<PAGE>
 1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-Q



            X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           ---
                         SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1999

                                       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 April 30, 1999, 2,672,481,440 common shares were outstanding.








<PAGE>
 2                                                           Form 10-Q - Part I

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

                                           For the Three        For the Six
                                            Months Ended       Months Ended
                                             March 31,           March 31,
                                           1999     1998       1999      1998

Revenues.............................   $ 8,220  $ 6,184    $ 17,484   $14,959

Costs................................     4,327    3,436       8,725     7,958

Gross margin.........................     3,893    2,748       8,759     7,001

Operating Expenses:
Selling, general and
  administrative expenses ...........     1,902    1,501       3,688     3,068
Research and development expenses ...     1,139      932       2,070     1,764
In-process research
 and development expenses............        18      157          39       584
Total operating expenses.............     3,059    2,590       5,797     5,416

Operating income.....................       834      158       2,962     1,585
Other income (expense) - net ........       (65)      31          37       178
Interest expense.....................        95       58         173       120
Income before income taxes...........       674      131       2,826     1,643
Provision for income taxes...........       232      102         956       789

Income before cumulative effect of
  accounting change..................       442       29       1,870       854

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

Net income...........................   $   442  $    29    $  3,178   $   854

Earnings per common share - basic:
Income before cumulative effect of
  accounting change..................   $   0.17 $   0.01   $   0.70   $  0.33
Cumulative effect of accounting
  change ............................          -        -       0.49         -
Net income...........................   $   0.17 $   0.01   $   1.19   $  0.33

Earnings per common share - diluted:
Income before cumulative effect of
  accounting change..................   $   0.16 $   0.01   $   0.68   $  0.32
Cumulative effect of accounting
  change ............................          -        -       0.48         -
Net income...........................   $   0.16 $   0.01   $   1.16   $  0.32

Dividends declared
  per common share...................   $   0.00 $   0.00   $   0.04   $  0.0375


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)

                                          March 31,     September 30,
                                            1999            1998
ASSETS

Cash and cash equivalents..............   $   792        $   712

Accounts receivable less
 allowances of $349 at
 March 31, 1999 and $392 at
 September 30, 1998 ...................     8,752          7,014

Inventories............................     4,332          3,081

Contracts in process, net of contract
 billings of $4,370 at
 March 31, 1999 and $3,036 at
 September 30, 1998....................     1,106          1,259

Deferred income taxes - net............     1,632          1,623

Other current assets...................     1,160            493

Total current assets...................    17,774         14,182

Property, plant and equipment, net
  of accumulated depreciation of
  $6,935 at March 31, 1999 and
  $6,392 at September 30, 1998.........     5,751          5,410

Prepaid pension costs..................     6,210          3,754

Deferred income taxes - net............         -            750

Capitalized software development costs.       346            298

Other assets...........................     2,759          2,437

TOTAL ASSETS...........................   $32,840        $26,831


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)

                                        March 31,      September 30,
                                           1999            1998
LIABILITIES

Accounts payable.......................   $ 2,410         $ 2,044
Payroll and benefit-related
  liabilities..........................     1,724           2,515
Postretirement and postemployment
  benefit liabilities..................       184             187
Debt maturing within one year..........     3,185           2,231
Other current liabilities..............     4,059           3,481

Total current liabilities..............    11,562          10,458

Postretirement and postemployment
  benefit liabilities..................     6,471           6,380
Long-term debt ........................     3,716           2,409
Other liabilities......................     2,040           1,969

Total liabilities .....................    23,789          21,216

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: 6,000,000,000
 Issued and outstanding shares:
 2,672,362,415 at March 31, 1999
 2,658,545,914 at September 30, 1998...        27              27
Additional paid-in capital.............     4,996           4,569
Guaranteed ESOP obligation.............       (34)            (49)
Retained earnings......................     4,384           1,350
Accumulated other comprehensive
 income (loss).........................      (322)           (282)

Total shareowners' equity...............    9,051           5,615

TOTAL LIABILITIES AND
 SHAREOWNERS' EQUITY...................   $32,840         $26,831


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)
                                                 For the Six Months
                                                   Ended March 31,
                                                 1999           1998
Operating Activities
Net income...............................     $ 3,178        $   854
Adjustments to reconcile net income
  to net cash (used in)provided by
  operating activities:
   Cumulative effect of accounting change      (1,308)             -
   Business restructuring charge(reversal)          -            (33)
   Depreciation and amortization.........         831            648
   Provision for uncollectibles..........          13             84
   Deferred income taxes.................         272             78
   Purchased in-process research and
     development.........................          39            584
   Increase in accounts receivable ......      (1,879)          (622)
   Increase in inventories
     and contracts in process............      (1,056)          (245)
   Increase(decrease) in accounts
     payable.............................         305           (227)
   Changes in other operating assets
     and liabilities.....................      (1,442)          (510)
   Other adjustments for noncash
     items - net.........................        (420)          (295)
Net cash (used in)provided by
 operating activities....................      (1,467)           316

Investing Activities
Capital expenditures ....................        (806)          (606)
Proceeds from the sale or disposal of
  property, plant and equipment..........          58             42
Purchases of equity investments..........        (116)           (68)
Sales of equity investments..............           1             25
Acquisitions of businesses,
 net of cash acquired....................        (212)           (15)
Dispositions of businesses...............          57            265
Other investing activities - net.........         (12)           (45)
Net cash used in investing activities....      (1,030)          (402)

Financing Activities
Repayments of long-term debt ............          (8)           (62)
Issuance of long-term debt...............       1,825            335
Proceeds of issuance of common stock.....         432            228
Dividends paid...........................        (106)           (97)
S-Corp distribution to stockholder                  -            (10)
Increase (decrease) in short-term
  borrowings - net.......................         455           (645)
Net cash provided by(used in)
  financing activities...................       2,598           (251)

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)

                                                  For the Six Months
                                                    Ended March 31,
                                                  1999          1998

Effect of exchange rate
  changes on cash........................          (21)          (42)

Net increase(decrease) in cash and
  cash equivalents.......................           80          (379)

Cash and cash equivalents
  at beginning of year...................          712         1,382

Cash and cash equivalents
  at end of period.......................      $   792       $ 1,003

















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 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 February 26, 1999 Lucent acquired Kenan Systems Corporation, a privately held
developer of third-party billing and customer care software, in exchange for
25.76 million shares of Lucent common stock. The transaction was accounted for
as a pooling-of-interests. The unaudited consolidated financial statements of
Lucent for prior periods have been restated to include the financial position,
cash flows and results of operations of Kenan. The unaudited consolidated
statements of income for the three and six month periods ended March 31, 1998
were derived by combining the results of operations of Lucent for the three and
six months ended March 31, 1998, respectively with the results of operations of
Kenan for the three and six months ended June 30, 1998, respectively. The
unaudited consolidated balance sheet at September 30, 1998 was derived by
combining the financial position of Lucent at September 30, 1998 with the
financial position of Kenan at December 31, 1998. The unaudited consolidated
statement of cash flows for the six months ended March 31, 1998 was derived by
combining the cash flows of Lucent for the six months ended March 31, 1998 with
the cash flows of Kenan for the six months ended June 30, 1998.

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. During the three and six months ended March 31, 1999, improved
performance on multi-year contracts and the resolution of certain contingencies
had a positive impact on the reported results of operations.

