<PAGE>


                     AS FILED WITH THE SEC ON AUGUST 4, 2000



                                  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 June 30, 2000

                                       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 - Area Code 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 June 30, 2000, 3,339,511,932 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 INCOME
                 (Dollars in Millions Except Per Share Amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  For the Three         For the Nine
                                                  Months Ended          Months Ended
                                                    June 30,              June 30,
                                                 2000        1999         2000      1999
<S>                                          <C>          <C>         <C>        <C>
Revenues..................................    $ 8,713     $ 7,403     $ 25,133   $ 22,270
Costs.....................................      4,923       3,830       14,103     10,972
Gross margin..............................      3,790       3,573       11,030     11,298

Operating Expenses:
Selling, general and
  administrative expenses ................      1,494       1,460        4,257      4,061
Research and development expenses ........      1,015       1,062        2,979      3,134
In-process research
 and development expenses.................        863          -           874        289
Total operating expenses..................      3,372       2,522        8,110      7,484

Operating income..........................        418       1,051        2,920      3,814
Other income - net .......................        119          12          351         52
Interest expense..........................         79          97          242        226
Income from continuing operations
 before income taxes......................        458         966        3,029      3,640
Provision for income taxes................        472         344        1,297      1,313

Income(loss)from continuing operations        $   (14)    $   622      $ 1,732    $ 2,327

Income(loss)from discontinued operations
 (net of tax of $(4) and $132 in 2000
  and $92 and $161 in 1999)...............       (287)        141          (29)       207

Income(loss) before cumulative effect
 of accounting change.....................       (301)        763        1,703      2,534

Cumulative effect of accounting change
 (net of income taxes of $842)............          -           -            -      1,308

Net income(loss)..........................    $  (301)    $   763      $ 1,703    $ 3,842

Earnings(loss) per common share - basic:
Income(loss)from continuing operations        $ (0.00)    $  0.20      $  0.54    $  0.75
Income(loss) from discontinued
  operations..............................      (0.09)       0.05        (0.01)      0.07
Cumulative effect of accounting
  change .................................          -           -            -       0.42
Net income(loss)..........................    $ (0.09)    $  0.25      $  0.53    $  1.24

Earnings(loss) per common share - diluted:
Income(loss)from continuing operations        $ (0.00)    $  0.19      $  0.53    $  0.73
Income(loss) from discontinued
  operations .............................      (0.09)       0.05        (0.01)      0.06
Cumulative effect of accounting
  change .................................          -           -            -       0.41
Net income(loss)..........................    $ (0.09)    $  0.24      $  0.52    $  1.20

Dividends declared
  per common share........................    $  0.02     $  0.02      $  0.06    $  0.06

</TABLE>


See Notes to 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>

                                          June 30,     September 30,
                                            2000            1999
<S>                                       <C>            <C>
ASSETS

Cash and cash equivalents..............   $   710        $ 1,686

Receivables less allowances
 of $330 at June 30, 2000
 and $318 at September 30, 1999 .......    10,101          8,799

Inventories............................     4,936          4,240

Contracts in process, net of contract
 billings of $6,138 at
 June 30, 2000 and $5,565 at
 September 30, 1999....................     1,758          1,102

Deferred income taxes - net............     1,511          1,472

Other current assets...................     1,565          1,941

Total current assets...................    20,581         19,240

Property, plant and equipment, net
  of accumulated depreciation of
  $6,983 at June 30, 2000 and
  $6,770 at September 30, 1999.........     6,621          6,219

Prepaid pension costs..................     5,923          5,459

Capitalized software development costs.       576            436

Goodwill and acquired technology, net of
  accumulated amortization of $719 at
  June 30, 2000 and $502 at
  September 30, 1999..................      8,736            960

Other assets...........................     3,308          2,151

Net assets of discontinued operations..       595            907

TOTAL ASSETS...........................   $46,340        $35,372

</TABLE>

See Notes to Consolidated Financial Statements.



                                    (CONT'D)





<PAGE>

 4                                                            Form 10-Q - Part I

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

<TABLE>
<CAPTION>
                                         June 30,     September 30,
                                           2000            1999
<S>                                       <C>            <C>

LIABILITIES

Accounts payable.......................   $ 2,196        $ 2,537
Payroll and benefit-related
  liabilities..........................       995          1,675
Postretirement and postemployment
  benefit liabilities..................        84            113
Debt maturing within one year..........     1,321          1,705
Other current liabilities..............     3,591          3,120

Total current liabilities..............     8,187          9,150

Postretirement and postemployment
  benefit liabilities..................     5,346          5,651
Long-term debt ........................     3,842          4,162
Other liabilities......................     2,835          2,473

Total liabilities .....................    20,210         21,436

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:
 3,339,511,932 at June 30, 2000
 3,142,537,636 at September 30, 1999...        33             31
Additional paid-in capital.............    18,801          7,994
Guaranteed ESOP obligation.............       (23)           (33)
Retained earnings......................     7,685          6,188
Accumulated other comprehensive
 income (loss).........................      (366)          (244)

Total shareowners' equity..............    26,130         13,936

TOTAL LIABILITIES AND
 SHAREOWNERS' EQUITY...................   $46,340        $35,372

</TABLE>

See Notes to Consolidated Financial Statements.




<PAGE>

 5                                                            Form 10-Q - Part I

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

<TABLE>
<CAPTION>
                                                 For the Nine Months
                                                   Ended June 30,
                                                 2000           1999
<S>                                           <C>            <C>
Operating Activities
Net income...............................     $ 1,703        $ 3,842
Less: income(loss)from discontinued
  operations, net........................         (29)           207
Less: Cumulative effect of accounting
  change.................................           -          1,308
Income from continuing operations........       1,732          2,327
Adjustments to reconcile income from
  continuing operations to net cash used in
  operating activities:
   Business restructuring reversal.......           -            (77)
   Depreciation and amortization.........       1,483          1,172
   Provision for uncollectibles..........         132             40
   Tax benefit from stock options........       1,026            291
   Deferred income taxes                           54            783
   Purchased in-process research and
     development.........................         874             15
   Adjustment to conform pooled
     companies' fiscal years.............          11            170
   Increase in receivables...............      (2,106)        (2,108)
   Increase in inventories
     and contracts in process............      (1,371)        (1,921)
   (Decrease)increase in accounts
     payable.............................        (368)           570
   Changes in other operating assets
     and liabilities.....................        (546)        (1,727)
   Other adjustments for noncash
     items - net.........................      (1,299)          (460)
Net cash used in operating activities
 of continuing operations................        (378)          (925)

Investing Activities
Capital expenditures ....................      (1,760)        (1,312)
Proceeds from the sale or disposal of
  property, plant and equipment..........          23             73
Purchases of investments........... .....        (567)          (756)
Sales or maturity of investments.........         853          1,197
Acquisitions of businesses,
 net of cash acquired....................        (197)          (244)
Dispositions of businesses...............         250             28
Other investing activities - net.........          32            (76)
Net cash used in investing activities
  of continuing operations...............      (1,366)        (1,090)

</TABLE>


See Notes to Consolidated Financial Statements.
                                    (CONT'D)




<PAGE>


 6                                                          Form 10-Q - Part I

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

<TABLE>
<CAPTION>
                                                 For the Nine Months
                                                    Ended June 30,
                                                  2000          1999
<S>                                              <C>              <C>
Financing Activities
Repayments of long-term debt ............        (404)            (8)
Issuance of long-term debt...............          61          1,842
Proceeds from issuance of common stock...       1,165            484
Dividends paid...........................        (190)          (160)
S-Corp distribution to stockholder                  -            (40)
(Decrease)increase in short-term
  borrowings - net.......................        (110)           806
Net cash provided by financing
 activities of continuing operations.....         522          2,924

Effect of exchange rate
  changes on cash........................         (38)            (5)

Net cash provided by (used in)
 discontinued operations.................         284           (628)

Net (decrease) increase in cash and
  cash equivalents of continuing operations      (976)           276

Cash and cash equivalents
  at beginning of year...................       1,686          1,144

Cash and cash equivalents
  at end of period.......................     $   710        $ 1,420

</TABLE>

See Notes to Consolidated Financial Statements.






<PAGE>

 7                                                            Form 10-Q - Part I

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (Dollars 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 and, in the opinion of
management, include all adjustments necessary for a fair presentation of the
results of operations, financial position and cash flows for each period shown.

On October 15, 1999, Lucent merged with International Network Services ("INS").
On November 3, 1999, Lucent merged with Excel Switching Corporation. These
mergers have been accounted for under the "pooling-of-interests" method of
accounting and the consolidated financial statements of Lucent were restated for
all periods prior to the mergers to include the accounts and operations of INS
and Excel.

The preparation of financial statements during interim periods requires
management to make numerous estimates and assumptions that impact the reported
amounts of assets, liabilities, revenues and expenses. Estimates and assumptions
are reviewed periodically and the effect of revisions is reflected in the
results of operations of the interim periods in which changes are determined to
be necessary. Improved performance on multi-year contracts and the resolution of
certain contingencies had a positive impact on fiscal year 1999 reported results
of operations.

