Change** 03/31/00   Change**
     Revenue           $5,915     $5,915  $4,354    35.9%    $7,154     (17.3%)
     Costs              5,416      4,880   3,672    32.9%     4,247      14.9%
     Gross margin         499      1,035     682    51.8%     2,907     (64.4%)
      Selling, general
       and administrative,
       before amortization
       of Goodwill and other
       acquired
       intangibles       1,899     1,899    1594    19.1%     1,228      54.6%
      Amortization of
       goodwill and
       other acquired
       intangibles         249        --       --       NA       --        NA
      Selling, general
       and administrative
       (SG&A)            2,148     1,899    1,594    19.1%    1,228      54.6%
      Research and
       development         970       970    1,012    (4.2%)     839      15.6%
      Business restructuring
       charges and related
       Asset impairment  2,174        --       --       NA       --        NA
 
     Total operating
      expenses           5,292     2,869    2,606    10.1%    2,067      38.8%
     Operating income
      (loss)           (4,793)    (1,834)  (1,924)    4.7%      840        NM
     Other expense, net   (77)       (77)     (40)  (92.5%)     (32)       NM
     Interest expense     153        153      127    20.5%       81      88.9%
     Income (loss) from
      continuing operations
      before (benefit)
      provision for income
      taxes            (5,023)    (2,064)  (2,091)   (1.3%)     727        NM
 
     (Benefit) provision
       for income
       taxes           (1,643)      (802)    (782)    2.6%      218        NM
     Income (loss) from
      continuing
      operations       (3,380)    (1,262)  (1,309)    3.6%      509        NM
     Earnings (loss) per
      share from continuing
      operations***     (0.99)     (0.37)   (0.39)    5.1%     0.16        NM
     Effective tax rate
      (%) - continuing
      operations         32.7%     38.9%    37.4%     1.5 pts  30.0%   8.9 pts
     Loss from discontinued
      operations, net    (308)       --       --       --        --        NA
     Loss per share from
      discontinued
      operations***     (0.09)       --       --       --        --        NA
     Net loss          (3,688)       --       --       --        --        NA
     Loss per share***  (1.08)       --       --       --        --        NA
     Weighted average
      shares***         3,400.8   3,400.8  3,387.2      NA     3,273.7     NA
 
 
     The accompanying notes are an integral part of the financial statements.
     Certain prior period amounts have been reclassified to conform to the
     current period presentation.
     *  The pro forma results from continuing operations exclude the results of
        Agere, amortization of goodwill and other acquired intangibles and
        business restructuring charges and related asset impairments.  Asset
        impairments include inventory writedowns of $536 million, which are
        recorded as a component of costs.  In addition, the pro forma results
        from operations for the three months ended March 31, 2000 exclude
        Avaya, Lucent's Consumer Products business which was sold in March
        2000, and the results of the power business which was sold in December
        2000.
     ** Change between the pro forma 3-month periods ended 03/31/01 and
        12/31/00, and 03/31/01 and 03/31/00.
     *** As a result of the loss reported from continuing operations for the
         three months ended March 31, 2001 and December 31, 2000, potentially
         dilutive securities have been excluded from the calculation of loss
         per share because their effect would offset the loss. Represents
         diluted earnings per share for March 31, 2000.
     NA - not applicable
     NM - not meaningful
 
                             Consolidated Balance Sheet
               (Unaudited; Millions of Dollars, except share amounts)
 
                                     3/31/01        12/31/00       9/30/00
     ASSETS
     Cash and cash equivalents        $1,402          $3,814        $1,467
     Receivables, less allowance of
      $588, $535 and $479              6,136           6,612         8,782
     Inventories, net                  6,119           6,391         5,100
     Contracts in process, net         1,572           1,691         1,881
     Deferred income taxes, net        1,623           1,109         1,101
     Other current assets              1,967           1,900         1,575
     Net current assets from
      discontinued operations             --             394           634
     Total current assets             18,819          21,911        20,540
     Property, plant, and equipment,
      net                              5,078           5,144         5,046
     Prepaid pension costs             6,486           6,220         6,238
     Goodwill and other acquired
      intangibles, net                 5,123           6,206         6,463
     Other assets                      3,260           3,748         3,593
     Net assets from discontinued
      operations                       5,361           5,495         5,632
     Total Assets                   $ 44,127        $ 48,724       $47,512
 
     LIABILITIES
     Accounts payable                 $2,055          $2,302        $2,583
     Payroll and benefit-related
      liabilities                      1,318           1,011         1,010
     Debt maturing within one year     2,314           5,015         3,468
     Other current liabilities         4,256           3,625         3,099
     Net current liabilities from
      discontinued operations          2,101              --            --
     Total current Liabilities        12,044          11,953        10,160
     Post-retirement and
      post-employment benefit
      Liabilities                      5,140           5,060         5,395
     Long-term debt                    3,056           3,050         3,030
     Deferred income taxes, net          324           1,017         1,203
     Other liabilities                 1,503           1,896         1,552
     Total liabilities                22,067          22,976        21,340
 
     SHAREOWNERS' EQUITY
     Common stock*                        34              34            34
     Additional paid-in capital       20,599          20,490        20,390
     Guaranteed ESOP obligations         (3)             (9)          (16)
     Retained earnings                 1,912           5,668         6,129
     Accumulated other comprehensive
      income (loss)                    (482)           (435)         (365)
     Total shareowners' equity        22,060          25,748        26,172
 
     Total liabilities and
      shareowners' equity            $44,127        $ 48,724       $47,512
 
     * $0.01 per share par value; 10,000,000,000 authorized shares;
       3,401,539,700 issued and outstanding shares on 03/31/01. 3,391,491,521
       outstanding shares on 12/31/00.   3,384,332,104 outstanding shares on
       9/30/00.
 
     For a discussion of the balance sheet and related items, refer to Lucent's
 Investor Highlights document, available on our Web site at
 http://www.lucent.com.
 
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