The financial statement results 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 consolidated
financial statements and notes thereto in Lucent's Form 10-K for the year ended
September 30, 1998, the audited supplemental consolidated financial statements
and notes thereto in Exhibit 99-1 of the Company's Form 8-K (dated February 26,
1999) for the year ended September 30, 1998 and the unaudited supplemental
consolidated financial statements and notes thereto included in Exhibit 99-2 of
the Company's Form 8-K (dated February 26, 1999) for the quarterly period ended
December 31, 1998.

The financial statements presented have been restated to reflect the two-for-one
splits of Lucent's common stock which became effective on April 1, 1998 and
April 1, 1999. Certain prior period amounts have been reclassified to conform to
the current period presentation.

2. 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.






<PAGE>
 8                                                            Form 10-Q - Part I

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

The cumulative effect of this accounting change related to periods prior to
fiscal year 1999 of $2,150 ($1,308 after-tax, or $0.49 and $0.48 per basic and
diluted share, respectively) is a one-time, non-cash credit to fiscal 1999
earnings. This accounting change also resulted in a reduction in benefit costs
as a result of the change in Lucent's pension and postretirement accounting in
the three and six months ended March 31, 1999 that increased income by $107 ($65
after-tax, or $0.02 per basic and diluted share) and $215 ($130 after-tax, or
$0.05 per basic and diluted share), respectively as compared to the previous
accounting method. A comparison of pro forma amounts is presented below showing
the effects if the accounting change were applied retroactively:

<TABLE>
<CAPTION>
                                              Three Months                Six Months
                                             Ended March 31,            Ended March 31,
                                            1999       1998            1999       1998
                                            ----       ----            ----       ----
<S>                                         <C>       <C>             <C>       <C>   
Net Income                                  $  442    $   89          $1,870    $  973
         Earnings per share-basic           $ 0.17    $ 0.03          $ 0.70    $ 0.37
         Earnings per share-diluted         $ 0.16    $ 0.03          $ 0.68    $ 0.37
</TABLE>


3. COMPREHENSIVE INCOME

Lucent has adopted Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" as of October 1, 1998 which requires new
standards for reporting and display of comprehensive income and its components
in the financial statements. However, it does not affect net income or total
shareowners' equity. The components of comprehensive income, net of tax, are as
follows:

<TABLE>
<CAPTION>
                                        Three Months Ended        Six Months Ended
                                             March  31,              March  31,
                                          1999       1998         1999       1998
                                       --------------------     --------------------
<S>                                    <C>          <C>         <C>         <C>   
Net income...........................  $  442       $  29       $ 3,178     $  854

Other comprehensive income(loss):
 Foreign currency translation
    adjustments......................     (96)        (31)          (45)      (113)
 Unrealized holding gains(losses)
    arising during the period........     (13)          3            (2)       (18)
 Minimum pension liability adjustment       7           -             7          -
Comprehensive income.................  $  340       $   1       $ 3,138     $  723
</TABLE>

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

<TABLE>
<CAPTION>
                                           Foreign Currency              Total Accumulated
                                              Translation               Other Comprehensive
                                             Adjustments      Other        Income(Loss)
                                           ----------------   -----     -------------------
<S>                                        <C>                <C>       <C>
Accumulated other comprehensive income
  (loss) at September 30, 1998........        $ (279)         $ (3)           $ (282)
Other comprehensive income (loss)
 for the period.......................           (45)            5               (40)
Accumulated other comprehensive income
  (loss) at March 31, 1999............        $ (324)         $  2            $ (322)
</TABLE>

The foreign currency translation adjustments are not currently adjusted for
income taxes since they relate to indefinite investments in non-United States
subsidiaries.
<PAGE>
 9                                                          Form 10-Q - Part I

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

In the quarter ended March 31, 1999, Lucent completed the purchases of
WaveAccess Ltd., the Ethernet LAN component business of Enable Semiconductor,
and Sybarus Technologies. In the quarter ended December 31, 1998 Lucent
completed the purchase of Quadritek Systems, Inc.

The following table presents the aggregate information related to these
acquisitions:

                                Three Months Ended        Three Months Ended
                                     12/31/98                   3/31/99
                               --------------------      --------------------
Purchase price................         $50                       $137
Goodwill......................          24                        109
Existing technology...........           5                         12
Purchased IPR&D (after-tax)...          14                         15
Goodwill amortization
  period (years)..............           8                        4-7
Existing technology
  amortization period (years).           6                          7

All of the above acquisitions were accounted for under the purchase method of
accounting.

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

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.
<PAGE>
 10                                                         Form 10-Q - Part I

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

5. ASCEND COMMUNICATIONS, INC.

On January 13, 1999, Lucent announced that it had entered into a definitive
agreement to merge with Ascend Communications, Inc. Under the terms of the
agreement, which was approved by each company's board of directors, each share
of Ascend common stock will be converted into 1.650 shares of Lucent common
stock. Based on Lucent's closing stock price of $53 15/16 on January 12, 1999,
the transaction would be valued at approximately $20 billion. The transaction,
which is subject to customary conditions and regulatory approvals, is expected
to be completed during Lucent's third fiscal quarter, which ends June 30, 1999,
and is expected to be accounted for as a pooling-of-interests.

6.   SUPPLEMENTARY BALANCE SHEET INFORMATION

Inventories at March 31, 1999 and September 30, 1998 were as follows:

                                        March 31,       September 30,
                                          1999              1998
                                     --------------    ---------------
     Completed goods ...............    $ 2,281           $ 1,578
     Work in process and
       raw materials................      2,051             1,503
     Total inventories .............    $ 4,332           $ 3,081

7.   BUSINESS RESTRUCTURING AND OTHER CHARGES

For the three months ended March 31, 1999 and 1998, $19 and $99, respectively,
were applied to the 1995 business restructuring reserve. For the six months
ended March 31, 1999 and 1998, $32 and $137, respectively, were applied to the
1995 business restructuring reserve. Included in the three and six months ended
March 31, 1998 activity was a $33 reversal of business restructuring and other
charges primarily related to employee separations. The remaining reserve for
business restructuring as of March 31, 1999 was $219.

8. EARNINGS PER COMMON SHARE

Basic earnings per common share was calculated by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share was calculated by dividing net income 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.

Earnings per share amounts for the periods presented have been restated to
reflect the two-for-one splits of Lucent's common stock, which became effective
on April 1, 1998 and April 1, 1999. The following table reconciles the number of
shares utilized in the earnings per share calculations for the three and six
month periods ended March 31, 1999 and 1998:
<PAGE>
 11                                                         Form 10-Q - Part I

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


<TABLE>
<CAPTION>
                                     Three Months Ended       Six Months Ended
                                          March 31,               March 31,
                                       1999       1998        1999        1998
                                   -------------------------------------------
<S>                                  <C>        <C>          <C>        <C>   
Net income........................   $  442     $   29       $3,178     $  854

Earnings per common share - basic:
 Income before cumulative effect
  of accounting change............   $ 0.17     $ 0.01       $ 0.70     $ 0.33
 Cumulative effect of accounting
   change.........................        -          -         0.49          -
 Net income.......................   $ 0.17     $ 0.01       $ 1.19     $ 0.33

Earnings per common share - diluted:
 Income before cumulative effect
   of accounting change...........   $ 0.16     $ 0.01       $ 0.68     $ 0.32
 Cumulative effect of accounting
   change.........................        -          -         0.48          -
 Net income.......................   $ 0.16     $ 0.01       $ 1.16     $ 0.32