The reported results of operations and cash flows for interim periods are not
necessarily indicative of financial results for the full year. These unaudited
consolidated financial statements should be read in conjunction with the audited
restated consolidated financial statements and notes thereto for the year ended
September 30, 1999 included in Exhibit 99.1 to the Company's Form 8-K (filed
February 11, 2000).

The consolidated financial statements presented have been restated to reflect
the two-for-one split of Lucent's common stock which became effective on April
1, 1999. Certain prior period amounts have been reclassified to conform to the
current period presentation.

2. DISCONTINUED OPERATIONS

Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"("APB
30"), the consolidated financial statements of Lucent have been reclassified to
reflect the expected spin-off of the enterprise networks business. Accordingly,
the revenues, costs and expenses, assets and liabilities, and cash flows of the
enterprise networks business to be spun off have been segregated in the
Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated
Statements of Cash Flows. The net operating results, net assets and net cash
flows of this business have been reported as "Discontinued Operations" in the
accompanying consolidated financial statements.





<PAGE>

 8                                                            Form 10-Q - Part I

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

Summarized financial information for the discontinued operations is as follows:

<TABLE>
<CAPTION>

                                           For the Three          For the Nine
                                            Months Ended          Months Ended
                                             June 30,                June 30,
                                           2000     1999         2000      1999
<S>                                     <C>      <C>          <C>       <C>
Revenues.............................   $ 1,869  $ 2,038      $ 5,610   $ 5,796
Income from Discontinued Operations*
 (after applicable income taxes of
  $24 and $160 in 2000 and $92 and
  $161 in 1999)......................        45      141          303       207
Loss on Disposal of Business** (after
  applicable income tax benefit of
  $28 for the three and nine
  months of 2000)....................      (332)       -         (332)        -
Income(loss)from discontinued
  operations.........................      (287)     141          (29)      207

</TABLE>


<TABLE>
<CAPTION>
                                             At June 30, 2000   At September 30, 1999
<S>                                              <C>                    <C>
Current Assets.......................            $ 2,679                $ 3,043
Total Assets.........................              4,655                  4,955
Current Liabilities..................              2,750                  2,758
Total Liabilities....................              4,060                  4,048
Net assets of discontinued
   operations........................                595                    907

</TABLE>

*Income from discontinued operations includes an allocation of Lucent's interest
expense totaling $14 and $23 for the three months ended June 30, 2000 and 1999,
respectively, and $48 and $68 for the nine months ended June 30, 2000 and 1999,
respectively. Approximately $800 and $1,161 of commercial paper has been
allocated to discontinued operations, based on the amount of debt expected to be
assumed by the enterprise networks business upon spin-off adjusted for cash flow
activity, and is reflected in the net assets of discontinued operations at June
30, 2000 and September 30, 1999, respectively.

**The loss on disposal of the enterprise networks business recorded in the
Company's results for the quarter and nine months ended June 30, 2000 reflects
the estimated costs directly associated with the disposition, partially offset
by the estimated net earnings of the enterprise networks business through the
planned spin date of September 30, 2000. The costs reflect those components of
the enterprise networks business reorganization plan, including an estimated
business restructuring charge expected to be recorded by September 30, 2000
along with estimated transaction costs for the spin-off. Major components of the
reorganization plan are expected to include employee separation, real estate
consolidation and computer information costs. This charge does not include
additional restructuring projects and other contractual obligations which are
still being developed or assessed.




<PAGE>


 9                                                            Form 10-Q - Part I

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

3. ACQUISITIONS

The following table presents information about certain acquisitions by Lucent in
the nine months ended June 30, 2000. All the acquisitions were accounted for
under the purchase method of accounting, and the acquired technology valuation
included existing technology, purchased in-process research and development and
other intangibles. All charges were recorded in the quarter in which the
transaction was completed. On a proforma basis, if the following acquisitions
had occurred on October 1, 1999, the amortization of goodwill and acquired
technology would have increased by approximately $755 for the nine months ended
June 30, 2000.

<TABLE>
<CAPTION>
                                                                                             Amortization Period (in years)
                                                                               Purchased    ---------------------------------
             Acquisition     Purchase                Existing     Other         IPRD                  Existing       Other
                 Date         Price       Goodwill  Technology  Intangibles  (after-tax)   Goodwill  Technololgy   Intangibles

<S>            <C>       <C>              <C>         <C>        <C>         <C>           <C>       <C>           <C>
Chromatis(1)   6/28/00       $4,756        $4,218      n/a         $186         $428         7         n/a           2-7
                         Stock & options
Herrmann(2)    6/16/00          432           384       52           16           34         8           7             7
                         Stock & options
Ortel(3)       4/27/00        2,998         2,554      171           24          307         9         7.5           4-9
                         Stock & options
Agere(4)       4/20/00          377           303      n/a          n/a           94         7         n/a           n/a
                         Stock & options
DeltaKabel(5)   4/5/00           52            56      n/a          n/a          n/a         6         n/a           n/a
                               Cash
VTC Inc.(6)    3/17/00          104            46       31            7            7         7           5             7
                               Cash

</TABLE>

(1) Chromatis Networks Inc. was a supplier of in metro optical networking
    systems.
(2) Herrmann Technology, Inc. was a supplier of devices for next-generation
    dense wavelength division multiplexing (DWDM) optical networks.
(3) Ortel Corporation was a developer of optoelectronic components for cable TV
    networks.
(4) Agere, Inc. was a developer of programmable network processor technology.
(5) DeltaKabel Telecom cv was a developer of cable modem and Internet protocol
    (IP) telephony solutions for the European market.
(6) VTC Inc. was a supplier of semiconductor components to computer hard disk
    drive manufacturers.
n/a Not applicable.

In connection with the acquisition of Chromatis, certain key employees are
entitled to receive additional Lucent common shares based on the achievement of
specified milestones. Such shares, if distributed, will be recorded as
compensation expense.

In connection with the acquisition of Herrmann, certain stockholders are
entitled to receive additional Lucent common shares based on the achievement of
specified milestones. If distributed, a portion will be recorded as compensation
expense and a portion will be recorded as additional goodwill.

Included in the purchase price for the above acquisitions was purchased
in-process research and development, which was a non-cash charge to earnings as
this technology had not reached technological feasibility and had no future
alternative use. The remaining purchase price was allocated to tangible assets
and intangible assets, including goodwill and existing technology, less
liabilities assumed.





<PAGE>


 10                                                           Form 10-Q - Part I

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

The value allocated to purchased in-process research and development was
determined utilizing an income approach that included an excess earnings
analysis reflecting the appropriate cost of capital for the investment.
Estimates of future cash flows related to the in-process research and
development were made for each project based on Lucent's estimates of revenue,
operating expenses and income taxes from the project. These estimates were
consistent with historical pricing, margins and expense levels for similar
products.

Revenues were estimated based on relevant market size and growth factors,
expected industry trends, individual product sales cycles and the estimated life
of each product's underlying technology. Estimated operating expenses, income
taxes, and charges for the use of contributory assets were deducted from
estimated revenues to determine estimated after-tax cash flows for each project.
Estimated operating expenses include cost of goods sold; selling, general and
administrative expenses; and research and development expenses. The research and
development expenses include estimated costs to maintain the products once they
have been introduced into the market and generate revenues and costs to complete
the in-process research and development.

The discount rates utilized to discount the projected cash flows were based on
consideration of Lucent's weighted average cost of capital, as well as other
factors including the useful life of each project, the anticipated profitability
of each project, the uncertainty of technology advances that were known at the
time and the stage of completion of each project.

Management is primarily responsible for estimating the fair value of the assets
and liabilities acquired, and has conducted due diligence in determining the
fair value. Management has made estimates and assumptions that affect the
reported amounts of assets, liabilities and expenses resulting from such
acquisitions. Actual results could differ from those amounts.

TeraBeam Corporation
--------------------
On April 9, 2000, Lucent and TeraBeam Corporation entered into an agreement to
develop TeraBeam's fiberless optical networking system that provides high-speed
data networking between local and wide area networks. Under the agreement,
Lucent paid cash and contributed research and development assets, intellectual
property, and free-space optical products, valued in the aggregate at $450.
Lucent owns 30 percent of the venture that will develop the fiberless optical
networking system, which is accounted for under the equity method of accounting.
Lucent will also be a preferred supplier of optical components, networking
equipment and professional services to TeraBeam. In addition, under certain
conditions, Lucent will have the right to purchase TeraBeam's equity interest in
the venture. A total of $189 was allocated to goodwill and other identified
intangible assets to be amortized over 5 years.






