<PAGE>




                      AS FILED WITH THE SEC ON MAY 10, 2001


                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from _____________to _____________


                        Commission file number 001-11639

                            LUCENT TECHNOLOGIES INC.


       A Delaware                                      I.R.S. Employer
      Corporation                                      No. 22-3408857


               600 Mountain Avenue, Murray Hill, New Jersey 07974

                         Telephone Number: 908-582-8500




Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes__X__ No_____

At April 30, 2001, 3,405,810,989 common shares were outstanding.







<PAGE> 2




                                                              Form 10-Q - Part I

                         PART 1 - Financial Information

Item 1. Financial Statements


                    LUCENT TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Amounts in Millions, Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended                   Six Months Ended
                                                                       March 31,                            March 31,
                                                                  2001             2000              2001             2000
                                                                  ----             -----             ----             ----
<S>                                                            <C>               <C>              <C>              <C>
Revenues.................................                        $ 5,915          $ 7,230           $10,269          $14,320
Costs....................................                          5,416            4,291             9,088            8,167
                                                                 -------          -------           -------          -------
Gross margin.............................                            499            2,939             1,181            6,153

Operating Expenses:
Selling, general and administrative......                          2,148            1,309             4,003            2,551
Research and development.................                            970              844             1,982            1,595
Business restructuring charges and
   related asset impairments.............                          2,174                -             2,174                -
                                                                 -------          -------           -------          -------
Total operating expenses.................                          5,292            2,153             8,159            4,146
                                                                 -------          -------           -------          -------

Operating income (loss)..................                         (4,793)             786            (6,978)           2,007
Other income (expense)- net .............                            (77)             (19)             (117)             237
Interest expense.........................                            153               81               280              160
                                                                 -------          -------           -------          -------
Income (loss) from continuing operations
   before provision (benefit) for income
   taxes..................................                        (5,023)             686            (7,375)           2,084
Provision (benefit) for income taxes......                        (1,643)             224            (2,421)             643
                                                                 -------          -------           -------          -------

Income (loss) from continuing operations..                        (3,380)             462            (4,954)           1,441
Income (loss) from discontinued
   operations (net of taxes)..............                          (308)             293              (313)             563
                                                                 -------          -------           -------          -------
Income (loss) before extraordinary item
   and cumulative effect of accounting
   change................................                         (3,688)             755            (5,267)           2,004
Extraordinary gain (net of taxes)........                              -                -             1,154                -
Cumulative effect of accounting change
   (net of taxes)........................                              -                -                30                -
                                                                 -------          -------           -------          -------
Net income (loss)........................                        $(3,688)         $   755           $(4,083)         $ 2,004
                                                                 -------          -------           -------          -------
                                                                 -------          -------           -------          -------

Earnings (loss) per common share - basic:
Income (loss) from continuing
  operations.............................                        $(0.99)          $  0.15           $ (1.46)         $  0.45
Net income (loss)........................                        $(1.08)          $  0.24           $ (1.20)         $  0.63

Earnings (loss) per common share -
diluted:
Income (loss) from continuing
  operations.............................                        $ (0.99)         $  0.14           $ (1.46)         $  0.44
Net income (loss)........................                        $ (1.08)         $  0.23           $ (1.20)         $  0.61

Weighted average number of common
 shares outstanding - basic ..............                       3,400.8          3,183.4           3,394.0          3,168.8
Weighted average number of common
 shares outstanding - diluted ............                       3,400.8          3,273.7           3,394.0          3,271.3
</TABLE>



See Notes to Unaudited Consolidated Financial Statements.







<PAGE> 3





                                                              Form 10-Q - Part I


                    LUCENT TECHNOLOGIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          March 31,            September 30,
                                                                            2001                   2000
                                                                            ----                   ----
<S>                                                                     <C>                 <C>
ASSETS
Cash and cash equivalents ..............................                   $ 1,402                $ 1,467
Receivables, less allowance of $588 at March 31, 2001
  and $479 at September 30, 2000 .......................                     6,136                  8,782
Inventories.............................................                     6,119                  5,100
Contracts in process, net of contract billings of $7,469
  at March 31, 2001 and $6,744 at September 30, 2000....                     1,572                  1,881
Deferred income taxes - net ............................                     1,623                  1,101
Other current assets ...................................                     1,967                  1,575
Net current assets of discontinued operations ..........                         -                    634
                                                                           -------                -------
Total current assets ...................................                    18,819                 20,540

Property, plant and equipment, net of accumulated
  depreciation of $4,710 at March 31, 2001 and $4,464 at
  September 30, 2000 ...................................                     5,078                  5,046
Prepaid pension costs ..................................                     6,486                  6,238
Goodwill and other acquired intangibles, net of
   accumulated amortization of $1,356 at March 31, 2001
   and $852 at September 30, 2000.......................                     5,123                  6,463
Other assets ...........................................                     3,260                  3,593
Net long-term assets of discontinued operations ........                     5,361                  5,632
                                                                           -------                -------
Total assets ...........................................                   $44,127                $47,512
                                                                           -------                -------
                                                                           -------                -------

LIABILITIES
Accounts payable .......................................                   $ 2,055                $ 2,583
Payroll and benefit-related liabilities ................                     1,318                  1,010
Debt maturing within one year ..........................                     2,314                  3,468
Other current liabilities ..............................                     4,256                  3,099
Net current liabilities of discontinued operations .....                     2,101                      -
                                                                           -------                -------
Total current liabilities...............................                    12,044                 10,160

Postretirement and postemployment benefit liabilities...                     5,140                  5,395
Long-term debt .........................................                     3,056                  3,030
Deferred income taxes - net ............................                       324                  1,203
Other liabilities ......................................                     1,503                  1,552
                                                                           -------                -------
Total liabilities ......................................                    22,067                 21,340

Commitments and contingencies

SHAREOWNERS' EQUITY
Preferred stock-par value $1.00 per share
  Authorized shares: 250,000,000;
  issued and outstanding shares: none...................                         -                      -
Common stock-par value $.01 per share
  Authorized shares: 10,000,000,000; issued and
  outstanding shares: 3,401,539,700 at March 31, 2001
  and 3,384,332,104 at September 30, 2000...............                        34                     34
Additional paid-in capital .............................                    20,599                 20,390
Guaranteed ESOP obligation .............................                        (3)                   (16)
Retained earnings ......................................                     1,912                  6,129
Accumulated other comprehensive income (loss)...........                      (482)                  (365)
                                                                           -------                -------
Total shareowners' equity ..............................                    22,060                 26,172
                                                                           -------                -------
Total liabilities and shareowners' equity ..............                   $44,127                $47,512
                                                                           -------                -------
                                                                           -------                -------
</TABLE>


See Notes to Unaudited Consolidated Financial Statements.






<PAGE> 4



                                                              Form 10-Q - Part I


                    LUCENT TECHNOLOGIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Dollars in Millions)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                 Six Months Ended March 31,
                                                                    2001           2000
                                                                    ----           ----
<S>                                                             <C>            <C>
Operating Activities:
Net income (loss).........................................         $(4,083)       $ 2,004
Less: Income (loss) from discontinued operations..........            (313)           563
        Extraordinary gain................................           1,154              -
        Cumulative effect of accounting change............              30              -
                                                                   -------        -------
Income (loss) from continuing operations..................          (4,954)         1,441

Adjustments to reconcile income (loss) from continuing
  operations to net cash used in operating activities:
  Non-cash portion of business restructuring charges and
  related asset impairments...............................           1,984              -
 Depreciation and amortization............................           1,301            692
 Provision for uncollectibles and customer financings.....           1,074            116
 Tax benefit from employee stock options .................              11            909
 Deferred income taxes ...................................          (1,403)           (30)
 Pension credit ..........................................            (696)          (494)
 Other adjustments for non-cash items ....................             233           (419)
Changes in operating assets and liabilities:
  Decrease (increase) in receivables......................           2,373         (1,096)
  Increase in inventories and contracts in process........          (1,293)          (516)
  Decrease in accounts payable............................            (500)          (316)
  Changes in other operating assets and liabilities.......            (955)          (625)
                                                                   -------        -------
Net cash used in operating activities from continuing
  operations..............................................          (2,825)          (338)
                                                                   -------        -------

Investing Activities:
Capital expenditures .....................................            (752)          (740)
Purchases of investments .................................             (65)           (88)
Sales or maturity of investments .........................              36            831
Dispositions of businesses ...............................           2,494            210
Other investing activities ...............................               6             25
                                                                   -------        -------
Net cash provided by investing activities from continuing
  operations..............................................           1,719            238
                                                                   -------        -------

Financing Activities:
Net proceeds from (payments on) short-term borrowings.....           1,379           (482)
Payment of credit facility fees...........................            (100)             -
Proceeds from issuances of long-term debt.................               -             16
Repayments of long-term debt .............................               -           (374)
Proceeds from issuance of common stock ...................             153            901
Dividends paid ...........................................            (136)          (126)
                                                                   -------        -------
Net cash provided by (used in) financing activities
  from continuing operations .............................           1,296            (65)
Effect of exchange rate changes on cash and
  cash equivalents .......................................             (25)            (5)
                                                                   -------        -------
Net cash provided by (used in) continuing operations......             165           (170)
Net cash (used in) provided by discontinued operations....            (230)            34
                                                                   -------        -------
Net decrease in cash and cash equivalents.................             (65)          (136)
Cash and cash equivalents at beginning of year............           1,467          1,686
                                                                   -------        -------
Cash and cash equivalents at end of period ...............         $ 1,402        $ 1,550
                                                                   =======        =======
</TABLE>


See Notes to Unaudited Consolidated Financial Statements.