Number of Shares (in millions)
----------------------------------
Common shares - basic.............  2,666.7    2,633.9      2,663.5    2,617.1

Effect of dilutive securities:
 Stock options....................     72.9       47.1         70.2       41.8
 Other............................      5.0        2.5          5.0        1.8

Common shares - diluted...........  2,744.6    2,683.5      2,738.7    2,660.7

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......      1.1        0.3          1.4        0.5
</TABLE>

9.  PHILIPS CONSUMER COMMUNICATIONS ("PCC")

On October 1, 1997, Lucent contributed its Consumer Products business to a new
venture formed by Lucent and Philips Electronics N.V. ("Philips") in exchange
for 40% ownership of PCC. On October 22, 1998, Lucent and Philips announced
their intention to end the PCC venture and agreed to regain control of their
original businesses. The results of operations and net assets of the remaining
businesses Lucent previously contributed to PCC have been consolidated as of
October 1, 1998. The revenues are included in Other Systems and Products. In
December 1998, Lucent sold certain assets of the wireless handset portion of the
remaining businesses to Motorola. Lucent is continuing to look for opportunities
to sell the remaining consumer products businesses.
<PAGE>
 12                                                         Form 10-Q - Part I

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

10.  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 and other matters. Such matters are subject to many
uncertainties, and outcomes are not predictable with assurance. Consequently,
the ultimate aggregate amount of monetary liability or financial impact with
respect to these matters at March 31, 1999 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 beyond that provided for at March 31, 1999 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. ("AT&T") as a potentially
responsible party ("PRP") at numerous "Superfund" sites pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA") or comparable state statutes. Under the Separation and Distribution
Agreement ("Separation and Distribution Agreement"), among Lucent, AT&T and NCR
Corporation ("NCR"), 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.

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 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 March 31, 1999 cannot be estimated.
<PAGE>
 13                                                         Form 10-Q - Part I

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


11. SUBSEQUENT EVENTS

Mosaix
------
On April 5, 1999, Lucent announced its intention to acquire Mosaix, a Redmond,
Washington-based provider of software that links companies' front and back
offices and helps them deliver more responsive and efficient customer service.
Under the terms of the agreement, each share of Mosaix will be converted into
0.1927 shares of Lucent -- $10.77 per Mosaix share, based on Lucent's April 1,
1999 closing stock price of $55.875. The value of the transaction would be
approximately $145, including approximately 2.8 million common shares to be
reissued by Mosaix, based on Lucent's closing price on April 1, 1999. Lucent
expects that the acquisition will be completed in the quarter ended June 30,
1999 and be accounted for as a pooling-of-interests.
<PAGE>
 14                                                         Form 10-Q - Part I


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

HIGHLIGHTS

Lucent reported net income of $442 million, or $0.16 per share(diluted) for the
quarter ended March 31, 1999. The year-ago quarterly net income was $29 million,
or $0.01 per share(diluted). For the current six month period, Lucent reported
net income of $3,178 million, or $1.16 per share(diluted) compared with net
income of $854 million, or $0.32 per share(diluted) in the same prior period.
Included in the current six month results is a $1,308 million (or $0.48 per
share-diluted) cumulative effect of accounting change related to Lucent's
pension and postretirement benefits (see Note 2). Lucent's income before the
cumulative effect of accounting change was $1,870 million for the six month
period ended March 31, 1999. Net income for the three and six month periods
ended March 31, 1998 includes a $33 million, pre-tax (or $21 million, after-tax)
reversal of the 1995 business restructuring charges.

Gross margin increased $1,145 million and $1,758 million for the quarter and six
month periods ended March 31, 1999, respectively, compared with the year- ago
periods. These increases in gross margin were primarily due to higher sales
volume and improved performance on multi-year contracts compared with the same
periods of the prior year.

Operating income of $834 million reflects an increase of $676 million in the
quarter compared with the same quarter in 1998 and was 10.1% of revenues. For
the six months ended March 31, 1999, operating income of $2,962 million reflects
an increase of $1,377 million, largely due to increased sales levels.

On January 13, 1999, Lucent announced that it had entered into a definitive
agreement to merge with Ascend Communications, Inc. Under the terms of the
agreement, which was approved by each company's board of directors, each share
of Ascend common stock will be converted into 1.65 shares of Lucent common
stock. Based on Lucent's closing stock price of $53 15/16 on January 12, 1999,
the transaction would be valued at approximately $20 billion. The transaction,
which is subject to customary conditions and regulatory approvals, is expected
to be completed during Lucent's third fiscal quarter, which ends June 30, 1999,
and is expected to be accounted for as a pooling-of-interests.

On January 22, 1999, Lucent completed the acquisition of WaveAccess. The
acquisition was accounted for using the purchase method of accounting and has
been included in the financial statements for the periods ended March 31, 1999.

On February 22, 1999, Lucent acquired Sybarus Technologies, a privately held
semiconductor design company based in Ottawa, Canada. The transaction was
accounted for under the purchase method of accounting and has been included in
the financial statements for the periods ended March 31, 1999.

During the quarter ended March 31, 1999, Lucent acquired the Ethernet LAN
component business of Enable Semiconductor ("Enable"), a privately held company
based in Milpitas, California. The transaction was accounted for under the
purchase method of accounting and has been included in the financial statements
for the periods ended March 31, 1999.
<PAGE>
 15                                                         Form 10-Q - Part I


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

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 foreign and domestic competitors as well as continued changes in
technology and public policy. These competitors may include entrants from the
telecommunications, software, data networking and semiconductor industries.
Existing competitors have, and new competitors may have, strong financial
capability, technological expertise, well-recognized brand names and a global
presence. As a result, Lucent's management periodically assesses market
conditions and redirects the Company's resources to meet the challenges of
competition. Steps Lucent may take include acquiring or investing in new
businesses and ventures, partnering with existing businesses, delivering new
technologies, closing and consolidating facilities, disposing of assets,
reducing work force levels or withdrawing from markets.

Lucent has taken measures to manage the seasonality of its business by changing
the date on which its fiscal year ends and its compensation programs for
employees. As a result, Lucent has achieved a more uniform distribution of
revenues -- accompanied by a related redistribution of earnings -- throughout
the year. Revenues and earnings still remain higher in the first fiscal quarter
primarily because many of Lucent's large customers historically delay a
disproportionate percentage of their capital expenditures until the fourth
quarter of the calendar year (Lucent's first fiscal quarter).

The purchasing behavior of Lucent's largest customers has increasingly 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 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 multi-year
contracts involve new technologies that may not have been previously deployed on
a large-scale commercial basis. On its multi-year 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. The loss of any of these customers, or any
substantial reduction in orders by any of these customers, could materially
adversely affect Lucent's operating results.

Lucent has been successful in diversifying its customer base and seeking out new
types of customers globally. These new types of customers include competitive
access providers, competitive local exchange carriers, wireless service
providers, cable television network operators and computer manufacturers.
<PAGE>
 16                                                         Form 10-Q - Part I


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


REVENUES - THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS ENDED
MARCH 31, 1998

Total revenues increased 32.9% to $8,220 million in the quarter compared with
the same quarter of 1998, due to increases in sales from Systems for Network
Operators, Business Communications Systems, Microelectronic Products and Other
Systems and Products. For the quarter, sales within the United States increased
by 24.3% compared with the same quarter in 1998 and sales outside the United
States increased 60.6% compared with the same quarter last year. Sales outside
of the United States were 28.8% of revenues for the current quarter as compared
to 23.9% of revenues for the year-ago quarter.