<PAGE>


 11                                                           Form 10-Q - Part I

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

4. ACCOUNTING CHANGE - EMPLOYEE BENEFIT PLANS

Effective October 1, 1998, Lucent changed its method for calculating the
market-related value of plan assets used in determining the expected
return-on-asset component of annual net pension and postretirement benefit
costs. Under the previous accounting method, the calculation of the
market-related value of plan assets included only interest and dividends
immediately, while all other realized and unrealized gains and losses were
amortized on a straight-line basis over a five-year period. The new method used
to calculate market-related value includes immediately an amount based on
Lucent's historical asset returns and amortizes the difference between that
amount and the actual return on a straight-line basis over a five-year period.
The new method is preferable under Statement of Financial Accounting Standards
No. 87 because it results in calculated plan asset values that are closer to
current fair value, thereby lessening the accumulation of unrecognized gains and
losses, while still mitigating the effects of annual market value fluctuations.

The cumulative effect of this accounting change related to periods prior to
fiscal year 1999 of $2,150 ($1,308 after-tax, or $0.42 and $0.41 per basic and
diluted share, respectively) is a one-time, non-cash credit to fiscal 1999
earnings.

5. COMPREHENSIVE INCOME

Comprehensive income represents net income plus the results of certain
shareowners' equity changes not reflected in the Statements of Income. The
components of comprehensive income, net of tax, are as follows:

<TABLE>
<CAPTION>
                               Three Months Ended       Nine Months Ended
                                    June 30,                June 30,
                                 2000       1999         2000       1999
                              --------------------   -------------------
<S>                           <C>          <C>         <C>       <C>
Net income(loss)............. $  (301)     $   763     $ 1,703   $ 3,842

Other comprehensive
 income(loss):
 Foreign currency translation
    adjustments..............     (37)         (38)        (96)      (83)
 Unrealized holding gains
    (losses) arising during
    the period...............     (25)         189         (26)      187
  Minimum pension liability
    adjustment...............       -            -           -         7
                              -------      -------     -------   -------
Comprehensive income(loss).. $   (363)     $   914     $ 1,581   $ 3,953
                              -------      -------     -------   -------

</TABLE>






<PAGE>

 12                                                           Form 10-Q - Part I

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

The after-tax components of accumulated other comprehensive income (loss) are as
follows:

<TABLE>
<CAPTION>
                                                                              Total
                                                                            Accumulated
                                    Foreign                   Minimum         Other
                                   Currency     Unrealized    Pension      Comprehensive
                                  Translation    Holding     Liability        Income/
                                   Adjustment     Gains      Adjustment       (Loss)
                                   ----------    --------    ----------     ---------
<S>                               <C>           <C>          <C>           <C>
Accumulated other comprehensive
 income(loss) at
 September 30, 1999............    $ (313)       $   79       $  (10)        $ (244)
Current period change..........       (96)          156            -             60
Reclassification adjustments
 (net of tax of $118)..........         -          (182)           -           (182)
Accumulated other comprehensive    -------      -------      -------        -------
 income(loss) at June 30, 2000.    $ (409)       $   53       $  (10)        $ (366)
                                   -------      -------      -------        -------

</TABLE>

The foreign currency translation adjustments are not currently adjusted for
income taxes since they relate to indefinite investments in non-United States
subsidiaries.

6. SUPPLEMENTARY BALANCE SHEET INFORMATION

Inventories at June 30, 2000 and September 30, 1999 were as follows:

<TABLE>
<CAPTION>

                                         June 30,       September 30,
                                          2000              1999
                                     --------------    ---------------
     <S>                               <C>                <C>
     Completed goods ...............    $ 2,568           $ 2,374
     Work in process and
       raw materials................      2,368             1,866
                                        --------           --------
     Total inventories .............    $ 4,936           $ 4,240
                                        --------           --------
</TABLE>


7. EARNINGS PER COMMON SHARE

Basic earnings(loss) per common share was calculated by dividing net
income(loss) by the weighted average number of common shares outstanding during
the period. Diluted earnings(loss) per share was 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 common shares had been issued. As a result of the net
loss reported for the three month period ended June 30, 2000, potentially
dilutive securities have been excluded from the calculation of diluted
earnings(loss) per share for that period because their effect would be
anti-dilutive.





<PAGE>


 13                                                           Form 10-Q - Part I

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

The following table reconciles the number of shares utilized in the earnings per
share calculations for the three and nine-month periods ended June 30, 2000 and
1999:

<TABLE>
<CAPTION>

                                          Three Months Ended        Nine Months Ended
                                               June 30,                  June 30,
                                           2000       1999          2000       1999
                                        ----------------------  ---------------------
<S>                                       <C>        <C>          <C>        <C>
Number of Shares (in millions)
----------------------------------
Common shares - basic.............        3,242.3    3,108.1      3,193.3    3,093.1

Effect of dilutive securities:
 Stock options....................              0      115.5         99.1      107.5
 Other............................              0        6.8          5.2        7.8

Common shares - diluted...........        3,242.3    3,230.4      3,297.6    3,208.4

Potentially dilutive securities
excluded from computation of earnings
(loss) per share - diluted

 Stock options....................           83.7          -            -          -
 Other............................            5.2          -            -          -


Options excluded from the
computation of earnings per
share - diluted since option
exercise price was greater than
the average market price of the
common shares for the period......           58.1        1.7         22.7        3.9

</TABLE>


8.  OPERATING SEGMENTS

Lucent adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," beginning with its financial statements for the fiscal
year ended September 30, 1999. This standard requires disclosure of segment
information on the same basis used internally for evaluating segment performance
and for deciding how to allocate resources to segments.

As described in Note 2, Lucent has reclassified the results of operations of its
enterprise networks business as discontinued operations. The enterprise networks
business was previously disclosed as a separate operating segment. The segment
data included below has been restated to exclude amounts related to the
enterprise networks business.

Lucent operates in the global telecommunications networking industry and has two
reportable operating segments: Service Provider Networks ("SPN") and
Microelectronics and Communications Technologies ("MCT"). SPN provides public
networking systems and software to telecommunications service providers and
public network operators around




<PAGE>


 14                                                           Form 10-Q - Part I

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

the world. MCT designs and manufactures high-performance integrated circuits,
power systems and optoelectronic components for applications in the
communications and computing industries. MCT also includes network products, new
ventures and intellectual property.

The two reportable operating segments are strategic market units that offer
distinct products and services. These segments were determined based on the
customers and the markets that Lucent serves. Each market unit is managed
separately as each operation requires different technologies and marketing
strategies. Intersegment transactions that occur are based on current market
prices and all intersegment profit is eliminated in consolidation.

Performance measurement and resource allocation for the reportable operating
segments are based on many factors. The primary financial measure used is
Operating income, exclusive of goodwill and existing technology amortization,
and of purchased in-process research and development and other costs from
business acquisitions (acquisition/integration-related costs).

Lucent employs shared-service concepts to realize economies of scale and
efficient use of resources. The costs of shared services, and other corporate
center operations managed on a common basis, are allocated to the segments based
on usage, where possible, or other factors based on the nature of the activity.
The following tables present Lucent's revenues and operating income by
reportable operating segment:

<TABLE>
<CAPTION>

                                                        Three Months          Nine Months
                                                           Ended                Ended
                                                          June 30,             June 30,
                                                        2000     1999       2000    1999
   EXTERNAL REVENUES                                 ------------------   ----------------
<S>                                                  <C>       <C>        <C>      <C>
Service Provider Networks                            $ 6,885   $ 5,923    $20,030  $18,002
Microelectronics and Communications Technologies       1,809     1,306      4,814    3,680
  Total reportable segments                            8,694     7,229     24,844   21,682
Other and corporate                                       19       174        289      588
   Total External Revenues                           $ 8,713   $ 7,403    $25,133  $22,270

   INTERSEGMENT REVENUES
Service Provider Networks                            $    83   $    52    $   184  $   141
Microelectronics and Communications Technologies         347       331        943      955
  Total reportable segments                              430       383      1,127    1,096
Other and corporate                                     (430)     (383)    (1,127)  (1,096)
   Total Intersegment Revenues                       $     -   $     -    $     -  $     -

   TOTAL REVENUES
Service Provider Networks                            $ 6,968   $ 5,975    $20,214  $18,143
Microelectronics and Communications Technologies       2,156     1,637      5,757    4,635
  Total reportable segments                            9,124     7,612     25,971   22,778
Other and corporate                                     (411)     (209)      (838)    (508)
   Total Revenues                                    $ 8,713   $ 7,403    $25,133  $22,270

</TABLE>





<PAGE>


 15                                                           Form 10-Q - Part I

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

<TABLE>
<S>                                                <C>       <C>        <C>      <C>
   OPERATING INCOME
Service Provider Networks                          $ 1,024   $   949    $ 3,139  $ 3,710
Microelectronics and Communications Technologies       339       169        930      622
  Total reportable segments (a)                      1,363     1,118      4,069    4,332
Acquisition/integration-related costs                 (863)      (81)      (935)    (378)
Goodwill and existing technology amortization         (118)      (46)      (216)    (137)
Other and corporate                                     36        60          2       (3)
Operating income                                       418     1,051      2,920    3,814
Other income--net                                      119        12        351       52
Interest expense                                       (79)      (97)      (242)    (226)
  Income before income taxes                      $    458   $   966    $ 3,029  $ 3,640

</TABLE>


(a) Segment operating income excludes goodwill and existing technology
amortization, and acquisition/integration-related costs.