<PAGE> 5

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements have been prepared
by Lucent Technologies Inc. ("Lucent" or the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") and, in the
opinion of the Company, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of results of operations, financial
position and cash flows as of and for the periods presented.

The preparation of financial statements and related disclosures in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the period reported.
Actual results could differ from those estimates. Estimates are used in
accounting for, among other things, long-term contracts, allowances for
uncollectible receivables and customer financings, inventory obsolescence,
product warranty, depreciation, employee benefits, taxes and contingencies.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the Consolidated Financial Statements in the period that they
are determined to be necessary.

The Company believes that the disclosures made are adequate to keep the
information presented from being misleading. The results for the three and six
months ended March 31, 2001 are not necessarily indicative of financial results
for the full year. These Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements and notes thereto
included in Lucent's latest Annual Report on Form 10-K for the year ended
September 30, 2000.

Certain reclassifications have been made to conform to the current period
presentation.

2. BUSINESS RESTRUCTURING CHARGES AND RELATED ASSET IMPAIRMENTS

In connection with a restructuring plan to exit certain non-strategic product
lines and to streamline its cost structure in various businesses and corporate
operations, Lucent recorded in the current fiscal quarter a pre-tax charge to
earnings of $2,710, which includes restructuring costs of $810 and asset
write-downs of $1,900. Asset write-downs include inventory write-downs of $536,
which are recorded as a component of Costs in the Consolidated Statement of
Operations.

Restructuring costs primarily relate to involuntary employee separations of $389
for approximately 6,300 employees, facility closings of $60, contract
settlements of $350 and other of $11.

The employee separations impact all business groups and geographic regions of
the Company, with the majority pertaining to management employees. Of the $389
employee separation charge, payments of $84 for termination benefits to certain
US management employees are expected to be funded through the Company's surplus
pension assets. As of March 31, 2001, approximately 900 employee separations
have been completed. Lucent anticipates that employee separations will be
substantially completed during the fourth fiscal quarter of 2001.

Contract settlements are primarily associated with product line discontinuances
and facility closings.

Asset write-downs primarily reflect the write-down of certain long-lived assets
and inventory that became impaired as a result of management's decision to
discontinue certain product lines and product development efforts. Impairment
losses were primarily based upon the write-down of goodwill and other acquired
intangibles to their fair value, which was estimated by discounting the expected
future cash flows. As a result, an impairment charge of $835 for goodwill and
other acquired intangibles was recorded and largely relates to the write-off of
$556 of goodwill relating to the rationalization of the metro optical
networking offer. The remainder of the asset write-downs primarily
consists of inventory, property, plant and equipment and capitalized software
associated with the Company's product rationalizations included in the
restructuring plan. These actions primarily affect the Products segment.

The Company expects to substantially complete the restructuring plan by December
31, 2001.








<PAGE> 6

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)


The following table displays the status of the restructuring reserve at March
31, 2001:

<TABLE>
<CAPTION>
                                               ------Deductions-------
                                        Initial        Cash          Non-cash        March 31, 2001
           Type of Cost                  Charge       Chartes         charges           Reserve

<S>                                 <C>                <C>             <C>              <C>
Restructuring costs:
Contract settlements                     $ 350         $ 41          $    -              $309
Employee separations                       389           13              84               292
Facility closings                           60            1               -                59
Other                                       11            -               -                11
                                        ------          ---          ------              ----
   Total Restructuring Costs               810           55              84               671
                                        ------          ---          ------              ----
Asset write-downs:
Goodwill and other
   acquired intangibles                    835            -             835                 -
Inventory                                  536            -             536                 -
Capitalized software                       179            -             179                 -
Property, plant &
   equipment, net                           94            -              94                 -
Other                                      256            -             256                 -
                                        ------          ---          ------              ----
   Total asset write-downs               1,900            -           1,900                 -
                                        ------          ---          ------              ----
Total                                   $2,710          $55          $1,984              $671
                                        ======          ===          ======              ====

</TABLE>

3. DISCONTINUED OPERATIONS

On December 29, 2000, Lucent completed the sale of its power systems
business (see Note 4). On April 2, 2001, Agere Systems Inc. ("Agere"), Lucent's
microelectronics business, completed an initial public offering ("IPO") (see
Note 13). Lucent plans to spin off its remaining interest in Agere through a
tax-free distribution to its shareholders ("Distribution") by September 30,
2001. The Company has historically reported the microelectronics and power
systems businesses as part of a single significant segment. Accordingly,
Lucent's consolidated financial statements for all periods presented have been
reclassified to reflect Agere and the power systems business as a discontinued
business segment in accordance with Accounting Principles Board Opinion No. 30.

On September 30, 2000, Lucent completed the spin-off of Avaya, Lucent's
former enterprise networks business in a tax-free distribution to its
shareholders. This segment has also been treated as a discontinued business
segment.

Summarized financial information for the discontinued operations is as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended                 Six Months Ended
                                                March 31,                         March 31,
                                          2001             2000             2001             2000
                                          ----             ----             ----             ----

<S>                                     <C>              <C>              <C>               <C>
Revenues:
   Agere and power systems........       $1,002           $1,125           $2,489            $2,100
   Avaya .........................            -            1,901                -             3,741
                                         ------           ------           ------            ------
Total revenues.....................      $1,002           $3,026           $2,489            $5,841
                                         ======           ======           ======            ======

Income(loss)from discontinued
   operations (net of taxes):
   Agere and power
   systems(a)......................      $ (146)          $  160           $ (151)           $  305
   Avaya(b)........................           -              133                -               258
   Loss on disposal of Agere
    (net of taxes)(a)..............        (162)               -             (162)                -
                                         ------           ------           ------            ------
Total income(loss)from
   discontinued operations
   (net of taxes)..................      $ (308)          $  293           $ (313)           $  563
                                         ======           ======           ======            ======


</TABLE>






<PAGE> 7

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                      March 31,                    September 30,
                                                         2000                          2000

<S>                                                       <C>                         <C>
Agere and power systems:
Current assets...............................            $ 1,648                       $1,583
Current liabilities..........................              3,749  (c)                     949
                                                         -------                       ------
Net current (liabilities) assets of
   discontinued operations...................            $(2,101)                      $  634
                                                         =======                       ======

Long-term assets.............................            $ 5,807                       $6,050
Long-term liabilities........................                446                          418
                                                         -------                       ------
Net long-term assets of discontinued
   operations................................            $ 5,361                       $5,632
                                                         =======                       ======

</TABLE>

-------

(a) Agere and power systems income (loss) from discontinued operations was net
of applicable income tax benefits of $8 and $107 for the three and six months
ended March 31, 2001, respectively, and net of applicable income tax provisions
of $62 and $182 for the three and six months ended March 31, 2000, respectively.
The loss on disposal of Agere, net of a tax benefit of $94, is composed of
Lucent's share of the estimated future net losses and separation costs of the
microelectronics business through the planned spin date of September 30, 2001,
partially offset by a gain of approximately $140 associated with Lucent's debt
exchange on April 2, 2001 (see Note 13).

(b) Avaya's income from discontinued operations for the three and six months
ended March 31, 2000, was net of applicable income taxes of $69 and $136,
respectively.

(c) Includes $2,500 of short-term debt assumed by Agere (see Note 6).


4. EXTRAORDINARY GAIN

On December 29, 2000, Lucent completed the sale of its power systems business to
Tyco International Ltd. for $2,500 in cash. In connection with the sale, Lucent
recorded an extraordinary gain of $1,154 (net of tax of $762), subject to
potential purchase price adjustments to be resolved by the end of fiscal year
2001. Lucent does not expect such adjustments, if any, to be significant to its
consolidated results of operations.

5. ACCOUNTING CHANGE - DERIVATIVE FINANCIAL INSTRUMENTS

Effective October 1, 2000, Lucent adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), and its corresponding amendments under SFAS No. 138.
SFAS 133 requires Lucent to measure all derivatives, including certain
derivatives embedded in other contracts, at fair value and to recognize them in
the Consolidated Balance Sheet as an asset or liability, depending on Lucent's
rights or obligations under the applicable derivative contract. For derivatives
designated as fair value hedges, the changes in the fair value of both the
derivative instrument and the hedged item are recorded in earnings. For
derivatives designated as cash flow hedges, the effective portions of changes in
fair value of the derivative are reported in other comprehensive income ("OCI")
and are subsequently reclassified into earnings when the hedged item affects
earnings. Changes in fair value of derivative instruments not designated as
hedging instruments and ineffective portions of hedges are recognized in
earnings in the period incurred. The adoption of SFAS 133 as of October 1, 2000,
resulted in a cumulative after-tax reduction in net loss of $30 (net of tax of
$17) and an $11 credit to OCI recorded in the quarter ended December 31, 2000.
The reduction in net loss is primarily attributable to derivatives not
designated as hedging instruments, including foreign currency embedded
derivatives, equity warrants and other derivatives. For the six months ended
March 31, 2001, the change in fair market value of derivative instruments was
recorded in other income (expense) and was not material. The Financial
Accounting Standards Board's Derivatives Implementation Group continues to
identify and deliberate multiple issues related to the implementation of SFAS
133.







