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SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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FORM 10-K/A

(Amendment No. 1)

|ý                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|For The Fiscal Year Ended September 30, 2002
|OR                                          
|o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-15951

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AVAYA INC.

|A DELAWARE  |  | I.R.S. EMPLOYER
|----------- |  | ---------------
|CORPORATION |  | NO. 22-3713430 

211 Mount Airy Road, Basking Ridge, New Jersey 07920
Telephone Number 908-953-6000

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class                                           |  | Exchange on which registered
|------------------------------------------------------------- |  | ----------------------------
|Common Stock, par value $.01 per share                        |  | New York Stock Exchange     
|Series A Junior Participating Preferred Stock Purchase Rights |  | New York Stock Exchange     
|Liquid Yield Option Notes due 2021                           |  | New York Stock Exchange     

Securities registered pursuant to Section 12(g) of the Act:

None

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 ý No o

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

At
November 29, 2002, the aggregate market value of the voting common equity held by non-affiliates was approximately $907 million.

At
November 29, 2002, 365,801,780 common shares were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

|Portions of the 2002 Annual Report to Shareholders                          |  | Parts I, II and IV
|--------------------------------------------------------------------------- |  | ------------------
|Portions of the Proxy Statement for the 2003 Annual Meeting of Shareholders |  | Part III          

EXPLANATORY NOTE

Avaya Inc. is filing this Amendment No. 1 to its Annual Report on Form 10-K/A for the fiscal year ended September 30, 2002 (the
"Form 10-K/A") to amend certain items in its Annual Report on Form 10-K for the fiscal year ended September 30, 2002, which was originally filed with the Securities and Exchange
Commission on December 23, 2002 (the "Annual Report"). The amendments to the Annual Report included in the Form 10-K/A are in response to comments received from the Staff of the Division
of Corporation Finance of the SEC in connection with their review of our Registration Statement on Form S-3 filed with the SEC on June 23, 2003. None of the amendments to the Annual
Report reflected in this Form 10-K/A resulted in a restatement of the financial statements or other financial information included in the Annual Report.

This
Form 10-K/A continues to speak as of the date of the original filing of the Annual Report and we have not updated the disclosures contained therein to reflect any events that
occurred at a later date. The filing of this Form 10-K/A shall not be deemed an admission that the original filing, when made, included any untrue statement of a material fact or omitted to
state a material fact necessary to make a statement not misleading.

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TABLE OF CONTENTS

|Item     |  | Description                                                                           |  | Page
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I  
|1.       |  | Business                                                                              |  | 4   
|2.       |  | Properties                                                                            |  | 24  
|3.       |  | Legal Proceedings                                                                     |  | 24  
|4.       |  | Submission of Matters to a Vote of Security-Holders                                   |  | 28  
|PART II 
|5.       |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 28  
|6.       |  | Selected Financial Data                                                               |  | 28  
|7.       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 28  
|7A.      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 28  
|8.       |  | Financial Statements and Supplementary Data                                           |  | 28  
|9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 28  
|PART III
|10.      |  | Directors and Executive Officers of the Registrant                                    |  | 28  
|11.      |  | Executive Compensation                                                                |  | 30  
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 30  
|13.      |  | Certain Relationships and Related Transactions                                        |  | 30  
|14.      |  | Controls and Procedures                                                               |  | 30  
|PART IV 
|15.      |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 31  

This
Annual Report on Form 10-K/A contains trademarks, service marks and registered marks of Avaya and its subsidiaries and other companies, as indicated. Unless
otherwise provided in this Annual Report on Form 10-K/A, trademarks identified by ® and  are registered trademarks or trademarks, respectively, of
Avaya Inc. or its subsidiaries. All other trademarks are the properties of their respective owners. Liquid Yield Option
Notes is a trademark of Merrill, Lynch & Co., Inc. Microsoft® is a registered trademark of Microsoft Corporation.

All
market share data is based on the most recently available information from independent industry analysts.

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PART I

Item 1.Business.