The following table presents Lucent's revenues by product line, and the
approximate percentage of total revenues for the three months ended March 31,
1999 and 1998:

                                                      Three Months
                                                         Ended
                                                       March  31,
  Dollars in Millions                       --------------------------------
                                                 1999             1998
                                            -------------    ---------------
Systems for Network Operators........       $5,149   63%     $3,681   60%
Business Communications Systems......        1,987   24       1,730   28
Microelectronic Products.............          851   10         705   11
Other Systems and Products...........          233    3          68    1
Total................................       $8,220  100%     $6,184  100%

Revenues from SYSTEMS FOR NETWORK OPERATORS increased $1,468 million, or 39.9%
in 1999 compared with the same quarter in 1998. Revenues were driven by sales of
wireless systems, optical networking systems, data networking systems for
service providers, switching systems, communications software and services.
Continued demand for data services and Internet access in businesses and
residences contributed to the group's quarterly revenues.

Revenues from Systems for Network Operators in the United States increased by
28.1% over the year-ago quarter. Revenues generated outside the United States
increased 82.6% compared with the same quarter in 1998 due to revenue growth in
all major international regions. Revenues generated outside the United States
represented 28.2% of revenues for the quarter compared with 21.6% for the same
quarter of 1998.

Revenues from BUSINESS COMMUNICATIONS SYSTEMS increased $257 million, or 14.9%
compared with the year-ago quarter. Increased sales of Definity(R) enterprise
communication servers, including those with Call Center applications, messaging
systems, and NetCare(R) services contributed to the increased revenue for the
quarter. Sales within the United States increased 10.3% for the quarter compared
with the same quarter of 1998. Revenues generated outside the United States
increased by 33.9%. Revenues generated outside the United States represented
22.6% of revenues for the quarter compared with 19.4% in the same quarter in
1998.


--------------------------------------
(R)  Registered trademark of Lucent
<PAGE>
 17                                                         Form 10-Q - Part I


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

Revenues from MICROELECTRONIC PRODUCTS increased $146 million, or 20.7% compared
with the year-ago quarter driven by sales of optoelectronics components and
customized chips for high performance communications, data networking, and
computing. Increased revenues from power systems also contributed to the
increase. Sales within the United States increased 4.7% compared to the same
quarter in 1998. Revenues generated outside the United States increased 37.3%.
The growth in revenues outside the United States was driven by sales in the
Asia/Pacific, including China, and Europe/Middle-East/Africa regions. Revenues
generated outside the United States represented 55.8% of sales for the quarter
compared with 49.1% for the same quarter of 1998.

Revenues from OTHER SYSTEMS AND PRODUCTS increased $165 million compared with
the year-ago quarter primarily due to the consolidation of the businesses
regained from the PCC venture (see Note 9).

COSTS AND GROSS MARGIN - THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS
ENDED MARCH 31, 1998

Total costs increased by $891 million, or 25.9% in 1999 compared with the same
quarter in 1998 primarily due to higher sales volume. As a percentage of
revenue, gross margin increased to 47.4% from 44.4% in the year-ago quarter. The
increase this quarter compared with the same quarter in 1998 reflects a more
favorable mix of products and improved performance on multi-year contracts.

OPERATING EXPENSES - THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS
ENDED MARCH 31, 1998

Selling, general and administrative expenses as a percentage of revenues were
23.1% for the quarter, a decrease of 1.2 percentage points compared with 24.3%
for the same quarter in 1998.

Selling, general and administrative expenses increased $401 million, or 26.7%
compared with the same year-ago quarter. This increase was primarily associated
with higher sales levels.

Research and development expenses represented 13.9% of revenues for the quarter
compared with 15.1% of revenues for the same quarter of 1998.

Research and development expenses increased $207 million during the quarter
compared with the same year-ago quarter. This was primarily due to increased
expenditures in support of wireless, data networking, optical networking and
switching, and microelectronic products.

The purchased in-process research and development expenses for the 1999 quarter
were $18 million associated with the acquisitions of Sybarus, WaveAccess and
Enable compared with $157 million related to the acquisition of Prominet for the
same quarter of 1998.
<PAGE>
 18                                                         Form 10-Q - Part I


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

OTHER INCOME(EXPENSE), INTEREST EXPENSE AND PROVISION FOR INCOME TAXES - THREE
MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS ENDED MARCH 31, 1998

Other income(expense) - net was an expense of $65 million as compared to income
of $31 million for the year-ago quarter. Contributing to the decrease were
higher losses on foreign exchange and increased charitable contributions in the
current quarter.

Interest expense for the quarter increased $37 million to $95 million compared
with the same quarter in 1998. The increase in interest expense is due to higher
debt levels for the quarter ended March 31, 1999 compared with the same quarter
in 1998.

The effective income tax rate for the quarter was 34.4%, a decrease from 77.9%
in the same quarter of 1998. This decrease was due to the 1998 write-off of
non-tax deductible purchased in-process research and development expenses
associated with the acquisition of Prominet. Excluding the impact of the
purchased in-process research and development expenses associated with the
acquisition of Enable and WaveAccess in 1999 and Prominet in 1998, the effective
tax rate was 34.0% for 1999 as compared to 35.4% for 1998. This decrease is
primarily due to the tax impact of foreign activity.

REVENUES - SIX MONTHS ENDED MARCH 31, 1999 VERSUS SIX MONTHS ENDED MARCH 31,
1998

Total revenues increased to $17,484 million, or 16.9% compared with the same six
month period in 1998, due to increases in sales from Systems for Network
Operators, Business Communications Systems, Microelectronic Products and Other
Systems and Products. Revenue growth was due to sales increases globally. Total
revenue growth for the six month period was driven by sales within the United
States which grew 4.8% compared with the same period in 1998, and sales outside
the United States which increased 52.6% compared with the same period in 1998.

The following table presents Lucent's revenues by product line, and the
approximate percentage of total revenues for the six months ended March 31, 1999
and 1998:

                                                       Six Months
                                                          Ended
                                                        March 31,
  Dollars in Millions                       --------------------------------
                                                 1999              1998
                                            --------------    --------------
Systems for Network Operators........       $ 11,324   64%    $  9,675   65%
Business Communications Systems......          3,962   23        3,660   24
Microelectronic Products.............          1,672   10        1,480   10
Other Systems and Products...........            526    3          144    1
Total................................       $ 17,484  100%    $ 14,959  100%
<PAGE>
 19                                                         Form 10-Q - Part I

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

Revenues from SYSTEMS FOR NETWORK OPERATORS increased $1,649 million, or 17.0%
compared with the same six month period in 1998. The increase resulted from
higher sales of switching and optical networking systems, data networking
systems for service providers, wireless systems, communications software and
services. Demand for those products was driven in part by second line subscriber
growth in businesses and residences for Internet services and data traffic.

Revenues from Systems for Network Operators in the United States was flat
compared to the year-ago six month period. Revenues generated outside the United
States for 1999 increased 70.5% compared with the same six month period in 1998
due to revenue growth in the Europe/Middle-East/Africa and Caribbean/Latin
America regions. Revenues generated outside the United States represented 35.6%
of revenues for 1999 compared with 24.4% in same six month period of 1998.