<PAGE> 8

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

Foreign Currency Risk
---------------------
Lucent conducts its business on a multinational basis in a wide variety of
foreign currencies. To manage this risk, Lucent enters into various foreign
exchange forward and option contracts to manage its exposure to changes in those
foreign exchange rates. Alternatively, Lucent may hedge foreign exchange risk in
certain sales and purchase contracts by embedding terms in the contracts that
affect the ultimate amount of cash flows under the contract. Principal
currencies hedged are Canadian dollars, Brazilian reals, Australian dollars,
British pounds, Japanese yen and Euros.

Lucent has designated certain freestanding foreign currency derivatives as
hedging instruments under SFAS 133 against its intercompany and external
foreign-currency-denominated loans. These exposures make up a large proportion
of the notional value of Lucent's total foreign currency risk and are well
defined as to amounts and timing of repayments. The derivatives hedging these
exposures are designated as cash flow hedging instruments for anticipated cash
flows not to exceed twelve months. Lucent will continue to hedge all other types
of foreign currency risk to preserve the economic cash flows of the Company in
accordance with corporate risk management policies but generally does not expect
to designate related derivative instruments as hedges for cost/benefit reasons.
Accordingly, the changes in fair value of these undesignated freestanding
foreign currency derivative instruments are recorded in earnings in the period
of change and have not been material to Lucent due to the short maturities of
these instruments.

Lucent's foreign currency embedded derivatives consist of sales and purchase
contracts with cash flows indexed to changes in or denominated in a currency
that neither party to the contract uses as their functional currency. Changes in
the fair value of these embedded derivatives are recorded in earnings in the
current period.

Interest Rate Risk
-------------------
Lucent manages its ratio of fixed to floating rate debt with the objective of
achieving a mix that management believes is appropriate. To manage this mix in a
cost-effective manner, Lucent, from time to time, enters into interest rate swap
agreements, in which it agrees to exchange various combinations of fixed and/or
variable interest rates based on agreed upon notional amounts. The interest rate
swaps in effect at March 31, 2001 were designated as fair value hedge
instruments and their fair value was not material.

Other Derivatives
------------------
From time to time, Lucent may obtain warrants to purchase equity securities in
other companies to compliment its investment portfolio. Warrants that provide
for net share settlement are considered to be derivative instruments and are
generally not eligible to be designated as hedging instruments as there is no
corresponding underlying exposure.

6. DEBT

Debt Maturing Within One Year:

<TABLE>
<CAPTION>
                                                            March 31,          September 30,
                                                              2001                  2000

<S>                                                         <C>                   <C>
     Commercial paper..................                     $  829                 $2,475
     Current portion of long-term debt.                        750                    750
     Revolving credit facility.........                        500                      -
     Secured borrowings and other......                        235                    243
                                                            ------                 ------
                                                             2,314                  3,468
     Long-term debt....................                      3,056                  3,030
                                                            ------                 ------
        Total debt.....................                     $5,370                 $6,498
                                                            ======                 ======

</TABLE>

On February 22, 2001, Lucent completed arrangements for $6,500 of Credit
Facilities with financial institutions. These Credit Facilities consist of a
replacement for the 364-day $2,000 Credit Facility that expired on February 22,
2001 and a new 364-day $2,500 assumable Credit Facility for Agere (the
"Assumable Credit Facility"). In addition to these two Credit Facilities, Lucent
amended an existing $2,000 Credit Facility expiring in February 2003. Under the
364-day $2,000 Credit Facility, any loans outstanding at maturity may be
extended,







<PAGE> 9

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

at Lucent's option, to February 26, 2003. Prior to the IPO, Lucent borrowed $2.5
billion under the Assumable Credit Facility, which was assumed by Agere on April
2, 2001, the closing of their IPO. Lucent has allocated this short-term debt to
discontinued operations at March 31, 2001 and it is reflected in the net current
liabilities of discontinued operations.

The Credit Facilities are secured by substantially all of Lucent's assets (the
"Collateral"), including the pledge of the Agere stock owned by Lucent. Lucent
expects the pledge of the Agere stock to be released by September 30, 2001.
Certain other existing financings and obligations are, and certain future
financings and obligations could be, similarly secured during the time the
Collateral arrangements for the Credit Facilities are in effect.

The Credit Facilities contain affirmative and negative covenants, including
financial covenants requiring the maintenance of specified consolidated minimum
net worth and minimum earnings before interest, taxes, depreciation and
amortization (EBITDA). As of March 31, 2001, Lucent was in compliance with these
covenants. In addition, meeting a current asset ratio requirement is a condition
for releasing the pledge of the Agere stock and will terminate upon the
Distribution. The Agere stock can be released and the Distribution can occur at
Lucent`s request if there is no event of default under Lucent's Credit
Facilities (including compliance with the net worth, EBITDA, and current asset
ratio covenants) and Lucent has received $2,500 of proceeds from certain
non-operating sources. As of April 2, 2001, Lucent had received $519 of such
proceeds (see Note 13).

As of March 31, 2001, Lucent had borrowed $500 under its remaining $4,000 Credit
Facilities. The borrowings during the quarter were primarily used to pay down
Lucent's commercial paper balances as they became due.

7. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) represents net income (loss) plus the results of
certain changes not reflected in the Consolidated Statements of Operations. The
components of comprehensive income (loss), net of tax, (except for foreign
currency translation adjustments which are not currently adjusted for income
taxes since they relate to indefinite investments in non-United States
subsidiaries) are as follows:

<TABLE>
<CAPTION>

                                                         Three Months Ended                Six Months Ended
                                                              March 31,                        March 31,
                                                        2001            2000             2001             2000
                                                        ----            ----             ----             ----

<S>                                                  <C>              <C>              <C>                 <C>
Net income (loss).................................    $(3,688)          $755           $(4,083)          $2,004
Other comprehensive income (loss):
Foreign currency translation adjustments..........        (64)            (7)              (48)             (59)
Reclassification adjustment to foreign currency
   translation for sale of foreign entities (net
   of  tax of $2).................................          -              -                (3)               -
Unrealized holding gains (losses) on certain
  investments.....................................        (26)             7              (121)             170
Reclassification adjustments for realized gains
  and impairment losses on certain investments(net
  of tax provision (benefit) of $27, ($21), $28
  and ($110), respectively).......................         40            (53)               43             (171)
Cumulative effect of accounting change (SFAS 133).          -              -                11                -
Net derivative gains on cash flow hedges..........          2              -                 1                -
                                                      -------           ----           -------           ------
Comprehensive income (loss).......................    $(3,736)          $702           $(4,200)          $1,944
                                                      =======           ====           =======           ======

</TABLE>







<PAGE> 10

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)


8. SUPPLEMENTARY BALANCE SHEET INFORMATION

Inventories:

<TABLE>
<CAPTION>

                                                                 March 31,       September 30,
                                                                   2001              2000

<S>                                                     <C>                <C>
     Completed goods..............................                $3,151            $2,810
     Work in process and raw materials............                 2,968             2,290
                                                                  ------            ------
        Total inventories.........................                $6,119            $5,100
                                                                  ======            ======

</TABLE>

9. EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the sum of the weighted average number of common shares outstanding
plus all additional common shares that would have been outstanding if
potentially dilutive securities had been issued. As a result of the net loss
from continuing operations reported for the three and six months ended March 31,
2001, approximately 34.8 and 45.1, respectively, of potential common shares have
been excluded from the calculation of diluted earnings (loss) per share because
their effect would reduce the loss per share.

In addition, options where the exercise price was greater than the average
market price of the common shares of 423.6 and 376.8 for the three and six month
periods ended March 31, 2001, respectively, and 39.6 and 11.3 for the three and
six month periods ended March 31, 2000, respectively, were excluded from the
computation of diluted earnings (loss) per share.

The following table sets forth the computation of basic and diluted earnings
(loss) per share:

<TABLE>
<CAPTION>
                                                                  Three Months Ended                  Six Months Ended
                                                                      March 31,                          March 31,
                                                                2001             2000              2001             2000
                                                                ----             ----              ----             ----

<S>                                                           <C>               <C>             <C>                <C>
Net income (loss) ............................                $(3,688)          $ 755            $(4,083)           $2,004
Earnings (loss) per common share - basic:
   Income (loss) from continuing operations...                $ (0.99)          $0.15            $ (1.46)           $ 0.45
   Income (loss) from discontinued                                                                                    0.18
     operations...............................                  (0.09)           0.09              (0.09)
   Extraordinary gain.........................                      -               -               0.34                 -
   Cumulative effect of accounting change.....                      -               -               0.01                 -
                                                              -------        --------            -------            -------
   Net income(loss)...........................                $ (1.08)          $0.24            $ (1.20)           $ 0.63
                                                              =======        ========            =======            =======

Earnings (loss) per common share-diluted:
   Income (loss) from continuing operations                   $ (0.99)          $0.14            $ (1.46)           $  0.44
   Income (loss) from discontinued                                                                                     0.17
     operations...............................                  (0.09)           0.09              (0.09)
   Extraordinary gain.........................                      -               -               0.34                  -
   Cumulative effect of accounting change.....                      -               -               0.01                  -
                                                              -------        --------            -------            -------

   Net income (loss)..........................                $ (1.08)          $0.23            $ (1.20)           $  0.61
                                                              =======        ========            =======            =======

Dividends declared per common share...........                $  0.02           $0.00            $  0.04            $  0.04
                                                              =======        ========            =======            =======

Number of Shares
Common shares - basic.........................                3,400.8         3,183.4            3,394.0            3,168.8
Effect of dilutive securities:
   Stock options..............................                      -            85.0                  -               97.1
   Other .....................................                      -             5.3                  -                5.4
                                                              -------        --------            -------            -------
Common shares - diluted.......................                3,400.8         3,273.7            3,394.0            3,271.3
                                                              =======        ========            =======            =======

</TABLE>








<PAGE> 11

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

10.  OPERATING SEGMENTS

Lucent operates in the global telecommunications networking industry and
designs, develops, manufactures and services communication systems, software and
related products. Lucent's operations include two reportable segments: Products
and Services. The two reportable segments are managed separately. The Products
segment provides public networking systems and software to telecommunications
service providers and public network operators around the world and optical
fiber for applications in the communications and computing industries. The
Services segment includes the full life cycle of planning and design, consulting
and integration support services as well as network engineering, provisioning,
installation and warranty support.

