LUCENT TECHNOLOGIES REPORTS RESULTS FOR THIRD QUARTER OF FISCAL 2003

MURRAY HILL, N.J. -- Lucent Technologies (NYSE: LU) today reported results for the third quarter of fiscal 2003, which ended June 30, 2003, in accordance with U.S. generally accepted accounting principles (GAAP).  The company recorded revenues of $1.96 billion in the quarter, which represented an 18 percent sequential decline from the $2.4 billion in revenues achieved in the second quarter of fiscal 2003.  The company recorded $2.95 billion in revenues in the year-ago quarter.
      
The company's net loss for the quarter was $254 million or 7 cents per share¹.  These results compare with a loss of $351 million or 14 cents per share in the second quarter of fiscal 2003 and a net loss of $8.03 billion or $2.35 per share in the year-ago quarter.
      
The third quarter's loss per share included the negative impact of charges associated with an impairment of goodwill related to certain multiservice switching products and the revaluation of warrants that are expected to be issued as part of Lucent's global settlement of shareowner litigation, which were offset by certain income tax benefits. 
      
By comparison, the loss per share for the second quarter of fiscal 2003 included the net unfavorable impact of 6 cents per share², which was primarily due to charges for Lucent's global settlement of shareowner litigation and the repurchase of convertible securities and debt obligations, certain income tax benefits and a reduction of business restructuring reserves.  The loss per share for the year-ago quarter included the net unfavorable impact of $2.11 per share2 for several items, including deferred tax valuation allowances, business restructuring actions and asset impairments.
      
EXECUTIVE COMMENTARY ON FINANCIAL RESULTS AND OUTLOOK
"Despite our decline in Mobility revenues this quarter, we were able to continue our progress on the bottom line," said Lucent Technologies Chairman and CEO Patricia Russo. "We also saw some positive indicators in new revenue opportunity areas, highlighted by services contracts with Telecom New Zealand and the U.S. Army, as well as new business partnerships with other technology leaders like Juniper Networks.  We will balance our investment in new revenue opportunities with the need to reduce our breakeven further, and we now expect our return to profitability to occur in fiscal 2004."
      
The company said it is continuing its practice of not providing quarterly revenue guidance. "This quarter, we continued to see progress on our balance sheet. We contained spending and used only a modest amount of cash, which left us with a balance of about $4.9 billion in cash and short-term investments," said Lucent Technologies Chief Financial Officer Frank D'Amelio.  "We continue to see progress in our cost reductions and this helped us post a gross margin of 29 percent despite the revenue decline. We clearly have more work to do given the continuing market uncertainty, and we are developing plans to lower our breakeven so that we can return to profitability as soon as possible in fiscal 2004."
     
BALANCE SHEET UPDATE
As of June 30, 2003, Lucent had $4.9 billion in cash and short-term investments. This represents an increase of approximately $1.5 billion in the quarter. The increase primarily resulted from $1.6 billion raised through a public offering of convertible senior debt. The offering was part of the company's overall effort to strengthen its balance sheet. It provides additional flexibility to repay or repurchase certain short- and medium-term debt obligations over time, or can be used for general corporate purposes.  Cash used in operations was $58 million during the quarter, compared with $293 million in the second quarter.
      
GROSS MARGIN AND OPERATING EXPENSES
Gross margin for the quarter was 29 percent of revenues as compared with 32 percent for the second quarter of fiscal 2003, a sequential decrease of 3 percentage points. The decline was the result of lower sales volume and product mix, related to the Mobility business.
      
Operating expenses for the third quarter of fiscal 2003 were $842 million as compared with $742 million for the second quarter of fiscal 2003.  The sequential increase was primarily due to the net impact of changes in restructuring and bad debt reserves and a goodwill impairment charge in the third quarter. Excluding the impact of these items, sequential operating expenses decreased slightly.
      
REVIEW OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2003
On a sequential basis, revenues in the United States decreased 17 percent to $1.2 billion, and international revenues decreased 20 percent to $763 million. Compared with the year-ago quarter, U.S. and international revenues decreased by 41 percent and 15 percent, respectively.
      
The company continued to deploy products to help its customers evolve and expand existing networks and introduced new products that add next-generation capabilities where customers need them. 
      
The company also continued to focus on new opportunities to grow its services business this quarter and announced the following services contracts:
* A $100 million agreement with Telecom New Zealand to manage its 3G CDMA2000 1X mobile voice and data network.  Lucent Worldwide Services will be responsible for network planning, design, deployment, support and management of the network. 
* A $50 million contract with the U.S. Department of the Army for Lucent Worldwide Services to provide network integration and professional services for a major data infrastructure upgrade at Army installations in North America and Asia.