Revenues from BUSINESS COMMUNICATIONS SYSTEMS increased $302 million, or 8.3%
compared with the same six month period in 1998. This increase was led by sales
of DEFINITY(R) enterprise communication servers, NetCare(R) services and
messaging systems. Revenues generated outside the United States increased by
18.8%, due to growth in all major international regions. Revenues generated
outside the United States represented 20.8% of the revenue for 1999 compared
with 19.0% in the same six month period of 1998. For 1999, sales within the
United States increased 5.8% compared with the same six month period of 1998.

Revenues from MICROELECTRONIC PRODUCTS increased $192 million, or 13.0% for 1999
compared with the same six month period in 1998 due to higher sales of
optoelectronic components and customized chips for high performance
communications, data networking and computing. Increased sales of power systems
also contributed to the increase. Sales within the United States were relatively
flat compared with the same period in 1998. Revenues generated outside the
United States increased 28.3% compared with the same period in 1998. The growth
in revenues generated outside the United States was driven by sales in the
Asia/Pacific, including China, Europe/Middle-East/Africa and Canada regions.
Revenues generated outside the United States represented 55.6% of sales compared
with 48.9% for the same six month period of 1998.

Revenues from OTHER SYSTEMS AND PRODUCTS increased $382 million compared with
the year-ago quarter primarily due to the consolidation of the businesses
regained from the PCC venture (see Note 9).

COSTS AND GROSS MARGIN - SIX MONTHS ENDED MARCH 31, 1999 VERSUS SIX MONTHS
ENDED MARCH 31, 1998

Total costs increased $767 million, or 9.6% compared with the same six month
period in 1998 due to the increase in sales volume. Gross margin percentage
increased to 50.1% from 46.8% in the year-ago period. The increase in gross
margin percentage for the current six months was due to a more favorable mix of
products and improved performance on multi-year contracts.

OPERATING EXPENSES - SIX MONTHS ENDED MARCH 31, 1999 VERSUS SIX MONTHS ENDED
MARCH 31, 1998

Selling, general and administrative expenses as a percentage of revenues were
21.1% for 1999, an increase of 0.6 percentage points from the same period in
1998.
<PAGE>
 20                                                         Form 10-Q - Part I


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

Selling, general and administrative expenses increased $620 million, or 20.2%
compared with the same period in 1998. This increase is attributed to the higher
sales volume, investment in growth initiatives and increased amortization of
goodwill and existing technology. In addition, the 1998 six-month period
included a $33 million reversal of 1995 business restructuring charges.

Research and development expenses represented 11.8% of revenues for the period,
unchanged from the year-ago six-month period.

Research and development expenses increased $306 million compared with the same
period in 1998. This was primarily due to increased expenditures in support of
wireless, data networking, optical networking, switching and microelectronic
products.

The purchased in-process research and development expenses for 1999 were $39
million reflecting the charges associated with the acquisition of Quadritek,
Sybarus, WaveAccess and Enable, compared with $584 million related to the
acquisitions of Livingston and Prominet for the same period in 1998.

OTHER INCOME, INTEREST EXPENSE AND PROVISION FOR INCOME TAXES -SIX MONTHS
ENDED MARCH 31, 1999 VERSUS SIX MONTHS ENDED MARCH 31, 1998

Other income -- net decreased $141 million for 1999 compared with the same
period in 1998. This decrease was primarily due to the $149 million gain on the
sale of the Company's ATS business in the year-ago period.

Interest expense was $173 million for the first six months of 1999, an increase
of $53 million due to higher debt levels in 1999.

The effective income tax rate was 33.8% for the six months ended March 31, 1999,
a decrease from the effective tax rate of 48.0% in the year-ago period. This
decrease was due to the 1998 write-off of non-tax deductible purchased
in-process research and development expenses associated with the acquisition of
Livingston and Prominet. Excluding the impact of the purchased in-process
research and development expenses associated with the acquisition of Enable and
WaveAccess in 1999 and Prominet and Livingston in 1998, the effective income tax
rate decreased from 35.4% in 1998 to 33.7% in 1999. This decrease was primarily
due to increased research tax credits and the tax impact of foreign activity.

CASH FLOWS - SIX MONTHS ENDED MARCH 31, 1999 VERSUS SIX MONTHS ENDED MARCH 31,
1998

Cash used in operating activities for the six months ended March 31, 1999 was
$1,467 million compared with cash provided by operating activities of $316
million in the same year-ago period. This reduction in cash was primarily due to
increases in accounts receivable and inventories.

Cash payments of $32 million were made for the six-month period ended March 31,
1999, for the 1995 business restructuring charge. Of the 23,000 positions that
Lucent announced it would eliminate in connection with the restructuring
charges, approximately 20,200 positions have been eliminated as of March 31,
1999.
<PAGE>
 21                                                         Form 10-Q - Part I


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

Comparing the six months ended March 31, 1999 and 1998, cash used in investing
activities increased to $1,030 million from $402 million primarily due to
increases in capital expenditures and cash used for acquisitions, and the
decrease in cash from dispositions.

Capital expenditures were $806 million and $606 million for the six-month
periods ended March 31, 1999 and 1998, 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 cost reduction efforts and international growth.

Cash provided by financing activities for the six months ended March 31, 1999
was $2,598 million compared with $251 million used in financing activities in
the same year-ago period. This increase in cash provided by financing activities
was primarily due to increased issuances of both short- and long-term debt.

The ratio of total debt to total capital (debt plus equity) was 43.3% at March
31, 1999 compared to 45.2% at September 30, 1998.

TOTAL ASSETS, WORKING CAPITAL AND LIQUIDITY

Total assets increased $6,009 million, or 22.4%, from fiscal year-end 1998. This
increase was largely due to increases in prepaid pension costs, accounts
receivable, and inventories of $2,456 million, $1,738 million, and $1,251
million, respectively. Prepaid pension costs increased due to the change in
accounting for pensions. The increase in accounts receivable was primarily
related to higher sales volume, and a higher percentage of sales outside the
United States. The increase in inventories resulted from the need to meet
current and anticipated sales commitments to customers.

Total liabilities increased $2,573 million, or 12.1% from fiscal year-end 1998.
This increase was due primarily to higher short- and long-term debt levels.

Working capital, defined as current assets less current liabilities, increased
$2,488 million from September 30, 1998, primarily resulting from the increase in
accounts receivable and inventories, partially offset by higher short-term debt.

On March 15, 1999, Lucent issued $1.36 billion of 6.45% 30 year debentures due
March 15, 2029. Lucent is using the proceeds to reduce its outstanding
commercial paper balance.

At March 31, 1999, Lucent maintained approximately $4,700 million in credit
facilities of which a portion is used to support Lucent's commercial paper
program. At March 31, 1999, approximately $4,200 million 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 and short- and long-term debt financings will be adequate to satisfy
its future cash requirements, although there can be no assurance that this will
be the case.
<PAGE>
 22                                                         Form 10-Q - Part I


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

Network operators world-wide are requiring their suppliers to arrange or provide
long-term financing for them as a condition to obtaining or bidding on
infrastructure projects. These projects may require financing in amounts ranging
from modest sums to over 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 investors. This enables Lucent to reduce the amount of its
commitments and free up additional financing capacity.