Lucent has reclassified the results of operations related to Agere, its power
systems business and Avaya as discontinued operations (see Note 3). Agere and
the power systems business were previously disclosed within a separate operating
segment, Microelectronics and Communications Technologies. In addition, Avaya
was also previously disclosed as a separate operating segment, Enterprise
Networks. The new segment structure described above reflects the Company's
management of its remaining business.

Performance measurement and resource allocation for the reportable operating
segments are based on many factors. The primary financial measure is
contribution margin, which includes the revenues and costs and expenses directly
controlled by the reportable segment. In addition, contribution margin includes
allocations of the provision for uncollectibles and customer financings, which
are typically managed on a common basis. Contribution margin for reportable
segments excludes certain personnel costs including those related to pension and
post-retirement and certain other costs related to shared services such as
general corporate functions and regional sales and marketing which are managed
on a common basis in order to realize economies of scale and efficient use of
resources. Contribution margin for reportable segments also excludes
acquisition-related costs such as goodwill and other acquired intangibles
amortization, purchased in-process research and development and other costs from
business acquisitions and, in fiscal 2001, business restructuring charges and
related asset impairments. The accounting policies of the reportable segments
are essentially the same as those applied in the consolidated financial
statements to the extent that the related items are included within contribution
margin. Intersegment transactions that occur are based on current market prices
and all intersegment profit is eliminated in consolidation.

The following tables present Lucent's revenues and contribution margin by
reportable operating segment:

<TABLE>
<CAPTION>
                                                                   Three Months                         Six Months
                                                                  Ended March 31,                     Ended March 31,
                                                               2001             2000              2001               2000
                                                               ----             ----              ----               ----

<S>                                                            <C>             <C>                 <C>             <C>
                        External Revenues
Products.........................................              $4,786          $ 5,939             $8,149           $11,581
Services.........................................               1,106            1,111              2,026             2,237
                                                               ------           ------            -------           -------
   Total reportable segments.....................               5,892            7,050             10,175            13,818
Other (a)........................................                  23              180                 94               502
                                                               ------           ------            -------           -------
   Total External Revenues.......................               5,915            7,230             10,269            14,320
                                                               ======           ======            =======           =======

                      Intersegment Revenues
Products.........................................                  22               36                 68                92
Services.........................................                  59               22                 82                37
                                                               ------           ------            -------           -------
   Total reportable segments.....................                  81               58                150               129
Other (a)........................................                 (81)             (58)              (150)             (129)
                                                               ------           ------            -------           -------
   Total Intersegment Revenues...................                   -                -                  -                 -
                                                               ======           ======            =======           =======

                         Total Revenues
Products.........................................               4,808            5,975              8,217            11,673
Services.........................................               1,165            1,133              2,108             2,274
                                                               ------           ------            -------           -------
   Total reportable segments.....................               5,973            7,108             10,325            13,947
Other (a)........................................                 (58)             122                (56)              373
                                                               ------           ------            -------           -------
   Total Revenues................................              $5,915           $7,230            $10,269           $14,320
                                                               ======           ======            =======           =======

</TABLE>








<PAGE> 12

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months                         Six Months
                                                                   Ended March 31,                     Ended March 31,
                                                                2001             2000              2001               2000
                                                                ----             ----              ----               ----

<S>                                                            <C>              <C>                <C>               <C>
                       Contribution Margin
Products..........................................            $  (684)           $1,391            $(1,819)          $ 2,869
Services..........................................               (246)              175               (333)              311
                                                              -------            ------            --------          -------
   Total reportable segments .....................               (930)            1,566             (2,152)            3,180
Business restructuring charges and related asset
     impairments..................................             (2,710)                -             (2,710)               -
Acquisition/integration-related costs ............                   -                -                  -               (62)
Goodwill and other acquired intangibles
     amortization ................................               (249)              (43)              (510)              (88)
Regional sales and marketing expenses ............               (592)             (617)            (1,163)           (1,185)
Other (a).........................................               (312)             (120)              (443)              162
                                                              -------            ------            --------          -------
   Operating income (loss)........................            $(4,793)           $  786           $ (6,978)          $ 2,007
                                                              =======            ======            ========          =======

</TABLE>

(a)  Other primarily includes the results from the Company's remaining consumer
     products business in fiscal 2000, other smaller units, eliminations of
     internal business, and unallocated costs of shared services. The remaining
     consumer products business was sold in the second fiscal quarter of 2000.

11. COMMITMENTS AND CONTINGENCIES

In the normal course of business, Lucent is subject to proceedings, lawsuits and
other claims, including proceedings under laws and government regulations
related to environmental and other matters. Such matters are subject to many
uncertainties, and outcomes are not predictable with assurance. Consequently,
the ultimate aggregate amount of monetary liability or financial impact with
respect to these matters at March 31, 2001 cannot be ascertained. While these
matters could affect the operating results of any one quarter when resolved in
future periods and while there can be no assurance with respect thereto,
management believes that after final disposition, any monetary liability or
financial impact to Lucent, from matters other than those described in the next
paragraph, beyond that provided for at March 31, 2001 would not be material to
the annual Consolidated Financial Statements.

Lucent and certain of its former officers are defendants in several purported
shareholder class action lawsuits for alleged violations of federal securities
laws, which have been consolidated in a single action. Specifically, the
complaints allege, among other things, that beginning in late October 1999,
Lucent and certain of its officers misrepresented Lucent's financial condition
and failed to disclose material facts that would have an adverse impact on
Lucent's future earnings and prospects for growth. These actions seek
compensatory and other damages, and costs and expenses associated with the
litigation. These actions are in the early stages and the Company is unable to
determine their potential impact on the Consolidated Financial Statements.
Lucent intends to defend these actions vigorously. Also, Lucent has been served
with several derivative complaints filed by individual Lucent shareholders
against the current members of Lucent's Board of Directors, two former directors
and an officer, which have been consolidated in a single action. These
actions make claims for breach of fiduciary duties allegedly owed to the
Company, and seek damages against the defendants and in favor of Lucent, as well
as costs and expenses associated with litigation for the individual plaintiffs.
These derivative actions are in the early stages and the Company is unable to
determine their potential impact on the Consolidated Financial Statements.
Lucent intends to defend this action vigorously.

A complaint has been filed by Winstar Communications, Inc. and Winstar Wireless,
Inc. against Lucent in connection with the Chapter 11 bankruptcy petition
filed by Winstar Communications, Inc. and various related entities. The
complaint asserts claims for breach of contract and fraudulent inducement
against the Company and seeks damages in excess of $10 billion and injunctive
relief, as well as costs and expenses associated with litigation. Lucent
believes this action is without merit.








<PAGE> 13

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)

In connection with the formation of Lucent from certain units of AT&T Corp. and
the associated assets and liabilities of those units (the "Separation") and
AT&T's distribution of its remaining interest in Lucent to its shareowners (The
"Distribution"), Lucent, AT&T and NCR Corporation executed and delivered the
Separation and Distribution Agreement, dated as of February 1, 1996, as amended
and restated, and certain related agreements. The Separation and Distribution
Agreement, among other things, provides that Lucent will indemnify AT&T and NCR
for all liabilities relating to Lucent's business and operations and for all
contingent liabilities relating to Lucent's business and operations or otherwise
assigned to Lucent. In addition to contingent liabilities relating to the
present or former business of Lucent, any contingent liabilities relating to
AT&T's discontinued computer operations (other than those of NCR) were assigned
to Lucent. The Separation and Distribution Agreement provides for the sharing of
contingent liabilities not allocated to one of the parties, in the following
proportions: AT&T: 75%, Lucent: 22%, and NCR: 3%. The Separation and
Distribution Agreement also provides that each party will share specified
portions of contingent liabilities related to the business of any of the other
parties that exceed specified levels.

In connection with the spin-off of Avaya, Lucent and Avaya executed and
delivered a Contribution and Distribution Agreement which provides for
indemnification by each company with respect to contingent liabilities primarily
relating to their respective businesses or otherwise assigned to each, subject
to certain sharing provisions. In the event the aggregate value of all amounts
paid by each company, in respect of any single contingent liability or any set
or group of related contingent liabilities, is in excess of $50, each company
will share portions in excess of the threshold amount based on agreed-upon
percentages. The Contribution and Distribution Agreement also provides for the
sharing of certain contingent liabilities, specifically: (1) any contingent
liabilities that are not primarily contingent liabilities of Lucent or
contingent liabilities associated with the businesses attributed to Avaya; (2)
certain specifically identified liabilities, including liabilities relating to
terminated, divested or discontinued businesses or operations; and (3) shared
contingent liabilities within the meaning of the Separation and Distribution
Agreement with AT&T Corp.