Integrated Network Solutions (INS)
Revenues for the third quarter of fiscal 2003 were $1.06 billion, an increase of 2 percent sequentially and a decrease of 22 percent compared with the year-ago quarter. 
      
In the third quarter, Lucent had several significant optical, software and broadband announcements:
* BellSouth choosing the Lucent Metropolis® DMX Access Multiplexer to increase the network capacity of its optical networks covering nine U.S. states. 
* Optical networking wins in China (Beijing Communication Corporation (BCC), Zhejiang Telecom and Shandong Unicom) and South Korea (Hanaro Telecom).
* New product announcements in optical networking (Metropolis® DMXplore Access Multiplexer), broadband access (V-16 IP DSLAM), switching (iGEN(tm) Compact Switch) and software (VitalSuite® 9.1)
* A partnership with Juniper Networks to deliver unified data and optical networking solutions to our service provider customers worldwide.
* Brazil Telecom installing 100,000 new ADSL ports using Stinger® DSL Access Concentrators.
* China Unicom deploying Lucent network management software to help manage their long-haul switched network.

Mobility Solutions
Revenues for the third quarter of fiscal 2003 were $826 million, a decrease of 36 percent sequentially and a decrease of 45 percent compared with the year-ago quarter. 
      
Despite a decline in Mobility revenue, Lucent continues to show progress in its 3G spread spectrum technology offers, including yesterday's announcement of a contract with Sprint, valued at up to $1 billion, to upgrade its high-speed wireless network with additional 3G mobile equipment.  In the third quarter, Lucent announced several wins and developments:
* A $45 million contract with European mobile operator O2 for PacketStar® (PSAX) Multiservice Media Gateways and services to support their 3G Universal Mobile Telecommunications System (UMTS) network rollout.
* Six Sprint PCS affiliates choosing the Lucent PacketStar® (PSAX) 4500 Multiservice Media Gateway to boost capacity and reduce operating costs in their mobile networks.
* A multimillion dollar contract with E-Plus, Germany's third largest wireless carrier, for PSAX products and services to support its 3G UMTS network.
* Successful testing of Lucent CDMA2000(tm) equipment at 2.1 GHz spectrum in China - demonstrating its ability to support 3G mobile services using a spectrum that has been allocated for 3G services in China and other markets worldwide.
* Introducing the latest software release for Lucent's end-to-end high-speed data solution for 3G UMTS networks, which enables mobile operators to provide data services at speeds of up to 384 kilobits per second (kbps), and delivers exceptional levels of reliability and system performance.

The quarterly earnings conference call will take place today at 8:30 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 July 30, 2003.
      
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Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs and delivers networks for the world's largest communications service providers. Backed by Bell Labs research and development, Lucent relies on its strengths in mobility, optical, data and voice networking technologies as well as software and services to develop next-generation networks.  The company's systems, services and software are designed to help customers quickly deploy and better manage their networks and create new revenue-generating services that help businesses and consumers. For more information on Lucent Technologies, visit its Web site at http://www.lucent.com.

¹The loss per share information reported in this release represents basic and diluted loss per share.  Additionally, the loss per share includes the impact of preferred dividends and accretion, as well as conversion expense associated with the repurchase of 8% redeemable convertible preferred stock.

²Further details on the significant items impacting results are available in Exhibit E in the accompanying financial reporting package.

This news release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, the industries in which we operate, our beliefs and our management's assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by or on behalf of us.  Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. These risks and uncertainties include: the failure of the telecommunications market to improve or improve at the pace we anticipate; continued net losses may reduce or impair our legally available surplus; our ability to realize the benefits we expect from our strategic direction and restructuring program; our ability to secure additional sources of funds on reasonable terms; our credit ratings; our ability to compete effectively; our reliance on a limited number of key customers; our exposure to the credit risk of our customers as a result of our vendor financing arrangements and accounts receivable; our reliance on third parties to manufacture most of our products; the cost and other risks inherent in our long-term sales agreements; our product portfolio and ability to keep pace with technological advances in our industry; the complexity of our products; our ability to retain and recruit key personnel; existing and future litigation; our ability to protect our intellectual property rights and the expenses we may incur in defending such rights; changes in environmental health and safety law; changes to existing regulations or technical standards; the social, political and economic risks of our foreign operations; and the costs and risks associated with our pension and postretirement benefit obligations. For a further list and description of such risks and uncertainties, see the reports filed by us with the Securities and Exchange Commission.  Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this news release, whether as a result of new information, future events, changes in assumptions, or otherwise.