9. COMMITMENTS AND CONTINGENCIES

In the normal course of business, Lucent is subject to proceedings, lawsuits and
other claims, including proceedings under government laws and regulations
related to environmental, litigation under federal securities laws 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 June 30,
2000 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 in addition to
that provided for at June 30, 2000 would not be material to the annual
consolidated financial statements.

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 underway at numerous current and former facilities. In
addition, Lucent was named a successor to AT&T Corp. 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 ("Separation and Distribution Agreement"), among Lucent, AT&T and NCR
Corporation, dated as of February 1, 1996 as amended and restated, 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 from AT&T of the businesses and operations transferred to form Lucent
(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 the 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>


 16                                                           Form 10-Q - Part I

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars 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 5 to 30 years. Reserves for estimated losses from
environmental remediation are, depending on the site, based primarily upon
internal or third party environmental studies, 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 amount 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 June 30, 2000 cannot be estimated.


10. SUBSEQUENT EVENTS

Spin-Off of Microelectronics Business
-------------------------------------
On July 20, 2000, Lucent announced plans to spin off its microelectronics
business, which includes the optoelectronics components and integrated circuits
(IC) divisions, into a separate, new company to be named later. Lucent is
planning an initial public offering (IPO) for up to 20 percent of the new
company in the quarter ended March 31, 2001 and intends to spin off the
remaining shares in a tax-free distribution by the summer of 2001. Lucent
intends to seek a ruling from the Internal Revenue Service with respect to the
tax-free treatment of the spin-off. The spin-off is subject to certain
conditions, including a favorable tax ruling. Lucent expects to take a business
restructuring charge associated with the redesign of its business.

Spring Tide Networks
--------------------
On July 25, 2000, Lucent announced an agreement to acquire Spring Tide Networks,
a privately-held Maynard, Massachusetts-based leader in network switching
equipment, for approximately 26.8 million shares and options. Based on Lucent's
closing share price on July 24, 2000, the transaction would be worth
approximately $1,300. Lucent expects to account for the acquisition under the
purchase method of accounting. The purchase is expected to result in a one-time
charge against earnings of an accounting write-off assigned to in-process
research and development. The Company expects the acquisition to be completed in
the quarter ending September 30, 2000.





<PAGE>


 17                                                           Form 10-Q - Part I


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

On a total basis, Lucent reported a net loss of $301 million, or $0.09 loss per
share (diluted) for the quarter ended June 30, 2000. This compares with year-ago
quarterly net income of $763 million, or $0.24 per share (diluted). The net loss
of $301 million includes a $287 million net loss ($0.09 per share) from
discontinued operations. The $287 million net loss is comprised of $45 million
of net income from discontinued operations for the quarter and a $332 million
net loss on disposal of the enterprise networks business. This loss reflects the
estimated costs directly associated with the disposition, partially offset by
the estimated net earnings of the enterprise networks business through the
planned spin date of September 30, 2000. The costs reflect those components of
the enterprise networks business reorganization plan, including an estimated
business restructuring charge, expected to be recorded by September 30, 2000
along with estimated transaction costs for the spin-off. Major components of the
reorganization plan are expected to include employee separation, real estate
consolidation and computer information costs. This charge does not include
additional restructuring projects and other contractual obligations which are
still being developed or assessed.

DISCONTINUED OPERATIONS

On March 1, 2000, Lucent announced plans to spin off its enterprise networks
business to shareowners, forming a separate company that will focus directly and
independently on the enterprise networking market. The new company will be
called Avaya Inc.

The spin-off is expected to be accomplished through a tax-free distribution of
shares to Lucent's shareowners. Lucent anticipates the spin-off should be
completed on September 30, 2000.

Lucent has reclassified its Consolidated Financial Statements pursuant to
Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB
30"),to reflect the expected spin-off of the enterprise networks business.
Accordingly, the revenues, costs and expenses, assets and liabilities, and cash
flows of the enterprise networks business to be spun off have been segregated in
the Consolidated Statements of Income, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows. The net operating results, net assets and
net cash flows of this business have been reported as "Discontinued
Operations"in the accompanying consolidated financial statements. In addition,
income(loss) from discontinued operations includes an allocation of Lucent's
interest expense. Approximately $800 million and $1,161 million of commercial
paper has been allocated to discontinued operations, based on the amount of debt
expected to be assumed by the enterprise networks business upon spin-off
adjusted for cash flow activity, and is reflected in the net assets of
discontinued operations at June 30, 2000 and September 30, 1999, respectively.




<PAGE>


 18                                                           Form 10-Q - Part I

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

Revenues from the enterprise networks business decreased $169 million, or 8.3%
in the quarter compared with the same quarter in 1999 and $186 million, or 3.2%
in the nine months compared with the same period in 1999. Decreased sales of
communications solutions, including Definity (R) Enterprise Communication
Servers, messaging systems, express solutions and installation services
contributed to the decreased revenue for the quarter. Decreased sales of
communications solutions, including messaging systems, express solutions and
installation services, as well as decreased sales in Systimax(R)structured
cabling systems contributed to the decrease for the nine month period. Revenues
within the United States decreased 12.3% for the quarter compared with the same
quarter of 1999 and 6.0% for the nine months compared with the same period in
1999. Revenues generated outside the United States increased by 10.0% for the
quarter and 8.7% for the nine months, with revenue growth led by the
Asia/Pacific region for both periods. Revenues generated outside the United
States represented 21.4% of revenues for the quarter compared with 17.8% in the
same quarter in 1999 and 21.2% for the nine months compared with 18.9% for the
same period in 1999.

The loss on disposal of the enterprise networks business recorded in the
Company's results for the quarter and nine months ended June 30, 2000 reflects
the estimated costs directly associated with the disposition, partially offset
by the estimated net earnings of the enterprise networks business through the
planned spin date of September 30, 2000. The costs reflect those components of
the enterprise networks business reorganization plan, including an estimated
business restructuring charge expected to be recorded by September 30, 2000
along with estimated transaction costs for the spin-off. Major components of the
reorganization plan are expected to include employee separation, real estate
consolidation and computer information costs. This charge does not include
additional restructuring projects and other contractual obligations which are
still being developed or assessed.

The discontinued operations financial information presented by Lucent will
differ from the information reported by Avaya because of different assumptions
and allocations required to be made by the two companies.

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

HIGHLIGHTS

Lucent reported a loss from continuing operations of $14 million, or $0.00 per
share (diluted) for the quarter ended June 30, 2000, Lucent's third quarter of
fiscal 2000. This compares with year-ago quarterly income from continuing
operations of $622 million, or $0.19 per share (diluted). For the nine months
ended June 30, 2000, Lucent reported income from continuing operations of $1,732
million, or $0.53 per share (diluted) compared with income from continuing
operations of $2,327 million, or $0.73 per share (diluted) in the same period
last year.

The loss from continuing operations for the current quarter includes $863
million (non-tax impacting) of purchased in-process research and development
("IPRD") expenses related to the acquisitions of Chromatis Networks, Herrmann
Technology, Ortel Corporation and Agere, Inc. Income from continuing operations
for the year-ago quarter includes a charge of $81 million (non-tax impacting) to
operating expenses associated with the mergers with Ascend and RAScom, Inc. In
addition, income from





<PAGE>


 19                                                           Form 10-Q - Part I

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

continuing operations for the nine-month period ended June 30, 2000 includes $11
million ($7 million, after-tax) of IPRD expenses related to the acquisition of
VTC Inc., a gain of $189 million, pre-tax ($115 million, after-tax) associated
with the sale of an equity investment and a pre-tax charge of $61 million ($40
million, after-tax) to operating expenses primarily associated with the mergers
with International Network Services ("INS"), Excel Switching Corporation and
Xedia Corporation. Income from continuing operations for the prior-year
nine-month period also includes $313 million ($302 million, after-tax) of
purchased IPRD expenses primarily related to the acquisitions of WaveAccess,
Sybarus, Enable Semiconductor's Ethernet LAN business, Stratus and Quadritek, a
$24 million reversal of purchased IPRD related to Stratus (non-tax impacting);
and $7 million of merger-related costs associated with the merger of VitalSigns
(non-tax impacting).

On July 25, 2000, Lucent announced an agreement to acquire Spring Tide Networks,
a developer of network switching equipment, for approximately 26.8 million
shares and options. Based on Lucent's closing share price on July 24, 2000, the
transaction would be worth approximately $1,300 million. Lucent expects to
account for the acquisition under the purchase method of accounting. The
purchase is expected to result in a one-time charge against earnings of an
accounting write-off assigned to IPRD. The Company expects the acquisition to be
completed in the quarter ending September 30, 2000.