Environmental Matters

Lucent's current and historical operations are subject to a wide range of
environmental protection laws. In the United States, these laws often require
parties to fund remedial action regardless of fault. Lucent has remedial and
investigatory activities under way at numerous current and former facilities. In
addition, Lucent was named a successor to AT&T as a potentially responsible
party ("PRP") at numerous "Superfund" sites pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or
comparable state statutes. Under the Separation and Distribution Agreement,
Lucent is responsible for all liabilities primarily resulting from or relating
to the operation of Lucent's business as conducted at any time prior to or after
the Separation including related businesses discontinued or disposed of prior to
the Separation, and Lucent's assets including, without limitation, those
associated with these sites. In addition, under such Separation and Distribution
Agreement, Lucent is required to pay a portion of contingent liabilities paid
out in excess of certain amounts by AT&T and NCR, including environmental
liabilities.








<PAGE> 14

                                                              Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Amounts in Millions Except Per Share Amounts)
                                   (Unaudited)


It is often difficult to estimate the future impact of environmental matters,
including potential liabilities. Lucent records an environmental reserve when it
is probable that a liability has been incurred and the amount of the liability
is reasonably estimable. This practice is followed whether the claims are
asserted or unasserted. Management expects that the amounts reserved will be
paid out over the periods of remediation for the applicable sites, which
typically range from five to 30 years. Reserves for estimated losses from
environmental remediation are, depending on the site, based primarily on
internal or third-party environmental studies and estimates as to the number,
participation level and financial viability of any other PRPs, the extent of the
contamination and the nature of required remedial actions. Accruals are adjusted
as further information develops or circumstances change. The amounts provided
for in Lucent's consolidated financial statements for environmental reserves are
the gross undiscounted amounts of such reserves, without deductions for
insurance or third-party indemnity claims. In those cases where insurance
carriers or third-party indemnitors have agreed to pay any amounts and
management believes that collectibility of such amounts is probable, the amounts
are reflected as receivables in the financial statements. Although Lucent
believes that its reserves are adequate, there can be no assurance that the
amount of capital expenditures and other expenses which will be required
relating to remedial actions and compliance with applicable environmental laws
will not exceed the amounts reflected in Lucent's reserves or will not have a
material adverse effect on Lucent's financial condition, results of operations
or cash flows. Any possible loss or range of possible loss that may be incurred
in excess of that provided for at March 31, 2001 cannot be estimated.

12. RECENT PRONOUNCEMENT

In December 1999, the SEC issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on
the recognition, presentation and disclosure of revenues in financial statements
and requires adoption no later than the fourth quarter of fiscal 2001. Lucent
will adopt SAB 101 in the fourth fiscal quarter of 2001 retroactively to the
beginning of fiscal 2001. Management is currently evaluating the potential
effect of the implementation of SAB 101 on Lucent's financial condition and
results of operations. In implementing SAB 101, the Company expects to elect a
policy of not recognizing any revenue on equipment sold on an installed basis
until installation is complete. SAB 101 does not impact revenue recognition for
software and long-term contracts. The implementation of SAB 101 could result in
a significant one-time charge to earnings as a cumulative effect of accounting
change. In addition, the adoption may result in revisions of previously issued
quarterly results issued in fiscal 2001.

13. SUBSEQUENT EVENTS

Agere IPO
---------
On April 2, 2001, Agere completed an IPO of 600 shares of Class A common stock,
resulting in net proceeds of $3,440. As a result of the IPO, the Company will
record an increase to shareowner's equity of approximately $920 in the third
fiscal quarter of 2001. In addition, on April 2, 2001, Morgan Stanley exercised
its overallotment option to purchase an additional 90 shares of Agere Class A
common stock from Lucent. Morgan Stanley exchanged $519 of Lucent commercial
paper for the Agere shares. This transaction resulted in a gain of approximately
$140, which has partially reduced the estimated loss on disposal of Agere (see
Note 3). On April 2, 2001, after the IPO and the exercise of the overallotment
option, Lucent owned 58% of Agere.




<PAGE> 15

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

OVERVIEW

Lucent Technologies ("Lucent" or the "Company") designs and delivers the
systems, software, silicon and services for next-generation communications
networks for service providers and enterprises. Backed by research and
development of Bell Labs, Lucent focuses on high-growth areas such as broadband
and mobile Internet infrastructure; communications software; communications
semiconductors and optoelectronics; Web-based enterprise solutions that link
private and public networks; and professional network design and consulting
services.

During the fiscal year ended September 30, 2000 and continuing through the
second fiscal quarter of 2001, various initiatives were undertaken to reorganize
the Company to become more focused and better positioned to capitalize on market
opportunities. This reorganization included:

o    On April 2, 2001, Agere (Lucent's microelectronics business) completed an
     IPO of 600 million shares of Class A common stock. Lucent plans to spin off
     the remaining shares through a tax-free distribution to its shareholders by
     September 30, 2001 ("Distribution") (see AGERE IPO).

o    On March 12, 2001, Lucent announced that it was pursuing a variety of
     strategic alternatives for the optical fiber solutions business. The
     Company is currently reviewing several bids for the sale of the business.

o    On February 22, 2001, Lucent completed arrangements for $6.5 billion of
     Credit Facilities with financial institutions. (see LIQUIDITY AND CAPITAL
     RESOURCES).

o    On January 24, 2001, Lucent announced its restructuring plan. In connection
     with the plan, Lucent recorded a pre-tax charge to earnings of $2.7 billion
     in the current quarter ended March 31, 2001 (see RESTRUCTURING CHARGE AND
     RELATED ASSET IMPAIRMENTS).

o    On December 29, 2000 Lucent completed the sale of its power systems
     business to Tyco International Ltd, for $2.5 billion in cash.

o    On September 30, 2000 Lucent completed the spin-off of Avaya Inc., formerly
     its enterprise networks business.

Lucent's consolidated financial statements for all periods presented reflect
Agere and the power systems business and Avaya as discontinued business
segments.

On a total basis, Lucent reported a net loss of $3.7 billion, or $1.08 loss per
basic and diluted share for the quarter ended March 31, 2001, as compared with
net income in the prior year quarter of $755 million, or $0.23 per diluted
share. The current quarter net loss was impacted by a pretax charge for business
restructuring and related asset impairments of $2.7 billion ($0.58 per basic and
diluted share), a pre-tax charge of $845 million ($0.15 per basic and diluted
share) for an additional loss provision for amounts due from Winstar
Communications, Inc., which recently announced that it is seeking protection
under the U.S. Bankruptcy Code, and the write-down of certain equity
investments. Lucent has fully reserved for its loans to Winstar. In addition,
the current quarter included a net loss from discontinued operations of $308
million ($0.09 per basic and diluted share; see Note 3 to the accompanying
Consolidated Financial Statements). The prior year included net income from
discontinued operations of $293 million ($0.09 per diluted share).







<PAGE> 16

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION


For the six months ended March 31, 2001, Lucent reported a net loss of $4.1
billion, or $1.20 loss per basic and diluted share compared with net income of
$2.0 billion, or $0.61 per diluted share in the same period last year. In
addition to the items impacting the second fiscal quarter, the net loss for the
six-month period ended March 31, 2001 includes an extraordinary gain of $1.2
billion ($0.34 per basic and diluted share) related to the sale of the power
systems business, a gain from a cumulative effect of accounting change of $30
million ($0.01 per basic and diluted share) related to the adoption of Statement
of Financial Accounting Standard No. 133 and a net loss from discontinued
operations for the first fiscal quarter of $5 million. Net income for the
comparable prior year period includes net income from discontinued operations of
$563 million ($0.17 per diluted share), a pre-tax gain on the sale of an equity
investment of $189 million and a pre-tax charge of $61 million to operating
expenses primarily associated with the mergers with International Network
Services, Excel Switching Corp. and Xedia Corporation (combined $0.02 per
diluted share).

RESTRUCTURING CHARGE AND RELATED ASSET IMPAIRMENTS

In connection with a restructuring plan to exit certain non-strategic product
lines within the data networking, wireless, optical networking and switching
solutions groups and to streamline its cost structure in various businesses and
corporate operations, Lucent recorded in the current fiscal quarter a pre-tax
charge to earnings of $2.7 billion, which includes restructuring costs of $810
million and asset write-downs and other charges of $1.9 billion. The Company
expects to reduce its headcount by 10,000 through involuntary employee
separations and attrition. As of April 30, 2001, approximately 2,000 employee
separations were completed.

Restructuring costs primarily relate to involuntary employee separations of $389
million for approximately 6,300 employees, contract settlements of $350 million,
facility closings of $60 million and other of $11 million.

The employee separations impact all business groups and geographic regions of
the Company with the majority pertaining to management employees. Of the $389
million employee separation charge, payments of $84 million for termination
benefits to certain U.S. management are expected to be funded through the
Company's surplus pension assets. The remaining charge will be funded through
cash from operations. As of March 31, 2001, approximately 900 employee
separations have been completed of which $13 million was paid from cash from
operations. Lucent anticipates that employee separations will be substantially
completed during the fourth fiscal quarter of 2001.

Asset write-downs primarily reflect the write-down of certain long-lived assets
and inventory that became impaired as a result of management's decision to
discontinue certain product lines and product development efforts. Impairment
losses for goodwill and other acquired intangibles were based upon the
write-down to their fair value, which was estimated by discounting the expected
future cash flows. As a result, an impairment charge of $835 million for
goodwill and other acquired intangibles was incurred, which largely relates to a
write-down of $556 million relating to the rationalization of the metro
optical networking offer. The remainder of the asset write-downs primarily
consists of inventory, property, plant and equipment and capitalized software
associated with the Company's product rationalization included in the
restructuring plan. These actions primarily affect the Products segment.