As of March 31, 1999, Lucent had made commitments or entered into agreements to
extend credit to certain network operators, including PCS and wireless
operators, for an aggregate of approximately $4,360 million. As of March 31,
1999, approximately $635 million had been advanced and was outstanding. Included
in the $4,360 million is approximately $4,030 million to fourteen network
operators. As of March 31, 1999, approximately $515 million had been advanced
and outstanding under seven of these arrangements.

As part of the revenue recognition process, Lucent assesses the collectibility
of its receivables relating to contracts with customers for which Lucent
provides financing.

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.

RISK MANAGEMENT

Lucent is exposed to market risk from changes in foreign currency exchange rates
and interest rates, which could impact its results of operations, financial
condition and cash flow. 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 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 by the counterparties on
such instruments.

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 as of March 31, 1999 and
September 30, 1998. 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>
 23                                                         Form 10-Q - Part I


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

IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with the acquisition of Quadritek in the quarter ended December
31, 1998, Lucent allocated $14 million of the purchase price to purchased in-
process research and development. In connection with the acquisitions of
WaveAccess, Enable and Sybarus, in the quarter ended March 31, 1999, Lucent
allocated $15 million of the purchase prices to purchased in-process research
and development. 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 in-process research and development for each
of the above acquisitions using an income approach. This involved estimating the
fair value of the in-process research and development using the present value of
the estimated after-tax cash flows expected to be generated by the purchased
in-process research and development, 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 in-process research and development 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 in-process research and
development project. At the date of each acquisition, the in-process research
and development 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 timely, management's product pricing and growth rates
may not be achieved and Lucent may not realize the financial benefits expected
from the projects.

Quadritek
---------
On October 1, 1998, Lucent completed the acquisition of Quadritek. Quadritek was
involved in the development of Internet Protocol ("IP") network administration
software solutions. At the acquisition date, Quadritek was conducting
development, engineering, and testing activities associated with new product
offerings that will address IP name and address automation and the
synchronization of the delivery of network services for IP infrastructure.

WaveAccess
----------
On January 22, 1999, Lucent completed the acquisition of WaveAccess. WaveAccess
was involved in the development of packet radio technology for wireless Internet
access and metropolitan area networks. At the acquisition date, WaveAccess was
conducting development, engineering, and testing activities associated with the
next generations of WaveAccess' point-to-point Ethernet bridges, point-to- point
modems, and point-to-multipoint systems.
<PAGE>
 24                                                         Form 10-Q - Part I

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

Sybarus
-------
On February 22, 1999, Lucent completed the purchase of Sybarus. Sybarus was a
start-up company involved in semiconductor design. At the acquisition date,
Sybarus was developing integrated circuit technology for use in Synchronous
Optical Network and Synchronous Digital Hierarchy high-speed fiber optic
transmission systems.

Enable
------
During the quarter ended March 31, 1999, Lucent acquired Enable. Enable was
involved in the development of Ethernet local area network components. At the
acquisition date, Enable was conducting development, engineering, and testing
activities associated with Fast Ethernet and Gigabit Ethernet components for
networking systems.

OTHER

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 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,
among AT&T, Lucent and NCR Corporation dated as of February 1, 1996, as amended
and restated, Lucent is responsible for all liabilities primarily resulting from
or related to the operation of Lucent's business as conducted at any time prior
to or after the Separation including related businesses discontinued or disposed
of prior to the Separation, and Lucent's assets including, without limitation,
those associated with these sites. In addition, under 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.

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 period of remediation for the applicable site which ranges
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, and estimates as to the number, participation level and
financial viability of any other PRPs, the extent of the contamination and the
nature of required remedial actions. Accruals are adjusted as further
information develops or circumstances change. The amounts provided for in
Lucent's consolidated financial statements for environmental reserves are the
gross undiscounted 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 and
other expenditures that will be required relating to remedial actions and
compliance with applicable environmental laws will not exceed the amounts
reflected in Lucent's reserves or will not have a material adverse effect on
Lucent's financial condition, results of operations or cash flows. Any possible
loss or range of possible loss that may be incurred in excess of that provided
for at March 31, 1999 cannot be estimated.
<PAGE>
 25                                                         Form 10-Q - Part I


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

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.

Future Factors include increasing price and product/services competition by
foreign and domestic competitors, including new entrants; rapid technological
developments and changes and Lucent's ability to continue to introduce
competitive new products and services on a timely, cost-effective basis; the mix
of products/services; the achievement of lower costs and expenses; the ability
to successfully integrate the operations and businesses of Ascend, Kenan and
other acquired companies; the outcome and impact of Year 2000; domestic and
foreign governmental and public policy changes which may affect the level of new
investments and purchases made by customers; changes in environmental and other
domestic and foreign governmental regulations; protection and validity of patent
and other intellectual property rights; reliance on large customers; customer
demand for Lucent's products and services; technological, implementation and
cost/financial risks in the increasing use of large, multi-year contracts; the
cyclical nature of Lucent 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 Lucent'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 domestic and international
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, 1998 in Item 1 in the section
entitled "OUTLOOK-Forward Looking Statements" and the remainder of the OUTLOOK
section.
<PAGE>
 26                                                         Form 10-Q - Part I

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

Competition:
See discussion above under KEY BUSINESS CHALLENGES.

Dependence On New Product Development:
The markets for Lucent'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. Lucent'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 Lucent'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 international and domestic
standards-setting bodies.

Reliance on Major Customers:
See discussion above under KEY BUSINESS CHALLENGES.

Readiness for Year 2000:
Lucent is engaged in a major effort to minimize the impact of the Year 2000 date
change on Lucent's products, information technology systems, facilities and
production infrastructure. Lucent has targeted June 30, 1999 for completion of
these efforts.

The Year 2000 challenge is a priority within Lucent at every level of the
Company. Primary Year 2000 preparedness responsibility rests with program
offices which have been established within each of Lucent's product groups and
corporate centers. A corporate-wide Lucent Year 2000 Program Office ("LYPO")
monitors and reports on the progress of these offices. Each program office has a
core of full-time individuals augmented by a much larger group who have been
assigned specific Year 2000 responsibilities in addition to their regular
assignments. Further, Lucent has engaged third parties to assist in its
readiness efforts in certain cases. LYPO has established a methodology to
measure, track and report Year 2000 readiness status consisting of five steps:
inventory; assessment; remediation; testing and deployment. In addition, LYPO
tracks and reports on the development and deployment of Year 2000 contingency
plans.

Lucent is completing programs to make its new commercially available products
Year 2000 ready and has developed evolution strategies for customers who own
non-Year 2000 ready Lucent products. Nearly all of the upgrades and new products
needed to support customer migration are already generally available.

Lucent has launched extensive efforts to alert customers who have non-Year 2000
ready products, including direct mailings, phone contacts and participation in
user and industry groups. Lucent also has a Year 2000 website www.lucent.com/y2k
that provides Year 2000 product information. Lucent continues to cooperate in
the Year 2000 information sharing efforts of the Federal Communications
Commission and other governmental bodies.
<PAGE>
 27                                                         Form 10-Q - Part I

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


Lucent believes it has sufficient resources to provide timely support to its
customers that require product migrations or upgrades. However, because this
effort is heavily dependent on customer cooperation, Lucent monitors customer
response and takes steps to encourage customer responsiveness, as necessary.