On July 20, 2000, Lucent announced that it would spin off its microelectronics
business, which includes the optoelectronics components and integrated circuits
divisions, into a separate company. Lucent anticipates an initial public
offering (IPO) for up to 20 percent of the new company and intends to spin-off
the remaining shares in a tax-free distribution. The IPO is expected to be
completed in the quarter ended March 31 2001, and the spin-off should be
completed by the summer of 2001. The spin-off is subject to certain conditions,
including a favorable tax ruling. Lucent expects to take a business
restructuring charge associated with the redesign of its business.

On June 28, 2000, Lucent acquired Chromatis, a developer of metro optical
networking products. As part of the transaction, Lucent issued approximately
69.5 million common shares and assumed employee stock options covering an
additional 10 million common shares. In addition, certain key employees of
Chromatis could receive up to an additional 2.5 million common shares if
Chromatis meets certain performance-based goals. The acquisition was accounted
for as a purchase and resulted in a $428 million, one-time charge against
earnings for IPRD during the third fiscal quarter.





<PAGE>


 20                                                           Form 10-Q - Part I

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

On June 16, 2000, Lucent acquired Herrmann, a supplier of optical devices for
next generation dense wave division multiplexing ("DWDM") networks. As part of
the transaction, Lucent issued approximately 6.8 million common shares and
assumed employee stock options covering an additional 1.2 million common shares.
In addition, the Herrmann stockholders could receive up to an additional 675,000
common shares if Herrmann meets certain performance-based goals. The acquisition
was accounted for as a purchase and resulted in a $34 million, one-time charge
against earnings for IPRD during the third fiscal quarter.

On May 3, 2000 Lucent announced it is seeking a buyer for its Power Systems
business, a leading supplier of power products for the telecommunications and
computer industries. Lucent expects the business to be sold by the end of the
calendar year.

On April 27, 2000, Lucent acquired Ortel, a developer of optoelectronic
components for cable TV networks. As part of the transaction, Lucent issued
approximately 41.4 million common shares and assumed employee stock options
covering an additional 11.8 million common shares. The acquisition was accounted
for as a purchase and resulted in a $307 million, one-time charge against
earnings for IPRD during the third fiscal quarter.

On April 24, 2000, Lucent acquired Agere, a developer of programmable network
processor technology. As part of the transaction, Lucent issued approximately
7.8 million common shares and assumed employee stock options covering an
additional 291,000 common shares. The acquisition was accounted for as a
purchase and resulted in a $94 million, one-time charge against earnings for
IPRD during the third fiscal quarter.

KEY BUSINESS CHALLENGES

Lucent continues to face significant competition and expects that the level of
competition on pricing and product offerings will intensify. Lucent expects that
new competitors will enter its markets as a result of the trend toward global
expansion by U.S. and non-U.S. competitors as well as continued changes in
technology and public policy. These competitors may include entrants from the
telecommunications, software, data networking, cable television and
semiconductor industries. Existing competitors have, and new competitors may
have, strong financial capabilities, technological expertise, well-recognized
brand names and a global presence. Such competitors may include Alcatel, Cisco
Systems, Ericsson, Nortel Networks, and Siemens. Lucent's management
periodically assesses market conditions and redirects the Company's resources to
meet new challenges. Steps Lucent may take include acquiring or investing in




<PAGE>

 21                                                           Form 10-Q - Part I


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

new businesses and ventures, partnering with other companies, delivering new
technologies, closing and consolidating facilities, disposing of assets,
reducing work force levels and withdrawing from markets.

Historically, revenues and earnings had been higher in the first fiscal quarter
primarily because many of Lucent's large customers delayed a disproportionate
percentage of their capital expenditures until the fourth quarter of the
calendar year (Lucent's first fiscal quarter). Lucent took measures to manage
the seasonality of its business by changing the date on which its fiscal year
ends to September 30 beginning September 30, 1996, and its compensation programs
for employees, which resulted in a somewhat more uniform distribution of
revenues and earnings throughout the year. The Company expects to see further
shifts in seasonality as market conditions, industry-buying patterns and the
composition of its customer base continue to change.

Historically, the purchasing behavior of Lucent's largest customers has been
characterized by the use of fewer, larger contracts. These contracts typically
involve longer negotiating cycles, require the dedication of substantial amounts
of working capital and other resources, and in general require costs that may
substantially precede the recognition of associated revenues. Moreover, in
return for larger, longer-term purchase commitments, customers often demand more
stringent acceptance criteria, which can also cause revenue recognition delays.
Lucent has increasingly provided or arranged long-term financing for customers
as a condition to obtain or bid on infrastructure projects. Certain multiyear
contracts involve new technologies that may not have been previously deployed on
a large-scale commercial basis. On its multiyear contracts, Lucent may incur
significant initial cost overruns and losses that are recognized in the quarter
in which they become ascertainable. Further, profit estimates on such contracts
are revised periodically over the lives of the contracts, and such revisions can
have a significant impact on reported earnings in any one quarter.

Historically, a limited number of customers have provided a substantial portion
of Lucent's total revenues. These customers include AT&T, which continues to be
a significant customer, and the Regional Bell Operating Companies ("RBOCs"). The
communications industry is experiencing a consolidation of both U.S. and
non-U.S. companies. The loss of any of these customers, or any substantial
reduction in orders by any of these customers, could materially adversely affect
the Company's operating results. Changes in implementation plans by customers
inside and outside the United States could lead to delays in network deployments
by enterprises and service providers which could impact future results.

Lucent is diversifying its customer base and seeking out new types of customers
globally. These new types of customers include competitive access providers and
local exchange carriers, wireless service providers, cable television network
operators and computer manufacturers.




<PAGE>

 22                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


RESULTS OF OPERATIONS

REVENUES

Total revenues increased 17.7% to $8,713 million in the quarter compared with
the same quarter of 1999, and 12.9% to $25,133 million for the nine months
compared to the same period in 1999, respectively. For the quarter, sales within
the United States increased 21.6% compared with the same quarter last year.
Sales outside the United States increased 9.4% compared with the same quarter
last year, with revenue growth in the Asia/Pacific region, Caribbean/Latin
American region and Canada. Sales outside of the United States represented 29.5%
of revenues for the current quarter as compared to 31.8% of revenues for the
same quarter last year. For the nine months, sales within the United States
increased 14.3% and sales outside the United States increased 10.0% compared
with the same period in 1999. Sales outside of the United States represented
32.7% of revenues for the nine months ended June 30, 2000 as compared to 33.6%
of revenues for the same period in 1999.

The following table presents Lucent's revenues by segment and the approximate
percentage of total revenues for the three and nine months ended June 30, 2000
and 1999:

<TABLE>
<CAPTION>
                                                Three Months                        Nine Months
                                                    Ended                               Ended
                                                   June 30,                            June 30,
  Dollars in Millions                 -------------------------------         -------------------------------
                                           2000             1999                   2000              1999
                                          -------          -------                -------           -------
<S>                                   <C>        <C>     <C>     <C>          <C>       <C>     <C>        <C>
Service Provider Networks             $ 6,885    79%     $5,923    80%        $20,030    80%    $18,002    81%
Microelectronics and Communications
  Technologies                          1,809    21       1,306    18           4,814    19       3,680    16
Other and corporate                        19     -         174     2             289     1         588     3
Total Lucent                          $ 8,713   100%     $7,403   100%        $25,133   100%    $22,270   100%

</TABLE>


Revenues from SERVICE PROVIDER NETWORKS increased $962 million, or 16.2% in the
quarter compared with the same quarter in 1999 and $2,028 million, or 11.3% in
the nine months compared with the same period in 1999. These increases were
driven by sales of wireless systems, service provider Internet infrastructure
and Professional Services and, for the nine-month period, optical networking
equipment. The increase for the nine-month period was partially offset by shifts
in customers' purchases of new optical systems, resulting in manufacturing
capacity and deployment constraints, and lower than expected software revenues.

Revenues generated from service providers in the United States increased 21.4%
for the quarter and 13.0% for the nine months compared to the same periods in
1999, and included revenue gains from sales to wireless service providers,
incumbent local exchange carriers and competitive local exchange carriers. Sales
generated outside the United States increased 4.2% over the year-ago quarter.
For the nine months,





<PAGE>

 23                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

sales generated outside the United States increased 7.7% over the same
prior-year period, reflecting gains in all regions, except Europe/Middle
East/Africa. International sales growth for the quarter and year-to-date periods
was negatively impacted by the substantial reduction of revenues from a major
long-term foreign project. Revenues generated outside the United States
represented 27.0% of revenues for the quarter compared with 30.1% for the same
quarter of 1999 and 31.2% of revenues for the nine months compared with 32.3%
for the same period in 1999.

Lucent expects that product transition issues associated with a decline in
circuit switching sales and the substantial reduction of revenues from a major
long-term foreign project will not be offset as quickly by the ramp-up of newer
products. In addition, lengthy customer certification processes and component
shortages have led to a longer than expected full-volume ramp-up in optical
networking.