Lucent does not expect significant cash savings from the restructuring plan in
the current fiscal year. The restructuring plan is expected to yield cash
savings of approximately $750 million annually, beginning in fiscal year 2002.
These savings largely relate to reduced employee-related costs and are expected
to be realized primarily in operating expenses.

The Company expects to substantially complete the restructuring plan by December
31, 2001. Lucent will continue to review its product lines and internal
processes throughout fiscal year 2001, which may result in additional cost
structure improvements and associated business restructuring charges. In
addition, the Company continues to pursue its outsourcing plan for contract
manufacturing and has received bids for its manufacturing operations in Oklahoma
City, Oklahoma and Columbus, Ohio. This plan is expected to result in an
additional reduction in headcount by the end of the fiscal year.






<PAGE> 17

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION


DISCONTINUED OPERATIONS

Agere and the power systems business, and Avaya represented significant segments
of the Company and, in accordance with Accounting Principles Board Opinion No.
30, have been reclassified in the consolidated financial statements for all
periods presented as discontinued operations.

For further details of the components of discontinued operations see Note 3 of
the accompanying Consolidated Financial Statements.

The following discussion focuses on Lucent's results from continuing operations.

RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED MARCH 31, 2001 VERSUS THREE
AND SIX MONTHS ENDED MARCH 31, 2000

REVENUES

The following table presents Lucent's revenues by U.S. and non-U.S. and the
approximate  percentage of total revenues (in millions):

<TABLE>
<CAPTION>
                             Three Months Ended March 31,                  Six Months Ended March 31,
                             -----------------------------                 --------------------------
                          2001           2000         decrease         2001            2000         decrease
                          ----           ----         --------         ----            ----         --------
<S>                    <C>            <C>            <C>              <C>            <C>           <C>
 U.S.                    $4,136         $4,903        (15.6%)         $ 6,842        $ 9,664        (29.2%)
 Non - U.S.               1,779          2,327        (23.5%)           3,427          4,656        (26.4%)
                         ------         ------        ------          -------        -------        ------
 Total Revenues          $5,915         $7,230        (18.2%)         $10,269        $14,320        (28.3%)
                         ======         ======        ======          =======        =======        ======

</TABLE>


<TABLE>
<CAPTION>
                          As a percentage of                            As a percentage of
                            total revenues                                total revenues
                         -------------------                           ---------------------
<S>                      <C>             <C>                            <C>            <C>
 U.S.                    69.9%           67.8%                          66.6%          67.5%
 Non - U.S.              30.1%           32.2%                          33.4%          32.5%
                        -----           -----                          -----          -----
 Total Revenues         100.0%          100.0%                         100.0%         100.0%
                        =====           =====                          =====          =====

</TABLE>

The decrease in the three and six months ended March 31, 2001 was primarily due
to significant sales declines from the continued softening in the competitive
local exchange carrier market, slowdown in capital spending by established
service providers, which resulted in lower sales of hardware and software
products, and continued focus on a more selective vendor financing program.
Although revenue growth declined compared to the prior year, total revenues in
the current fiscal quarter improved by approximately 36% (53% in the U.S. and 8%
internationally) when compared to the first fiscal quarter of 2001. The
sequential growth was primarily from higher sales to large service provider
companies where Lucent provides a full range of network solutions, services and
support. The Company is redirecting its sales efforts away from the competitive
local exchange carrier market and towards the large service provider companies.






<PAGE> 18

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

REVENUES BY SEGMENT

The following table presents Lucent's revenues by segment and by U.S. and
non-U.S., and the approximate percentage of total revenues for the three and six
months ended March 31, 2001 and 2000 (in millions):


<TABLE>
<CAPTION>

                             Three Months Ended March 31,                    Six Months Ended March 31,
                             -----------------------------                   ---------------------------
                                                  % increase
                           2001       2000        (decrease)            2001           2000        % decrease
                           ----       ----        ----------            ----           ----        ----------
<S>                     <C>          <C>             <C>               <C>            <C>            <C>
U.S.:
  Products              $ 3,375      $ 3,972         (15.0%)           $ 5,381        $7,720         (30.3%)
  Services                  724          767          (5.6%)             1,368         1,419          (3.6%)
Non - U.S.:
  Products                1,411        1,967         (28.3%)             2,768         3,861         (28.3%)
  Services                  382          344          11.0%                658           818         (19.6%)
Total:
  Products              $ 4,786      $ 5,939         (19.4%)           $ 8,149      $ 11,581         (29.6%)
  Services                1,106        1,111          (0.5%)             2,026         2,237          (9.4%)
</TABLE>


<TABLE>
<CAPTION>
                          As a percentage of                               As a percentage of
                            total revenues                                  total revenues
                            --------------                                  --------------
<S>                      <C>          <C>                                <C>           <C>
  Products               80.9%        82.1%                              79.4%         80.9%
  Services               18.7%        15.4%                              19.7%         15.6%

</TABLE>


Revenue decreases from Products were across all product lines, except optical
fiber, and were primarily attributable to the factors noted in REVENUES. The
six-month period decrease was also impacted by a substantial reduction of
revenues to one large U.S. customer, partially offset by improved revenues to
large service providers in the second fiscal quarter of 2001, and the winddown
of a major long-term foreign project.

Revenues from Services for the six month period decreased due to the factors
noted above. A significant portion of Services revenues is generated from
revenues from Products, therefore, slower growth in Products affects growth in
Services.

GROSS MARGIN

As a percentage of revenue, gross margin decreased to 8.4% from 40.7% in the
prior year quarter and to 11.5% from 43.0% in the prior six-month period.
Excluding the impact of the $536 million inventory write-down associated with
the business restructuring charge, gross margin for the current fiscal quarter
and six-month period would have been 17.5% and 16.7%, respectively. Gross margin
continues to be constrained by a change in product mix, which includes lower
software revenues that typically have higher margins and the introduction of
newer products at lower margins, and costs associated with an infrastructure
built to support a larger revenue base. In the current fiscal quarter, gross
margin was also impacted by write-downs related to obsolete inventory and
provisions for contract settlements.

OPERATING EXPENSES

The following table presents Lucent's operating expenses and the percentage
change (in millions, excluding business restructuring and related asset
impairment charge):

<TABLE>
<CAPTION>
                                               Three Months Ended March 31,                 Six Months Ended March 31,
                                               -----------------------------                --------------------------
                                           2001           2000        %increase          2001         2000        %increase
                                           ----           ----        ---------          ----         ----        ---------
<S>                                       <C>              <C>              <C>        <C>          <C>                <C>
 SG&A, excluding amortization of
   goodwill and other acquired
   intangibles                            $ 1,899          1,266            50.0%      $ 3,493      $ 2,463            41.8%

 Amortization of goodwill and other
   acquired intangibles                       249             43              NM           510           88               NM
                                          -------        -------                       -------      -------            -----
   Total SG&A                               2,148          1,309            64.1%        4,003        2,551            56.9%
 R&D                                          970            844            14.9%        1,982        1,595            24.3%
                                          -------        -------                       -------      -------            -----
  Operating Expenses                      $ 3,118        $ 2,153            44.8%      $ 5,985      $ 4,146            44.4%
                                          =======        =======                       =======      =======            =====
</TABLE>
---------
NM  Not meaningful







<PAGE> 19

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

Increase in selling, general and administrative ("SG&A") expenses for the three
and six months ended March 31, 2001, excluding the amortization of goodwill and
other acquired intangibles, was largely the result of the provisions recorded in
the current fiscal quarter for amounts due from Winstar and higher provisions
for receivables and customer financings.

The increases in the amortization of goodwill and acquired intangibles are
primarily from the acquisitions of Chromatis Networks, Inc. in June 2000 and
Spring Tide Networks in September 2000. As a result of these acquisitions,
amortization of goodwill and other acquired intangibles in fiscal year 2001 will
be higher than the prior year. However, the impact of the increase will be lower
than originally anticipated due to the $835 million write-down of goodwill and
other acquired intangibles in connection with the restructuring plan.

The net increases in research and development ("R&D") expenses are primarily due
to acquisitions made subsequent to the second fiscal quarter of 2000 and new
product development, particularly in Internet infrastructure and next-generation
wireless products.

OTHER INCOME (EXPENSE) - NET

Other income (expense)- net, was an expense of $77 million for the quarter
compared to expense of $19 million in the prior year quarter. The increase in
the current fiscal quarter was largely due to a charge of approximately $145
million related to write-downs of certain equity investments, offset in part by
interest income. For the six months ended March 31, 2001, other income(expense)-
net was an expense of $117 million compared with income of $237 million in the
year-ago period. The change between periods was largely due to write-downs of
investments this period compared to net gains on sales of investments in the
prior year period. The prior year six-month period included a $189 million gain
from the sale of an equity investment.

INTEREST EXPENSE

Interest expense for the quarter increased $72 million to $153 million and for
the six months increased $120 million to $280 million as compared with the
similar periods of the prior year. The increases in interest expense are due to
higher average short-term debt levels coupled with an increase in weighted
average interest rates as compared to the same prior year periods.