Lucent has largely completed the inventory and assessment phases of the program
with respect to its factories, information systems, and facilities. Completion
of the remediation, testing and deployment phases of this project remains on
schedule to meet a June 30, 1999 target date. LYPO has developed a formal
"exceptions" tracking process to approve and track a small number of individual
cases in which factors such as third party dependencies prevent project
completion by the corporate target date. Completion of required activities in
these cases is anticipated well in advance of any adverse Year 2000 impact. As
of March 31, 1999, over 90% of factory-related remediation activities had been
completed. In addition, over 80% of the factory-related testing and deployment
activities had been completed.

Lucent is also completing its Year 2000 readiness program for the large number
of facilities that it owns or leases world-wide. Priority is being placed on
Lucent-owned facilities, leased facilities that Lucent manages and other
critical facilities that house large numbers of employees or significant
operations. Remediation efforts at these significant facilities have largely
been completed.

Currently, over 80% of Lucent's information technology infrastructure has been
determined to be Year 2000 ready and is deployed for use. In addition, over 85%
of the business applications lines of code that are supported by Lucent's
information technology group are now Year 2000 ready and have been deployed or
are awaiting deployment.

To ensure the continued delivery of third party products and services, Lucent's
procurement organization has analyzed Lucent's supplier base and has sent
surveys to approximately 5,000 suppliers. To supplement this effort, Lucent is
conducting more detailed readiness reviews of the Year 2000 status of the
suppliers ranked as most critical based on the nature of their relationship with
Lucent, the product/service provided and/or the content of their survey
responses. The majority of Lucent's suppliers have not completed their Year 2000
readiness efforts and, as a result, at this time Lucent cannot fully evaluate
the Year 2000 risks to its supply chain. Lucent continues to monitor the Year
2000 status of its suppliers to minimize this risk and is developing appropriate
contingency responses as the risks become clearer.

Lucent has committed considerable resources to Year 2000 contingency planning
throughout the enterprise. These plans focus on risks posed by the Year 2000
date change, as well as other sensitive dates such as September 9, 1999 and
February 29, 2000. Lucent's plans are designed both to mitigate the impact of
Year 2000 failures, as well as providing for emergency response mechanisms and
supporting the prompt resumption of regular operations. Lucent has largely
completed the first working drafts of its Year 2000 contingency plans for
customer support. Contingency plans for facilities are targeted for completion
by May 31, 1999. As Lucent completes the balance of its contingency plans over
the next several months, the plans will be continuously enhanced as updated
information is obtained, the risks posed by external dependencies become clearer
and customer support needs become more focused.
<PAGE>
 28                                                         Form 10-Q - Part I

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

The risk to Lucent resulting from the failure of third parties in the public and
private sector to attain Year 2000 readiness is the same as other firms in
Lucent's industry and other business enterprises generally. The following are
representative of the types of risks that could result in the event of one or
more major failures of Lucent's information systems, factories or facilities to
be Year 2000 ready, or similar major failures by one or more major third party
suppliers to Lucent: (1) information systems--could include interruptions or
disruptions of business and transaction processing such as customer billing,
payroll, accounts payable and other operating and information processes, until
systems can be remedied or replaced; (2) factories and facilities--could include
interruptions or disruptions of manufacturing processes and facilities with
delays in delivery of products, until non-compliant conditions or components can
be remedied or replaced; and (3) major suppliers to Lucent--could include
interruptions or disruptions of the supply of raw materials, supplies and Year
2000 ready components which could cause interruptions or disruptions of
manufacturing and delays in delivery of products, until the third party supplier
remedied the problem or contingency measures were implemented. Risks of major
failures of Lucent's principal products could include adverse functional impacts
experienced by customers, the costs and resources for Lucent to remedy problems
or replace products where Lucent is obligated or undertakes to take such action,
and delays in delivery of new products.

Lucent believes it is taking the necessary steps to resolve Year 2000 issues;
however, given the possible consequences of failure to resolve significant Year
2000 issues, there can be no assurance that any one or more such failures would
not have a material adverse effect on Lucent. Lucent estimates that the costs of
efforts to prepare for Year 2000 from calendar year 1997 through 2000 is about
$535 million, of which an estimated $375 million has been spent as of March 31,
1999. Lucent has been able to reprioritize work projects to largely address Year
2000 readiness needs within its existing organizations. As a result, most of
these costs represent costs that would have been incurred in any event. These
amounts cover costs of the Year 2000 readiness work for inventory, assessment,
remediation, testing and deployment including fees and charges of contractors
for outsourced work and consultant fees. Costs for previously contemplated
updates and replacements of Lucent's internal systems and information systems
infrastructure have been excluded without attempting to establish whether the
timing of non-Year 2000 replacement or upgrading was accelerated.

While the Year 2000 cost estimates above include additional costs, Lucent
believes, based on available information, that it will be able to manage its
total Year 2000 transition without any material adverse effect on its business
operations, products or financial prospects.

The actual outcomes and results could be affected by Future Factors including,
but not limited to, the continued availability of skilled personnel, cost
control, the ability to locate and remediate software code problems, critical
suppliers and subcontractors meeting their commitments to be Year 2000 ready and
provide Year 2000 ready products, and timely actions by customers.

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 Euro is currently
<PAGE>
 29                                                         Form 10-Q - Part I

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

trading on currency exchanges and 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, and parties can elect to pay for goods and services and
transact business using either the Euro or a legacy currency. 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 March 31, 1999, Lucent employed approximately 148,000 persons, of whom 76.9%
were located in the United States. Of these domestic employees, 39.6% 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 TOTAL ASSETS, WORKING CAPITAL AND LIQUIDITY, and KEY BUSINESS
CHALLENGES.

Seasonality:
See discussion above under KEY BUSINESS CHALLENGES.

Future Capital Requirements:
See discussion above under TOTAL ASSETS, WORKING CAPITAL AND LIQUIDITY.

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.
<PAGE>
30                                                         Form 10-Q - Part I

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


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 10 - COMMITMENTS AND CONTINGENCIES and OTHER.
<PAGE>
31                                                         Form 10-Q - Part I

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


SHARE RESTATEMENT

Effective on April 1, 1999, Lucent split its common stock in a two-for-one split
through the issue of one additional share for each outstanding share. As result,
the tables below represent a retroactive restatement of the earnings(loss) per
share as reported in the Company's Form 8-K (dated February 26, 1999), Exhibit
99-1 for the year ended September 30, 1998 and Exhibit 99-2 for the quarter
ended December 31, 1998:

                                Five Year Summary
                 (Dollars in millions, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                               Twelve Months          Nine Months        Twelve Months
                                  Ended                  Ended                Ended
                               September 30,         September 30,        December 31,
                           ---------------------      -------------       -------------
                            1998    1997    1996      1996     1995       1995     1994
<S>                         <C>     <C>     <C>       <C>      <C>        <C>      <C>
                                             (1)       (2)                 (1)
Earnings(loss) per common
 share - basic (3)(4)       0.40    0.22    (0.34)    0.10     0.07      (0.41)     n/a

Earnings(loss) per common
 share - diluted (3)(4)     0.39    0.22    (0.34)    0.10     0.07      (0.41)     n/a

Earnings(loss) per common
 share - Pro Forma(4)(5)     n/a     n/a    (0.31)    0.09     0.06      (0.34)     n/a

Dividends per common
 share (4)                  0.0775  0.05625 0.0375    0.0375     -          -       n/a
</TABLE>