Revenues from MICROELECTRONICS AND COMMUNICATIONS TECHNOLOGIES increased $503
million, or 38.5% in the quarter compared with the same quarter in 1999, and
$1,134 million, or 30.8% in the nine months compared with the same period in
1999. These increases were driven by sales of optoelectronic components and
optical fiber, power systems, and customized chips for high-speed communications
and wired and wireless LAN systems. Revenues within the United States increased
48.6% for the quarter compared with the same quarter of 1999 and 41.6% for the
nine months compared with the same period in 1999. Revenues generated outside
the United States increased by 25.5% for the quarter and 17.9% for the nine
months, with revenue growth in all major regions. Revenues generated outside the
United States represented 39.5% of revenues for the quarter compared with 43.6%
in the same quarter in 1999 and 40.9% for the nine months compared with 45.4%
for the same period in 1999.

Revenues from OTHER AND CORPORATE decreased $155 million compared with the
year-ago quarter and $299 million compared with the year-ago nine month period.
These decreases were due to lower revenues from the Company's consumer products
business which was sold in the second fiscal quarter of 2000.

COSTS AND GROSS MARGIN

Total costs increased by $1,093 million, or 28.5% compared with the year-ago
quarter and $3,131 million, or 28.5% compared with year-ago nine-month period.
As a percentage of revenue, gross margin decreased to 43.5% from 48.3% in the
year-ago quarter and to 43.9% from 50.7% in the year-ago nine-month period,
respectively. These decreases are primarily due to a ramp-up of costs associated
with the introduction and implementation of new products and a change in product
mix, including lower software revenues. In addition, Lucent anticipates a major
shift from higher margin switching products to newer products with initially
lower margins.





<PAGE>

 24                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


OPERATING EXPENSES

Selling, general and administrative ("SG&A") expenses as a percentage of
revenues were 17.1% for the quarter and 16.9% for the nine-month period, a
decrease of 2.6 percentage points compared with 19.7% for the same quarter in
1999, and a decrease of 1.3 percentage points for the nine-month period compared
with 18.2% for the same period in 1999. SG&A expenses increased $34 million, or
2.3% compared with the same year-ago quarter and increased $196 million, or 4.8%
compared with the prior nine-month period. Included in the current nine-month
period expense is $61 million primarily associated with the mergers with INS,
Excel and Xedia. Included in the prior nine-month period expense is $88 million
primarily associated with the mergers with Ascend, RAScom and VitalSigns.

Amortization expense associated with goodwill and existing technology was $118
million for the quarter compared with $46 million for the same quarter in 1999
and $216 million for the nine-month period compared with $137 million for the
same period in 1999. Excluding the amortization of goodwill and existing
technology, SG&A expenses as a percentage of revenues were 15.8% for the quarter
and 16.1% for the nine month period, a decrease of 3.3 percentage points and 1.5
percentage points, respectively, compared with 19.1% and 17.6% for the
corresponding periods in 1999. As a result of the acquisition activity this
quarter, Lucent expects the amortization of goodwill and existing technology to
significantly increase in future quarters. On a proforma basis, if the following
acquisitions had occurred on October 1, 1999, the amortization of goodwill and
acquired technology would have increased by approximately $755 for the nine
months ended June 30, 2000.

Research and development ("R&D") expenses represented 11.6% of revenues for the
quarter compared with 14.3% of revenues for the same quarter of 1999. For the
nine months, R&D expenses represented 11.9% of revenues compared with 14.1% for
the same period of 1999. R&D expenses decreased $47 million, or 4.4%, during the
quarter compared with the same quarter of 1999 and $155 million, or 4.9%, during
the nine-month period compared with the same period of 1999. This decrease was
attributable to efficiencies in Lucent's research and development processes as
well as increases in the capitalization of software expenses.

Purchased IPRD expenses for the quarter were $863 million, reflecting the
charges associated with the acquisitions of Chromatis, Herrmann, Ortel and
Agere. Purchased IPRD expenses for the nine months were $874 million, related to
the Chromatis, Herrmann, Ortel, Agere and VTC acquisitions, as compared to $289
million related primarily to the acquisitions of WaveAccess, Sybarus, Enable
Semiconductor's Ethernet LAN business, Stratus and Quadritek for the same period
of 1999. The 1999 period also included the $24 million reversal related to
Stratus.




<PAGE>

 25                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

OTHER

Other income - net for the quarter increased $107 million to $119 million from
$12 million in the year-ago quarter due to net gains from the sale of various
equity securities. For the nine months other income - net increased $299 million
to $351 million from $52 million in the year-ago period, resulting primarily
from net gains from the sale of various equity securities, including a $189
million gain from the sale of an equity investment, partially offset by fees
associated with certain customer financing transactions.

Interest expense for the quarter decreased $18 million to $79 million compared
with the same quarter in 1999 and for the nine months increased $16 million to
$242 million compared with the same period of 1999. The decrease in the quarter
is largely due to lower commercial paper balances.

Because of one-time non-tax impacting charges, taxable income exceeded reported
income resulting in an effective income tax rate of 103.1% for the quarter
compared to 35.6% for the prior year quarter. Excluding one-time costs
associated with the Chromatis, Hermann, Ortel and Agere acquisitions in 2000 and
Ascend and RAScom merger costs in 1999 and the amortization of goodwill and
acquired technology in both periods, the effective income tax rate is 30.0% for
the quarter compared with 31.9% in the prior year quarter. This decrease was
primarily due to increased research tax credits and the tax impact of non-U.S
activity.

The effective income tax rate of 42.8% for the nine months increased from 36.1%
for the year ago period. Excluding one-time purchased IPRD charges and merger
related costs in 1999 and 2000 and the gain related to the sale of an equity
investment in 2000 and the amortization of goodwill and acquired technology in
both periods, the effective income tax rate is 30.5% for the nine months
compared with 32.2% in the same year ago period. This decrease was primarily due
to increased research tax credits and the tax impact of non-U.S. activity.

CASH FLOWS

Cash used in operating activities for the nine months ended June 30, 2000 was
$378 million compared with $925 million in the same year-ago period. This
decrease in cash flows used in operating activities was primarily due to a
smaller increase in inventory levels, collection of other receivables and the
tax benefit from stock options exercised, partially offset by liquidations of
accounts payable and lower net income.

Cash used in investing activities for the nine months ended June 30, 2000 was
$1,366 million compared with $1,090 million in the same year-ago period. The
increase in cash used in investing activities was primarily due to increased
capital expenditures and decreased proceeds from the sales of investments,
partially offset by decreased purchases of investments as well as the
dispositions of businesses.




<PAGE>

 26                                                           Form 10-Q - Part I


   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

Capital expenditures were $1,760 million and $1,312 million for the nine-month
periods ended June 30, 2000 and 1999, respectively. Capital expenditures relate
to expenditures for equipment and facilities used in manufacturing and research
and development, including expansion of manufacturing capacity, and expenditures
for efficiency efforts and growth outside of the U.S.

Cash provided by financing activities for the nine months ended June 30, 2000
was $522 million compared with $2,924 million in the same year-ago period. This
decrease in cash provided by financing activities was primarily due to decreased
issuances of both short-and long-term debt, partially offset by the increase in
proceeds from the issuance of common stock upon exercise of stock options.

FINANCIAL CONDITION

Assets from continuing operations increased $11,280 million, or 32.7%, from
fiscal year-end 1999. This increase was largely due to an increase in goodwill
and acquired technology, as well as increases in receivables, other assets,
inventories and contracts in progress of $7,776 million, $1,302 million, $1,157
million, $696 million and $656 million respectively. These increases were
partially offset by decreases in cash and other current assets of $976 million
and $376 million, respectively. The increase in goodwill and acquired technology
is due to the acquisitions this quarter (see Note 3). Receivables increased
primarily due to higher sales volume coupled with slower collections. Other
assets increased due largely to the capitalization of internal use software,
customer financing activity and an increase in other intangible assets
associated with acquisitions this quarter. The increase in inventories resulted
from the need to meet current and anticipated sales commitments to customers.
Other current assets decreased largely due to the cash settlement from the sale
of an equity investment.

Total liabilities decreased $1,226 million, or 5.7% from fiscal year-end 1999.
This decrease was due primarily to lower payroll and benefit liabilities due to
the pay-out of year-end bonuses and lower debt balances resulting from the
payment of debt recorded in connection with the sale of certain customer
receivables with recourse. In addition, approximately $800 million and $1,161
million of commercial paper has been allocated to discontinued operations, based
on the amount of debt expected to be assumed by the enterprise networks business
upon spin-off adjusted for cash flow activity, and is reflected in the net
assets of discontinued operations at June 30, 2000 and September 30, 1999,
respectively.

Working capital, defined as current assets less current liabilities, increased
$2,304 million from September 30, 1999, primarily resulting from the decrease in
payroll and benefit liabilities and short-term debt and the increase in
receivables, contracts in process and inventories, partially offset by the
decrease in cash and cash equivalents.

The ratio of total debt to total capital (debt plus equity) was 16.5% at June
30, 2000 compared to 29.6% at September 30, 1999. The decrease was related to
the increase in additional paid in capital associated with the issuance of stock
for business acquisitions this quarter and the exercise of stock options, net
income for the nine months and the decrease in total debt.