PROVISION (BENEFIT) FOR INCOME TAXES

The following table presents Lucent's provision (benefit) for income taxes and
the related effective tax rates (in millions):

<TABLE>
<CAPTION>

                                       Three Months Ended             Six Months Ended
                                       -------------------           -----------------
                                            March 31,                    March  31,
                                            ---------                    ---------
                                        2001         2000             2001          2000
                                        ----         ----             ----          ----
<S>                                   <C>            <C>            <C>            <C>
Provision (benefit) for income
  taxes                               $(1,643)       $ 224          $(2,421)       $ 643
Effective tax rate                       32.7%        32.7%            32.8%        30.9%
</TABLE>


The current three and six month period effective tax rates are lower than the
U.S. statutory rate primarily from the impact of non-tax deductible goodwill
amortization and certain non-tax deductible charges for business restructuring
charges and related asset impairments on the pre-tax loss, both of which
decrease the effective tax benefit rate, offset in part by research and
development tax credits, which increase the effective tax benefit rate on the
pre-tax loss.

The prior year three and six month period  effective  tax rates are lower than
the U.S.  statutory  rate  primarily due to research and development tax credits
and the tax impact of non-U.S. activity.

As a result of the Company's loss from operations, Lucent has recorded a tax
benefit and related asset. While the Company has taxable income for U.S. federal
purposes in the applicable carryback periods to apply against a portion of the
current period loss, realizability of the recorded tax assets is dependent, in
part, on future taxable income. Management believes that sufficient future
taxable income will be generated in order to utilize the future deductible
amounts arising during fiscal 2001 and that this tax asset will be realizable,
although there can be no assurance that this will be the case.







<PAGE> 20

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION


LIQUIDITY AND CAPITAL RESOURCES

Agere IPO

On April 2, 2001, Agere completed its IPO of 600 million shares of Agere Class A
common stock, resulting in net proceeds of $3.4 billion to Agere. As a result of
the IPO, the Company will record an increase to shareowners' equity of
approximately $920 million in the third fiscal quarter of 2001. In addition,
Morgan Stanley exercised its overallotment option to purchase an additional 90
million shares of Agere Class A common stock from Lucent and exchanged $519
million of Lucent commercial paper for the Agere shares. The transaction
resulted in a gain of approximately $140 million, which has been included in
calculating the net loss on disposal of Agere. On April 2, 2001, after the IPO
and with the exercise of the overallotment option, Lucent owned 58% of Agere.

Debt

On February 22, 2001, Lucent completed arrangements for $6.5 billion of Credit
Facilities with financial institutions. These Credit Facilities consist of a
replacement for the 364-day $2.0 billion Credit Facility that expired on
February 22, 2001 and a new 364-day $2.5 billion assumable credit facility for
Agere (the "Assumable Credit Facility"). In addition to these two Credit
Facilities, Lucent amended an existing $2.0 billion Credit Facility expiring in
February 2003. Under the 364-day $2.0 billion Credit Facility, any loans
outstanding at maturity may be extended, at Lucent's option, to February 26,
2003. Prior to the IPO, Lucent borrowed $2.5 billion under the Assumable Credit
Facility, which was assumed by Agere on April 2, 2001, the closing of their IPO.
Lucent has allocated this short-term debt to discontinued operations at March
31, 2001 and it is reflected in the net current liabilities of discontinued
operations.

The Credit Facilities are secured by substantially all of Lucent's assets (the
"Collateral"), including the pledge of the Agere stock owned by Lucent. Lucent
expects the pledge of the Agere stock to be released by September 30, 2001.
Certain other existing financings and obligations are, and certain future
financings and obligations could be, similarly secured during the time the
Collateral arrangements for the Credit Facilities are in effect.

The Credit Facilities contain affirmative and negative covenants, including
financial covenants requiring the maintenance of specified, consolidated minimum
net worth and minimum earnings before interest, taxes, depreciation and
amortization (EBITDA). As of March 31, 2001, Lucent was in compliance with these
covenants. In addition, meeting a current asset ratio requirement is a condition
for releasing the pledge of the Agere stock and will terminate on the
Distribution. The Agere stock can be released and the Distribution can occur at
Lucent`s request if there is no event of default under Lucent's Credit
Facilities (including compliance with the net worth, EBITDA, and current asset
ratio covenants) and Lucent has received $2.5 billion of proceeds from certain
non-operating sources. As of April 2, 2001, Lucent had received $519 million of
such proceeds. The Company is evaluating a number of strategic alternatives to
satisfy this requirement, including the potential sale of the optical fiber
business.

Excluding the Assumable Credit Facility as of March 31, 2001, Lucent had $500
million outstanding under its remaining $4.0 billion Credit Facilities. The
borrowings during the quarter were primarily used to pay down Lucent's
commercial paper balances as they became due. As of April 30, 2001, Lucent
repaid all of its outstanding commercial paper balances.






<PAGE> 21

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION


Cash Flows

Net Cash Used in Operating Activities

Net cash used in operating activities was $2.8 billion for the six months ended
March 31, 2001 and was primarily due to the loss from continuing operations
(adjusted for non-cash items) of $2.5 billion, increase in inventories and
contracts in process of $1.3 billion and changes in other operating assets and
liabilities of $1.0 billion. These increases were partially offset by a decrease
in receivables of $2.4 billion.

Net cash used in operating activities of $338 million for the six months ended
March 31, 2000 was primarily due to increases in receivables and inventories and
contracts in process of $1,096 and $516 million, respectively, decrease in
accounts payable of $316 million and changes in other operating assets and
liabilities of $625 million, offset by income from continuing operations
(adjusted for non-cash items) of $1.3 billion and tax benefits from stock
options of $909 million.

Net Cash Provided by Investing Activities

Net cash provided by investing activities was $1.7 billion for the six months
ended March 31, 2001 and primarily consisted of the $2.5 billion cash proceeds
received from the sale of the power systems business offset in part by capital
expenditures of $752 million.

Net cash provided by investing activities was $238 million for the six months
ended March 31, 2000 and primarily consisted of proceeds from the sales of
investments of $831 million offset by $740 million of capital expenditures.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities for the six months ended March 31,
2001 of $1.3 billion was primarily from borrowings of short-term debt under the
Company's credit facility.

Net cash used in financing activities for the six months ended March 31, 2000 of
$65 million was primarily from the proceeds from issuances of common stock
related to the exercise of stock options offset by repayments of long-term debt
and short-term borrowings.

Notes Receivable and Financial Guarantees

Some of Lucent's customers worldwide are requiring their suppliers to arrange or
provide long-term financing for them as a condition of obtaining or bidding on
infrastructure projects. These projects may require financing in amounts ranging
from modest sums to more than a billion dollars. Lucent uses a disciplined
credit evaluation and business review process that takes into account the credit
quality of individual borrowers and their related business plans as well as
market conditions. The Company considers requests for financing on a
case-by-case basis and offers financing only after careful review. As market
conditions permit, Lucent's intention is to sell or transfer these long-term
financing arrangements, which may include both commitments and drawn-down
borrowings, to financial institutions and other investors. This enables Lucent
to reduce the amount of its commitments and free up additional financing
capacity.






<PAGE> 22

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

The following table presents Lucent's customer financing commitments at March
31, 2001 (in billions):

<TABLE>
<CAPTION>
                                                                At March 31, 2001
                                                  -----------------------------------------------
                                                  Total Loans and
                                                     Guarantees        Loans (a)       Guarantees
          <S>                                           <C>             <C>               <C>
          Drawn commitments                             $ 2.8           $ 2.0             $ 0.8
          Available but not drawn                         3.2             2.5               0.7
          Not available                                   0.9             0.8               0.1
                                                        -----           -----             -----
            Total                                       $ 6.9           $ 5.3             $ 1.6
                                                        =====           =====             =====

</TABLE>

---------
(a)   includes $737 million of drawn commitments, which are fully reserved for
      at March 31, 2001, and $263 million of available but not drawn amounts
      related to Winstar.

As part of the revenue recognition process, Lucent determines whether
the notes receivable under these contracts are reasonably assured of collection
based on various factors, among which is the ability of Lucent to sell these
notes.

Lucent will continue to provide or commit to financing where appropriate for its
business. The ability of Lucent to arrange or provide financing for its
customers will depend on a number of factors, including Lucent's capital
structure, credit rating and level of available credit, and its continued
ability to sell or transfer commitments and drawn-down borrowings on acceptable
terms.

Cash and Liquidity

Future financings will be arranged to meet Lucent's requirements with the
timing, amount and form of issue depending on the prevailing market and general
economic conditions. Lucent's credit ratings have been reduced during the
current year. Moody's Investor Services currently rates Lucent's commercial
paper as Prime-3 and its senior unsecured long-term debt as Baa3. Standard and
Poor's currently rates Lucent's commercial paper as A-3 and its senior unsecured
long-term debt as BBB-. All of the ratings have negative outlooks. Lucent is
continuing its discussions with the rating agencies. As a result of Lucent's
lower credit ratings, commercial paper and certain other short-term borrowings
are unavailable to Lucent. Lucent anticipates that its existing cash balances
and borrowings under its bank credit facilities will be adequate to satisfy its
near-term cash requirements, although there can be no assurance that this will
be the case.

RISK MANAGEMENT

Lucent is exposed to market risk from changes in foreign currency exchange rates
and, to a lesser extent, changes in interest rates that could impact its results
of operations and financial condition. Lucent manages its exposure to these
market risks through its regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. Lucent
uses derivative financial instruments as risk management tools and not for
trading purposes. In addition, derivative financial instruments are entered into
with a diversified group of major financial institutions in order to manage
Lucent's exposure to nonperformance on such instruments.