(1) Includes pretax restructuring and other charges of $2,801 ($1,847 after
    taxes) recorded as $892 of costs, $1,645 of selling, general and
    administrative expenses and $264 of research and development expenses.
(2) Beginning September 30, 1996, Lucent changed its fiscal year end from
    December 31 to September 30, and reported results for the nine-month
    transition period ended September 30, 1996. 
(3) The calculation of earnings (loss) per share on a historical basis includes 
    the retroactive recognition
    to January 1, 1995 of the 2,098,499,576 shares (524,624,894 shares on a
    pre-split basis) owned by AT&T on April 10, 1996.
(4) All per share data has been restated to reflect the two-for-one splits of
    Lucent's common stock which became effective on April 1, 1998 and April 1,
    1999.
(5) The calculation of earnings (loss) per share on a pro forma basis assumes
    that all 2,572,405,300 shares outstanding on April 10, 1996 were outstanding
    since January 1, 1995 and gives no effect to the use of proceeds from the
    IPO.
n/a Not applicable
<PAGE>
 32                                                          Form 10-Q - Part I

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

<TABLE>
<CAPTION>
QUARTERLY INFORMATION (UNAUDITED)
                                                   FISCAL YEAR QUARTERS
                               FIRST         SECOND        THIRD         FOURTH       TOTAL
                              -------       --------      -------       --------    ---------
<S>                           <C>           <C>           <C>           <C>         <C>
Year Ended                                                                         
  September 30, 1998                                                               
Earnings(loss) per                                                                 
 common share - basic.......  $ 0.32(a)     $ 0.01(b)    $(0.08)(c)    $ 0.16(d)    $  0.40 (a,b,c,d)
Earnings(loss) per                                                                 
 common share - diluted.....  $ 0.31(a)     $ 0.01(b)    $(0.08)(c)    $ 0.15(d)    $  0.39 (a,b,c,d)
Dividends per share.........  $ 0.0375      $ 0.000      $ 0.02        $ 0.02       $  0.0775
Stock price:(f)                                                                    
   High.....................   22 35/64      32 1/16      41 27/32      54 1/4       54 1/4
   Low......................   18 3/32       18 23/64     32            34 3/16      18 3/32
   Quarter-end close........   19 31/32      31 31/32     41 19/32      34 5/8       34 5/8
                                                                                   
Year Ended                                                                         
  September 30, 1997                                                               
Earnings(loss) per                                                                 
 common share - basic.......  $ 0.33        $ 0.03       $ 0.09        $(0.23)(e)   $ 0.22(e)
Earnings(loss) per                                                                 
 common share - diluted.....  $ 0.33        $ 0.03       $ 0.09        $(0.23)(e)   $ 0.22(e)
Dividends per share.........  $ 0.01875     $ 0.00       $ 0.01875     $ 0.01875    $ 0.05625
Stock price:(f)                                                                    
   High.....................   13 9/32       15 5/32      18 35/64      22 11/16     22 11/16
   Low......................   10 17/32      11 3/16      12 15/32      18 3/64      10 17/32
   Quarter-end close........   11 9/16       13 1/8       18 1/64       20 11/32     20 11/32
</TABLE>

(a) As a result of the 1998 acquisition of Livingston, Lucent recorded a non-tax
    charge of $427 in the first quarter for purchased in-process research and
    development.

(b) As a result of the 1998 acquisition of Prominet, Lucent recorded a non-tax
    charge of $157 in the second quarter for purchased in-process research and
    development.

(c) As a result of the 1998 acquisitions of Yurie and Optimay, Lucent recorded a
    non-tax charge of $668 in the third quarter for purchased in-process
    research and development.

(d) As a result of the 1998 acquisitions of SDX, MassMedia, LANNET and JNA,
    Lucent recorded a charge of $164 ($160 after tax) in the fourth quarter for
    purchased in- process research and development.

(e) As a result of the 1997 acquisition of Octel, Lucent recorded a charge of
    $979 ($966 after tax) in the fourth quarter for purchased in-process
    research and development and other charges.

(f)  Obtained from the Composite Tape. Stock prices have been restated to
     reflect the two-for-one splits of the Company's common stock effective
     April 1, 1998 and April 1, 1999.
<PAGE>
 33                                                          Form 10-Q - Part II
                      Part II - Other Information

Item 2.  Changes in Securities and Use of Proceeds.

(c)      On February 26, 1999, Lucent issued approximately 25.76 million shares
         of its common stock (adjusted to reflect the two-for-one split of its
         common stock effective April 1, 1999) to the owner of Kenan Systems
         Corporation in exchange for Kenan's total equity, 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 4. Submission of Matters to a Vote of Security Holders.

Lucent held its 1999 Annual Meeting of Shareowners on February 17, 1999. At that
meeting, shareowners elected three individuals as Directors of the Company for
terms to expire at the Annual Meeting to be held in the year 2002. In addition,
shareowners approved one Company proposal and rejected four shareowner
proposals. The persons elected and the results of the voting are as follows:

                                Votes                 Votes
                                  For              Withheld

Paul A. Allaire         1,094,075,432            10,890,025
Henry B. Schacht        1,093,728,415            11,237,042
John A. Young           1,092,327,081            12,638,376

                               Votes        Votes                      Broker
                                 For      Against       Abstain     Non-votes
Company proposal:
Approve an Amendment
to the Certificate of
Incorporation to
Increase Authorized
Common Stock . . . . . 1,034,852,065    63,311,632    6,801,760             0

Shareowner proposals:
Eliminate classified
board  . . . . . . . .   356,298,827   480,611,144   24,312,645   243,742,841

Discontinue Executive
Incentive Programs . .    76,608,234   748,761,091   38,853,291   243,742,841

Adopt Confidential
Voting Policy/
Independent Inspectors
of Election  . . . . .   367,114,305   469,560,783   24,547,528   243,742,841

Adopt Anti-Slave
Labor Policy . . . . .    88,801,828   700,859,371   71,561,417   243,742,841
<PAGE>
 34                                                          Form 10-Q - Part II
                      Part II - Other Information


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

(a)  Exhibits:

     Exhibit Number

     (3) (i)           Articles of Incorporation of the registrant, as amended
                       effective on February 17, 1999.

     (3) (ii)          By-Laws of the registrant, as amended effective February
                       17, 1999.

     (12)              Computation of Ratio of Earnings to Fixed Charges

     (27)              Financial Data Schedule

(b)  Reports on Form 8-K:

     Current Report on Form 8-K dated January 8, 1999 was filed pursuant to
     Item 5. (Other Events).

     Current Report on Form 8-K dated January 13, 1999 was filed pursuant to
     Item 5. (Other Events) and Item 7(c) (Exhibits).

     Current Report on Form 8-K dated February 26, 1999 was filed pursuant to
     Item 5. (Other Events) and Item 7 (Financial Statements, Pro Forma
     Financial Information and Exhibits).
<PAGE>
 35                                                          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 May 13, 1999
                          /s/ James S. Lusk
                          -----------------------------
                          By James S. Lusk
                          Vice President and Controller
                         (Principal Accounting Officer)
<PAGE>
 36                                                          Form 10-Q


                                Exhibit Index

Exhibit
Number

(3) (i)   Articles of Incorporation of the registrant, as amended
          effective on February 17, 1999.

(3) (ii)  By-Laws of the registrant, as amended effective on February 17, 1999.

(12)      Computation of Ratio of Earnings to Fixed Charges

(27)      Financial Data Schedule