<PAGE>

 27                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES - CONTINUING OPERATIONS

At June 30, 2000, Lucent maintained approximately $4.9 billion in credit
facilities of which a significant portion is used to support Lucent's commercial
paper program. At June 30, 2000, approximately $4.5 billion was unused.

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 anticipates that borrowings under its bank credit
facilities, the issuance of additional commercial paper, cash generated from
operations, short- and long-term debt financings and receivable securitizations
will be adequate to satisfy its future cash requirements, although there can be
no assurance that this will be the case.

Network operators 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 has increasingly
provided or arranged long-term financing for customers. As market conditions
permit, Lucent's intention is to lay off 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.

As of June 30, 2000, Lucent had made commitments or entered into agreements to
extend credit to certain customers for an aggregate of approximately $7.7
billion. Excluding amounts that are not available because the customer has not
yet satisfied the conditions precedent for borrowing, at June 30, 2000,
approximately $3.7 billion in loan commitments was undrawn and available for
borrowing and approximately $1.5 billion had been advanced and was outstanding.
In addition, Lucent had made commitments to guarantee customer debt of about
$1.0 billion at June 30, 2000. Excluding amounts not available for guarantee
because conditions precedent have not been satisfied, approximately $550 million
of guarantees was undrawn and available and about $350 million was outstanding
on June 30, 2000. As part of the revenue recognition process, Lucent determines
whether the receivables under these contracts are reasonably assured of
collection based on various factors among which is the ability of Lucent to sell
these loans and commitments. Lucent intends to continue pursuing opportunities
for the sale of future loans and commitments.

In addition to the above arrangements, 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 and level of available credit, and
its continued ability to lay off commitments and drawn-down borrowings on
acceptable terms. Lucent believes that it will be able to access the capital
markets on terms and in amounts that will be satisfactory to Lucent and that it
will be able to obtain bid and performance bonds, to arrange or provide customer
financing as necessary, and to engage in hedging transactions on commercially
acceptable terms, although there can be no assurance that this will be the case.




<PAGE>

 28                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


RISK MANAGEMENT

Lucent is exposed to market risk from changes in foreign currency exchange rates
and interest rates that could impact its results of operations, financial
condition and cash flows. 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. Derivative
financial instruments that are used to hedge foreign currency and interest rate
exposure are viewed as risk management tools and are not used for speculative or
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.

Certain securities held in Lucent's equity and investment portfolio are subject
to equity price risk. Lucent generally does not hedge its equity price risk,
however on occasion, may use equity derivative financial instruments which are
subject to equity price risks to complement its investment strategies. Lucent
has entered into an equity swap agreement under which Lucent is obligated to pay
to a third party in July 2000 and September 2000 any depreciation in the market
value of certain equity securities sold during the three months ended December
31, 1999 or receive any appreciation in such market value. The July 2000
settlement has been made. Changes in the market value of this equity swap are
reflected in net income.

Lucent uses foreign currency exchange contracts, and to a lesser extent foreign
currency options, to reduce significant exposure to the risk that the eventual
net cash inflows and outflows resulting from the sale of products to non-U.S.
customers and purchases from non-U.S. suppliers will be adversely affected by
changes in exchange rates. Foreign currency exchange contracts are designated
for recorded, firmly committed or anticipated purchases and sales. The use of
these derivative financial instruments allows Lucent to reduce its overall
exposure to exchange rate movements, since the gains and losses on these
contracts substantially offset losses and gains on the assets, liabilities and
transactions being hedged.

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 June 30, 2000 or September
30, 1999. Management does not foresee or expect any significant changes in its
exposure to interest rate fluctuations or in how such exposure is managed in the
near future.




<PAGE>

 29                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

IN-PROCESS RESEARCH AND DEVELOPMENT ("IPRD")

In connection with the acquisitions of Agere, Ortel, Herrmann, and Chromatis in
the quarter ended June 30, 2000, Lucent allocated $94 million (non-tax
impacting), $307 million (non-tax impacting), $34 million (non-tax impacting),
and $428 million (non-tax impacting), respectively, of the total purchase price
to purchased IPRD. As part of the process of analyzing each of these
acquisitions, Lucent made a decision to buy technology that had not yet been
commercialized rather than develop the technology internally. Lucent based this
decision on factors such as the amount of time it would take to bring the
technology to market. Lucent also considered Bell Labs' resource allocation and
its progress on comparable technology. Lucent expects to use the same decision
process in the future.

Lucent estimated the fair value of IPRD for each of the above acquisitions using
an income approach. This involved estimating the fair value of the IPRD using
the present value of the estimated after-tax cash flows expected to be generated
by the purchased IPRD, using risk adjusted discount rates and revenue forecasts
as appropriate. The selection of the discount rate was based on consideration of
Lucent's weighted average cost of capital, as well as other factors including
the useful life of each technology, profitability levels of each technology, the
uncertainty of technology advances that were known at the time, and the stage of
completion of each technology. Lucent believes that the estimated IPRD amounts
so determined represent fair value and do not exceed the amount a third party
would pay for the projects.

Where appropriate, Lucent deducted an amount reflecting the contribution of core
technology from the anticipated cash flows from an IPRD project. At the date of
each acquisition, the IPRD projects had not yet reached technological
feasibility and had no alternative future uses. Accordingly, the value allocated
to these projects was capitalized and immediately expensed at acquisition. If
the projects are not successful or completed on time, management's product
pricing and growth rate estimates may not be achieved and Lucent may not realize
the financial benefits expected from the projects.

Agere, Inc.
On April 20, 2000, Lucent completed the acquisition of Agere. Agere was involved
in the development of programmable network processors for use in managing
traffic on high-speed voice and data networks. At the acquisition date, Agere
was conducting development and qualification activities related to the
development of a fully programmable, multi-protocol network processor for OC-48
(2.5 gigabits per second) wire speeds.





<PAGE>

 30                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

Overall, substantial progress had been made on the IPRD projects at the
valuation date, with completion estimated at approximately 65%. Agere estimated
that the projects would be completed in the first quarter of fiscal 2001, after
which time it expected to begin generating economic benefits from the completed
projects. In total, costs to complete Agere's IPRD are expected to total
approximately $3.4 million. Projected future net cash flows attributable to
Agere's IPRD, assuming successful development, were discounted to net present
value using a discount rate of 30%.

Ortel,Inc.
On April 27, 2000, Lucent completed the acquisition of Ortel. Ortel was involved
in the development of semiconductor-based optoelectronic components used in
fiber optic systems for telecommunications and cable television networks. At the
acquisition date, Ortel was conducting development, engineering, and testing
activities associated with new, high-speed optical transmission and receiver
systems.

Overall, Ortel's IPRD projects were at completion stages ranging from 50% to
75%. Ortel anticipated that the projects would be completed in phases beginning
in June 2000, after which point economic benefits would begin to be generated.
In total, costs to complete Ortel's IPRD projects are expected to total
approximately $7.8 million. Projected net cash flows attributable to Ortel's
IPRD, assuming successful development, were discounted to net present value
using a discount rate of 25%.

Herrmann Technology
On June 16, 2000, Lucent completed the acquisition of Herrmann. Herrmann was
involved in the development and manufacturing of devices for next-generation
DWDM optical networks. At the acquisition date, Herrmann was conducting
development, engineering, and testing activities associated with the development
of next generation passive optical filters, which are critical building blocks
in designing optoelectronic components for DWDM networks.

Overall, Herrmann's IPRD projects were at completion stages ranging from 20% to
60%. Herrmann estimated that the projects would be completed in phases beginning
in the fourth quarter of fiscal 2000, after which time it expected to begin
generating economic benefits from the completed projects. In total, costs to
complete Herrmann's IPRD are expected to total approximately $1.2 million.
Projected future net cash flows attributable to Herrmann's IPRD, assuming
successful development, were discounted to net present value using discount
rates ranging from 25% to 30%.





<PAGE>

 31                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

Chromatis Networks
On June 28, 2000, Lucent completed the acquisition of Chromatis. Chromatis was
involved in the development of next-generation optical transport solutions that
provide telecommunications carriers with improvements in the cost, efficiency,
scale, and management of multi-service metropolitan networks. At the acquisition
date, Chromatis was conducting development and testing activities associated
with the first generation of its Metropolis product, which will integrate data,
voice, and video services together on metropolitan networks and combine this
traffic onto a wave division multiplexing ("WDM") system.

Overall, substantial progress had been made on the IPRD projects at the
valuation date, with completion estimated at approximately 85%. Chromatis
estimated that the projects would be completed in the fourth quarter of fiscal
2000, after which time it expected to begin generating economic benefits from
the completed projects. In total, costs to complete Chromatis' IPRD are expected
to total approximately $7.8 million. Projected future net cash flows
attributable to Chromatis' IPRD, assuming successful development, were
discounted to net present value using a discount rate of 25%.