Lucent's investment portfolio includes equity investments in public and
privately held emerging market companies. Many of these companies are still in
the start-up or development stage. These investments are inherently risky
because the markets for the technologies or products they have under development
are typically in the early stages and may never develop. In addition, the values
of Lucent's investments in publicly traded companies are subject to significant
market volatility. Due to the recent economic downturn in the technology sector,
Lucent recorded write-downs of approximately $145 million on certain equity
investments. Given current market conditions, the Company may incur additional
charges on its investment portfolio in the future. Lucent generally does not
hedge its equity price risk and as of March 31, 2001, Lucent had no outstanding
hedge instruments associated with this risk.

Lucent uses derivative financial instruments, including foreign exchange forward
and option contracts and interest rate swap agreements to manage changes in
foreign exchange rates and interest rates that may affect the eventual cash
flows in foreign currencies or underlying







<PAGE> 23

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

financial instruments. The Company believes that its hedge activities achieve
hedge effectiveness by creating a relationship whereby the gains and losses on
its derivative instruments counterbalance the changes in value of the designated
assets, liabilities and forecasted transactions being hedged.

Effective October 1, 2000, Lucent adopted SFAS 133 - "Accounting for Derivative
Instruments and Hedging Activities" and its corresponding amendments under SFAS
No. 138. The adoption of SFAS 133 resulted in a cumulative after-tax reduction
in net loss of $30 million (net of tax of $17 million) and an $11 million credit
to other comprehensive income (OCI) in the first quarter of fiscal year 2001.
The reduction in net loss is primarily attributable to derivatives not
designated as hedging instruments, including foreign currency embedded
derivatives, equity warrants and other derivatives (see Note 5 of the
accompanying Consolidated Financial Statements).

Lucent has not changed its policy regarding how exposures are managed since the
year ended September 30, 2000. Lucent continuously monitors all of its foreign
currency exposures. Lucent cannot predict whether it will incur foreign exchange
losses in the future; however, if significant foreign exchange losses are
experienced, they could have a material adverse effect on the results of
operations, financial condition and cash flows of Lucent.

Lucent manages its ratio of fixed to floating rate debt with the objective of
achieving a mix that management believes is appropriate. To manage this mix in a
cost-effective manner, Lucent, from time to time, enters into interest rate swap
agreements in which it agrees to exchange various combinations of fixed and/or
variable interest rates based on agreed-upon notional amounts. Lucent had no
material interest rate swap agreements in effect at March 31, 2001 or September
30, 2000.

OTHER INFORMATION

On November 21, 2000, Lucent announced that it had identified an issue impacting
revenue in the fourth fiscal quarter of 2000. The Company informed the SEC and
initiated a review by its outside counsel and outside auditors. In late
December, the Company announced the results of the review, which resulted in
certain adjustments to fourth fiscal quarter results. Lucent also informed the
SEC and is cooperating fully with the SEC's investigation of these matters.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this report contain forward-looking statements
that are based on current expectations, estimates, forecasts and projections
about the industries in which Lucent operates, management's beliefs, and
assumptions made by management. In addition, other written or oral statements
that constitute forward-looking statements may be made by or on behalf of
Lucent. Words such as "expects," "anticipates," "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 ("Future Factors") that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecast in
such forward-looking statements. Lucent undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.







<PAGE> 24

                                                              Form 10-Q - Part I

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION

Future Factors include increasing price, products and services competition by
U.S. and non-U.S. competitors, including new entrants; rapid technological
developments and changes and the Company's ability to continue to introduce
competitive new products and services on a timely, cost-effective basis; the mix
of products and services; the availability of manufacturing capacity, components
and materials; the ability to recruit and retain talent; the achievement of
lower costs and expenses; credit concerns in the emerging service provider
market; customer demand for the Company's products and services; the ability to
successfully integrate the operations and business of acquired companies; timely
completion of the proposed distribution of Lucent's remaining shares of Agere;
the timely implementation of the Company's restructuring and financial plans
and programs; U.S. and non-U.S. governmental and public policy changes that may
affect the level of new investments and purchases made by customers; changes in
environmental and other U.S. and non-U.S. governmental regulations; protection
and validity of patent and other intellectual property rights; reliance on large
customers and significant suppliers; the ability to supply customer financing;
technological, implementation and cost/financial risks in the use of large,
multiyear contracts; the Company's credit ratings; compliance with the covenants
and restrictions of the Company's Credit Facilities; the outcome of pending and
future litigation and governmental proceedings and continued availability of
financing, financial instruments and financial resources in the amounts, at the
times and on the terms required to support the Company's future business. These
are representative of the Future Factors that could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, general U.S. and
non-U.S. economic conditions, including the global economic slowdown and
interest rate and currency exchange rate fluctuations and other Future Factors.

For a further description of Future Factors that could cause actual results to
differ materially from such forward-looking statements, see the discussion in
Lucent's Annual Report on Form 10-K for the year ended September 30, 2000 - Item
1. section VIII. OUTLOOK and Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition - Forward-Looking Statements.

European Monetary Union--Euro

Several member countries of the European Union have established fixed conversion
rates between their existing sovereign currencies and the Euro and have adopted
the Euro as their new single legal currency. The legacy currencies will remain
legal tender in the participating countries for a transition period until
January 1, 2002. During the transition period, cashless payments can be made in
the Euro. Between January 1, 2002 and March 1, 2002, the participating countries
will introduce Euro notes and coins and withdraw all legacy currencies so that
they will no longer be available.

Lucent has in place a joint European-United States team representing affected
functions within the Company. This team is evaluating Euro-related issues
affecting the Company that include its pricing/marketing strategy, conversion of
information technology systems and existing contracts.

The Euro conversion may affect cross-border competition by creating cross-border
price transparency. Lucent will continue to evaluate issues involving
introduction of the Euro as further accounting, tax and governmental legal and
regulatory guidance is available. Based on current information and Lucent's
current assessment, Lucent does not expect that the Euro conversion will have a
material adverse effect on its business or financial condition.







<PAGE> 25

                                                             Form 10-Q - Part II

                           Part II - Other Information

Item 1.  Legal Proceedings

Since early January 2001, Lucent has been served with at least five derivative
complaints in Chancery Court in the State of Delaware. The actions were filed by
individual Lucent shareholders against the current members of Lucent's Board of
Directors, two former directors and an officer. The actions, which have been
consolidated in a single action in Chancery Court in Delaware, make claims
for breach of the fiduciary duty of good faith and other fiduciary duties
allegedly owed to the Company. The actions seek damages against the defendants
and in favor of Lucent, as well as costs and expenses associated with litigation
for the individual plaintiffs. This consolidated action is in the early stages
and the Company is unable to determine its potential impact on the Consolidated
Financial Statements. Lucent intends to defend this action vigorously.

Lucent is aware of several purported shareholder class actions that have been
filed against the Company and certain of its current and former officers for
alleged violations of federal securities laws in addition to the purported
shareholder class actions described in Lucent's Annual Report on Form 10-K for
the year ended September 30, 2000. The claims and relief sought in these
newly-filed actions are substantially similar to the claims and relief sought in
the purported class actions previously described in the Annual Report and all of
these related actions have been consolidated in a single action in U.S. District
Court in New Jersey. This consolidated action is in the early stages and Lucent
is unable to determine its potential impact on the Consolidated Financial
Statements. Lucent intends to defend this action vigorously.

A complaint has been filed by Winstar Communications, Inc. and Winstar Wireless,
Inc. against Lucent in connection with the Chapter 11 bankruptcy petition filed
by Winstar Communications, Inc. and various related entities in U.S. Bankruptcy
Court in Delaware. The complaint asserts claims for breach of contract and
fraudulent inducement against the Company and seeks damages in excess of
$10 billion and injunctive relief, as well as costs and expenses associated
with litigation. Lucent believes this action to be without merit.

Item 4. Submission of Matters to a Vote of Security Holders.

Lucent held its 2001 Annual Meeting of Shareowners on February 21, 2001. At that
meeting, shareowners elected Franklin A. Thomas as a Director of the Company for
a term to expire at the Annual Meeting to be held in the year 2004. In addition,
shareowners approved one Company proposal and rejected one shareowner proposal.
The director elected and the results of the voting are as follows:

<TABLE>
<CAPTION>

                                Votes                 Votes
                                 For                Withheld

<S>                             <C>                   <C>
Franklin A. Thomas          2,588,847,264          124,848,469
</TABLE>


<TABLE>
<CAPTION>

                                Votes          Votes                       Broker
                                 For          Against       Abstain      Non-votes

<S>                         <C>             <C>           <C>           <C>
Company proposal:
Approve 2001 Employee
Stock Purchase Plan . . .   1,454,964,889   235,858,016   27,276,747    995,596,081

Shareowner proposal:
Repeal classified
board  . . . . . . . . .      880,497,353   774,128,311   64,473,988    995,596,081

</TABLE>









<PAGE> 26

                                                             Form 10-Q - Part II

                           Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K.

(a)      Exhibits

(b)      Reports on Form 8-K:

The following reports on Form 8-K were filed during the current quarter:

                  Current Report on Form 8-K dated February 22, 2001 and filed
                  February 27, 2001 was filed pursuant to Item 5 (Other Events)
                  to furnish the Company's Credit Facilities agreements.

                  Current Report on Form 8-K dated and filed January 24, 2001
                  was filed pursuant to Item 9 (Regulation FD Disclosures) to
                  furnish the Company's Investor Relations HighLights bulletin.







<PAGE> 27

                                                                       Form 10-Q

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               Lucent Technologies Inc.
                               Registrant




Date May 10, 2001
                                            /s/ Mark R. White
                                       --------------------------------
                                          Mark R. White
                                          Senior Vice President and Controller
                                                 (Principal Accounting Officer)