Lucent Technologies reports results for fourth quarter and year end of fiscal 2003

Lucent Technologies behaalde in het gehele fiscale jaar 2003 een omzet van 8,5 miljard dollar, vergeleken met 12,3 miljard dollar in het fiscale jaar 2002. Het nettoverlies werd gereduceerd van 11,8 miljard dollar in het fiscale jaar 2002 tot 770 miljoen dollar in 2003. 

De omzetgroei werd behaald in alle belangrijke divisies: INS, Mobility en Services. Daarnaast groeide de omzet in alle grote productsegmenten, waaronder optical, data- en netwerkbeheer, diensten en draadloos.

Voor meer informatie:

Lammers van Toorenburg Benelux PR   
Armine Egberink     
Tel: 030-656 5070
lucent@lvtpr.nl      

LUCENT TECHNOLOGIES REPORTS RESULTS FOR FOURTH QUARTER AND YEAR END OF FISCAL 2003

- Records profitable quarter, with net income of 2 cents per share
- Generates positive operating cash flow of $145 million
- Posts revenues of $2.03 billion for the quarter, an increase of 3 percent sequentially

FOR RELEASE: WEDNESDAY, Oct. 22, 2003

MURRAY HILL, N.J. -- Lucent Technologies (NYSE: LU) today reported results for the fourth quarter and year end of fiscal 2003, which ended Sept. 30, 2003, in accordance with U.S. generally accepted accounting principles (GAAP). The company reported its first profitable quarter since March 2000, posting net income for the quarter that was $99 million or 2 cents per share1. These results compare with a net loss of $254 million or 7 cents per share2 in the third quarter of fiscal 2003 and a net loss of $2.81 billion or 84 cents per share2 in the year-ago quarter.
 
The company recorded revenues of $2.03 billion in the quarter, which is an increase of 3 percent from the $1.96 billion in revenues for the third quarter of fiscal 2003. The company recorded $2.28 billion in revenues in the year-ago quarter.

The fourth quarter's earnings per share included the negative impact of charges associated with the reversal of certain previously recognized income tax benefits, an asset impairment charge related to capitalized UMTS software development costs, and the revaluation of warrants that are expected to be issued as part of Lucent's global settlement of shareowner litigation, all of which were more than offset by the positive impact from bad debt and customer financing recoveries, a net reduction of reserves for certain business restructuring actions, and certain other items, including certain adjustments to employee expenses as well as customer and supplier credits.  The net effect of these charges and benefits was a favorable impact of about 2 cents per share on the fourth quarter's results(2).

For the fiscal year, Lucent reported revenues of $8.5 billion compared with $12.3 billion in fiscal 2002.  The net loss was $770 million or 29 cents per share during fiscal 2003, compared with a net loss of $11.8 billion or $3.49 per share during fiscal 2002. 

EXECUTIVE COMMENTARY ON FINANCIAL RESULTS "It feels great to post a profitable quarter with positive operating cash flow. It's the culmination of a lot of hard work and dedication on the part of the Lucent team," said Lucent Technologies Chairman and CEO Patricia Russo. "At this point, we have essentially completed our restructuring initiatives, reduced our total expenses by about $5.6 billion (3) year over year, and implemented plans to broaden our revenue base in areas like services, government contracts and outside the United States. As always, we will continue to ensure that our cost and expense profile is in line with the market. "As we exit fiscal 2003 and begin a new year, we still have some work to do, and in the current challenging market environment it's likely we will still have some ups and downs on the way to sustained profitability," continued Russo. "We are seeing signs of stability in the overall telecom market, with pockets of opportunity in areas like services, metro optical, voice over IP, broadband access and high-speed wireless data. During the quarter, for example, we announced some major wireless wins with China Unicom and Sprint; optical wins with AT&T and Dacom in South Korea; broadband wins in Poland and Sweden; and key services wins with O2 in Europe and KTF in Korea. In addition, just this week we announced a major broadband win with Bell Canada."