Given the uncertainties of the development process, the aforementioned estimates
are subject to change, and no assurance can be given that deviations from these
estimates will not occur. Management expects to continue development of these
efforts and believes there is a reasonable chance of successfully completing the
development efforts. However, there is risk associated with the completion of
the projects and there can be no assurance that the projects will realize either
technological or commercial success. Failure to successfully develop and
commercialize the IPRD would result in the loss of the expected economic return
inherent in the fair value allocation.

OTHER - Environmental Matters

See discussion in Note 9 to the Consolidated Financial Statements.

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
which 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") which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
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>

 32                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


Future Factors include increasing price and products and services competition by
non-U.S. and 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 achievement of lower costs and expenses; 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 spin off of the enterprise networks business and the proposed IPO and
spin off of the microelectronics business; 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; technological,
implementation and cost/financial risks in the use of large, multiyear
contracts; the cyclical nature of the Company's business; 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 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 below in this report
including the other sections referred to and also see the discussion in Lucent's
Form 10-K for the year ended September 30, 1999 in Item 1 in the section
entitled "X. OUTLOOK- A. Forward Looking Statements" and the remainder of the
OUTLOOK section.

Competition:

See discussion above under KEY BUSINESS CHALLENGES.

Dependence on New Product Development:

The markets for the Company's principal products are characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions and evolving methods of building and operating communications
systems for network operators and business customers. The Company's operating
results will depend to a significant extent on its ability to continue to
introduce new systems, products, software and services successfully on a timely
basis and to reduce costs of existing systems, products, software and services.
The success of these and other new offerings is dependent on several factors,
including proper identification of customer needs, cost, timely completion and
introduction, differentiation from offerings of the Company's competitors and
market acceptance. In addition, new technological innovations generally require
a substantial investment before any assurance is available as to their
commercial viability, including, in some cases, certification by non-U.S. and
U.S. standard-setting bodies.





<PAGE>

 33                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION

Reliance on Major Customers:

See discussion above under KEY BUSINESS CHALLENGES.

European Monetary Union - Euro:
On January 1, 1999, eleven member countries of the European Union established
fixed conversion rates between their existing sovereign currencies, and adopted
the Euro as their new common legal currency. The legacy currencies will remain
legal tender in the participating countries for a transition period between
January 1, 1999 and January 1, 2002. During the transition period, cash-less
payments can be made in the Euro. Between January 1, 2002 and July 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, existing contracts and currency risk and risk
management in the participating countries. 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.

Employee Relations:
On June 30, 2000, Lucent employed approximately 155,000 persons, including 76.3%
located in the United States. Of these domestic employees, approximately 39% are
represented by unions, primarily the Communications Workers of America
("CWA")and the International Brotherhood of Electrical Workers ("IBEW"). Lucent
has agreements with the CWA and IBEW expiring May 31, 2003.

Multi-Year Contracts:
Lucent has significant contracts for the sale of infrastructure systems to
network operators which extend over a multi-year period, and expects to enter
into similar contracts in the future, with uncertainties affecting recognition
of revenues, stringent acceptance criteria, implementation of new technologies
and possible significant initial cost overruns and losses. See also discussion
above under LIQUIDITY AND CAPITAL RESOURCES and KEY BUSINESS CHALLENGES.

Seasonality:
See discussion above under KEY BUSINESS CHALLENGES.

Future Capital Requirements:
See discussion above under FINANCIAL CONDITION and LIQUIDITY AND CAPITAL
RESOURCES.





<PAGE>

 34                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


Growth Outside the U.S., Foreign Exchange and Interest Rates:
Lucent intends to continue to pursue growth opportunities in markets outside the
U.S. In many markets outside the U.S., long-standing relationships between
potential customers of Lucent and their local providers, and protective
regulations, including local content requirements and type approvals, create
barriers to entry. In addition, pursuit of such growth opportunities outside the
U.S. may require significant investments for an extended period before returns
on such investments, if any, are realized. Such projects and investments could
be adversely affected by reversals or delays in the opening of foreign markets
to new competitors, exchange controls, currency fluctuations, investment
policies, repatriation of cash, nationalization, social and political risks,
taxation, and other factors, depending on the country in which such opportunity
arises. Difficulties in foreign financial markets and economies, and of foreign
financial institutions, could adversely affect demand from customers in the
affected countries.

See discussion above under RISK MANAGEMENT with respect to foreign exchange and
interest rates. A significant change in the value of the dollar against the
currency of one or more countries where Lucent sells products to local customers
or makes purchases from local suppliers may materially adversely affect
Lucent's results. Lucent attempts to mitigate any such effects through the
use of foreign currency contracts, although there can be no assurances that
such attempts will be successful.

Lucent hedges certain foreign currency transactions. The decline in value of
non-U.S. dollar currencies, may, if not reversed, adversely affect Lucent's
ability to contract for product sales in U.S. dollars because Lucent's products
may become more expensive to purchase in U.S. dollars for local customers doing
business in the countries of the affected currencies.

Legal Proceedings and Environmental:
See discussion above in Note 9 - COMMITMENTS AND CONTINGENCIES.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective October 1, 1999, Lucent adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). As a result, certain costs of computer software
developed or obtained for internal use have been capitalized and will be
amortized over a three-year period. The impact of adopting SOP 98-1 was a
reduction of costs and operating expenses of $73 million and $191 million during
the three and nine months ended June 30, 2000, respectively.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements and requires adoption no later than the fourth quarter of
fiscal 2001. The Company is currently evaluating the impact of SAB 101 to
determine what effect, if any, it may have on the Company's consolidated
financial position and results of operations.




<PAGE>

 35                                                           Form 10-Q - Part I

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
                           FINANCIAL CONDITION


In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). Subsequent to the issuance of
SFAS 133, the FASB has received many requests to clarify certain issues causing
difficulties in implementation. In June 2000, the FASB issued SFAS No. 138 which
responds to those requests by amending certain provisions of SFAS 133. These
amendments include allowing foreign-currency denominated assets and liabilities
to qualify for hedge accounting, permit the offsetting of certain inter-entity
foreign currency exposures that reduce the need for third party derivatives and
redefines the nature of interest rate risk to avoid sources of ineffectiveness.
Lucent has in place a team to address SFAS 133 related issues. This team has
been implementing an SFAS 133 compliant risk management information system,
globally educating both financial and non-financial personnel, inventorying
embedded derivatives and addressing various other SFAS 133 related issues.
Lucent will adopt SFAS 133 and the corresponding amendments under SFAS 138 no
later than the first quarter of fiscal year 2001. SFAS 133, as amended by SFAS
138, is not expected to have a material impact on Lucent's consolidated results
of operations, financial position or cash flows.




<PAGE>

 36                                                          Form 10-Q - Part II
                           Part II - Other Information


Item 2. Changes in Securities and Use of Proceeds.

(c) On June 16, 2000, Lucent issued 6,770,198 shares of its common stock to the
    shareowners of Herrmann Technology, Inc. in exchange for Herrmann's
    outstanding capital stock, in a merger transaction. The issuance of the
    common stock was exempt from registration under Section 4(2) of the
    Securities Act of 1933 because the transaction did not involve a public
    offering of securities by Lucent.

    On June 28, 2000, Lucent issued 72,043,313 shares of its common stock to the
    shareowners of Chromatis Networks Inc. in exchange for Chromatis'
    outstanding capital stock, in a merger transaction. The issuance of the
    common stock was exempt from registration under Section 4(2) of the
    Securities Act of 1933 because the transaction did not involve a public
    offering of securities by Lucent.

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

(a)  Exhibits:

     Exhibit Number

<TABLE>

        <S>       <C>
         (4)      First Supplemental Indenture dated as of April 17, 2000 to
                  Indenture dated as of April 1, 1996 (incorporated by reference
                  to Exhibit 4 of Report on 8-K filed May 5, 2000).

        (10)      Employment Agreement of Ms. Hopkins dated April 21, 2000.

        (12)      Computation of Ratio of Earnings to Fixed Charges.

        (27)      Financial Data Schedule.

</TABLE>





<PAGE>

 37                                                          Form 10-Q - Part II
                           Part II - Other Information


(b) Reports on Form 8-K:


        Current Report on Form 8-K dated and filed May 5, 2000 was filed
        pursuant to Item 5 (Other Events).





<PAGE>


 38
                                                         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.



Date August 4, 2000
                                        /s/ James S. Lusk
                                     ------------------------------
                                            James S. Lusk
                                            Senior Vice President and Controller
                                            (Principal Accounting Officer)





<PAGE>

 39                                                          Form 10-Q


                                  Exhibit Index

<TABLE>
<CAPTION>
Exhibit
Number

<S>      <C>
(4)      First Supplemental Indenture dated as of April 17, 2000 to
         Indenture dated as of April 1, 1996 (incorporated by reference
         to Exhibit 4 of Report on 8-K filed May 5, 2000).

(10)     Employment Agreement of Ms. Hopkins dated April 21, 2000.

(12)     Computation of Ratio of Earnings to Fixed Charges.

(27)     Financial Data Schedule.

</TABLE>