"We continue to make progress improving our gross margin," said Lucent Technologies Chief Financial Officer Frank D'Amelio. "This quarter, we increased our gross margin from 29 to 43 percent, primarily due to a favorable mix of products and services, as well as continued cost reductions. In addition, the margin was helped by certain significant items (2) mentioned previously. While our margin improvement helped us achieve profitability this quarter, it is not a rate we expect to maintain during fiscal 2004 due to anticipated quarterly shifts in product and geographic mix and the non-recurrence of certain favorable items," said D'Amelio. "While we are not giving specific guidance for next quarter, we expect to achieve sustainable profitability some time in fiscal 2004 at a margin rate of about 35 percent. We also expect revenues to remain essentially flat or to increase slightly year over year. As always, we will continue to focus on managing our cost and expense profile, while we increase our investment in certain new product areas like voice over IP," said D'Amelio.

BALANCE SHEET UPDATE
As of Sept. 30, 2003, Lucent had $4.5 billion in cash and short-term investments. This represents a decrease of approximately $400 million in the quarter. The decrease primarily resulted from the repurchase of $500 million of certain convertible securities and debt obligations, which will result in an annual reduction of approximately $50 million in fixed charges. Cash generated from operations was $145 million during the quarter, compared to a use of $58 million in the third quarter.

Lucent also recorded a non-cash charge to equity of $594 million related to its management pension plans, largely as a result of declines in interest rates used to develop the discount rate to value the plans' obligations. While the charge to equity did not impact quarterly results, it did result in the reversal of $165 million of previously recognized income tax benefits. The plan meets all the requirements of ERISA's funding rules and does not require cash contributions during fiscal 2004.

GROSS MARGIN AND OPERATING EXPENSES
Gross margin for the quarter was 43 percent of revenues as compared with 29 percent for the third quarter of fiscal 2003, a sequential increase of about 14 percentage points. The increase was primarily due to a favorable mix of products and services and continued cost reductions. In addition, the margin was helped by certain significant items2 mentioned previously.
 
Operating expenses for the fourth quarter of fiscal 2003 were $524 million as compared with $842 million for the third quarter of fiscal 2003. The sequential decrease was primarily due to the impact of continued cost reduction work and significant items2 mentioned previously.

REVIEW OF OPERATIONS - THREE MONTHS ENDED SEPT.  30, 2003 On a sequential basis, revenues in the United States were flat at $1.2 billion, and international revenues increased 7 percent to $820 million. Compared with the year-ago quarter, U.S. and international revenues decreased by 16 percent and 2 percent, respectively.
The company continues to focus on new revenue opportunities in its services and government businesses as well as its global business partner program, while delivering next-generation products. Highlights this quarter included:  
- Several professional services contracts with international carriers like KTF in Korea and O2 in the United Kingdom, which awarded Lucent a three-year agreement to assess and analyze the performance of its GSM and GPRS networks in Europe.
- Maintenance and deployment contracts with Delta Telecom, E-plus, Sprint, Codetel and Moscow Cellular Communications.
- The addition of another 20 global business partners serving 30 countries in Europe, the Middle East and Africa, and several optical and VoIP contracts that were won in Europe this quarter through business partners.
- A contract with Bechtel National, Inc., to assist in the repair and rehabilitation of the communications network in Iraq, including the installation and deployment of 240,000 lines serving Baghdad and the region.

Integrated Network Solutions (INS)
Revenues for the fourth quarter of fiscal 2003 were $1.11 billion, an increase of 5 percent sequentially and a decrease of 11 percent compared with the year-ago quarter. 
In the fourth quarter, Lucent had several significant optical and broadband announcements:
- A significant multi-year contract in which AT&T will use Lucent's Metropolis DMX Access Multiplexer to provide next-generation SONET capabilities to its network. 
- Metropolitan optical network wins with ICE in Costa Rica, Sasktel in Canada and Dacom in Korea.  
- An optical backbone contract for its WaveStar OLS 1.6T System with KT in Korea, and for the LambdaUnite MultiService Switch in China.
- Significant contract awards this quarter featuring two of Lucent's leading access network products; the AnyMedia Access System in Poland and the Stinger FS DSL Access Concentrator in Sweden.
- A second customer trial, announced by business partner D-Tel, for Lucent's new iGen Compact Switch.

Mobility Solutions
Revenues for the fourth quarter of fiscal 2003 were $856 million, an increase of 4 percent sequentially and a decrease of 9 percent compared with the year-ago quarter. 
Lucent continues to show progress in its 3G spread spectrum technology offers:
- A new multi-year contract valued at up to $1 billion to enhance Sprint's 3G network covering major markets from New York to California. 
- CDMA2000 equipment contracts with China Unicom, Codetel in the Dominican Republic and KTF in Korea together totaling more than $330 million.
- Deployment of 3G CDMA2000 networks in the 450MHz frequency band for Delta Telecom and Moscow Cellular Communications as part of the SKYLINK initiative.
- Verizon Wireless' commercial deployment of a Lucent-supplied 3G mobile network in Washington, D.C.  Customers on this network will receive data services at speeds comparable to the fastest wireline connections.
- A trial of Lucent's UMTS equipment with AT&T Wireless in the greater Miami area, announced last week.  Lucent has already achieved several key milestones in the project, including successfully making voice and data calls on the network.  Lucent also successfully tested its UMTS equipment with key suppliers in China, highlighting the readiness of Lucent's equipment for that market.

Fiscal Year Highlights
For the year, Lucent continued to leverage its cost and expense reductions into bottom line and balance sheet improvements, while making progress in new revenue areas such as professional and managed services, government contracts and business partnerships, as well as metro optical, voice over IP, broadband access and high-speed wireless data.  Highlights for the year included:
- An 18-point gross margin improvement year over year, from 13 to 31 percent.
- A decrease in total operating expenses from $8.5 billion to $2.9 billion on an annual basis; the total includes provisions for and recoveries of bad debts and customer financing, goodwill related charges and amortization and business restructuring charges and reversals.
- A reduction of the company's net loss from $11.8 billion to $770 million year over year.
- Introduction of new products, including the 5E-XC high capacity switch being deployed by SBC Communications; the Flexent OneBTS CDMA2000 base station for 3G CDMA and UMTS mobile networks; Metropolis DMXplore Access Multiplexer, which extends the reach of SONET networks to small and medium enterprises; the V-16 IP DSLAM, which delivers the fastest DSL speeds in the industry; and the iGEN Compact Switch, which reduces service providers' operating expenses by up to 90 percent.
- New and extended relationships with partners such as Sun Microsystems, EMC, Cisco Systems and Juniper Networks to supply leading-edge technology to complete our offers; also expansion of our Global Business Partners program with partners in 50 countries.
- Penetration of new services markets, with approximately $250 million in managed services contracts signed this year in North America, New Zealand and South America.
- Increased government business with the U.S. Department of the Army, government contractor Bechtel and more than a half-dozen other professional services contracts signed with large government contractors.

The quarterly earnings conference call will take place today at 14:30 CET 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 Wednesday, Oct. 29, 2003.

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.

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.

1) The per share information reported in this release represents basic and diluted per share amounts. Shares used in the three months ended September 30, 2003, diluted per share calculation include potentially diluted securities, however the earnings per share amounts were the same. Additionally, the per share amounts include the impact of preferred dividends and accretion, as well as conversion and redemption expense associated with the repurchase of 8% redeemable convertible preferred stock.

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

3) Annual operating expenses were reduced by approximately $5.6 billion in total and declined by $1.6 billion when excluding the impact of provisions for and recoveries of bad debts and customer financing, goodwill related charges and amortization, and business restructuring charges and reversals. See Exhibit B in the accompanying financial reporting package.