Overview

Avaya Inc. is a leading provider of communications systems, applications and services for enterprises, including businesses, government agencies and other
organizations. Our product offerings include converged voice and data networks, traditional voice communications systems, customer relationship management applications, unified communications
applications and structured cabling products. We support our broad customer base with comprehensive global service offerings that help our customers plan, design, implement and manage their
communications networks. We believe our global service organization is an important consideration for customers purchasing our products and applications and is a source of significant revenue for us,
primarily from maintenance contracts.

Our
revenue has declined significantly during the past several years. Revenue for the fiscal years ended September 30, 2000, 2001 and 2002 was $7,732 million,
$6,793 million and $4,956 million, respectively. The decline in revenue is attributable to, among other things, declines in the market for our traditional business, enterprise voice
communications systems, and the effect of general economic conditions on our customers' willingness to spend on enterprise communications technology during the last several years. The decline in
revenue has contributed to our net losses for the fiscal years ended September 30, 2000, 2001 and 2002 of $375 million, $352 million and $666 million, respectively, and our
accumulated deficit, in the amount of $1,182 million as of September 30, 2002.

We
were incorporated under the laws of the State of Delaware under the name "Lucent EN Corp." on February 16, 2000, as a wholly owned subsidiary of Lucent Technologies Inc.
As of June 27, 2000, our name was changed to "Avaya Inc." On September 30, 2000, Lucent contributed its enterprise networking business to us and distributed all of the outstanding
shares of our capital stock to its shareowners. We
refer to these transactions in this Annual Report on Form 10-K as the "distribution." Prior to the distribution, we had no material assets or activities as a separate corporate
entity. Following the distribution, we became an independent public company, and Lucent has no continuing stock ownership interest in us.

Operating Segments

We offer a broad array of communications systems, applications and services that enable enterprises to communicate with their customers, suppliers, partners and
employees through voice, Web, electronic mail, facsimile, Web chat sessions and other forms of communication, across an array of devices. These devices include telephones, computers, cell phones and
personal digital assistants.

Our
broad portfolio of products includes:



Our
products range from systems designed for multinational enterprises with multiple locations worldwide, thousands of employees and advanced communications requirements to systems
designed for businesses with less than ten employees.

Prior
to the fourth quarter of fiscal 2002, our businesses were organized into operating segments based on product groups. In the fourth quarter of fiscal 2002, we reevaluated our
business model due to the continued decline in spending on enterprise communications technology by our customers and redesigned our operating segments to align them with discrete customer sets and
market segment opportunities in order to optimize revenue growth and profitability. As a result, we now report our

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operating
results in the following four segments: Converged Systems and Applications, Small and Medium Business Solutions, Services and Connectivity Solutions. Please see Note 16 to our
Consolidated Financial Statements for the year ended September 30, 2002, which is incorporated by reference from our 2002 Annual Report to Shareholders, for financial information regarding our
operating segments.

For
the fiscal year ended September 30, 2002, revenue from our Converged Systems and Applications, Small and Medium Business Solutions, Services and Connectivity Solutions
segments were 42.0%, 4.8%, 41.7% and 11.5%, respectively, of our total revenue. The performance of our two largest segments, Converged Systems and Applications and Services, typically has the greatest
impact on our consolidated operating results. Because many of our customers who purchase products and applications from our Converged Systems and Applications segment purchase contracts to service
those products and applications from our Services segment, the performance of our Services segment is dependent in part on the performance of our Converged Systems and Applications segment. Our Small
and Medium Business Solutions segment currently represents a small portion of our total revenue and we are exploring alternatives for our Connectivity Solutions segment so that we can strengthen our
focus on our other offerings.

Historically,
sales of our traditional enterprise voice communication systems represented a significant portion of our revenue. Revenue generated by these systems has been declining,
however, and as described more fully under "Converged Systems and Applications," we are focused on the migration of our customer's networks from traditional voice communications systems
to converged voice and data networks. If we are successful in implementing our strategy, sales of converged voice and data network products will become a larger component of our total revenue in the
future, as adoption of converged voice and data networks by enterprises becomes more widespread. Our Converged Systems and Applications segment markets traditional voice and converged voice and data
network products to large enterprises and our Small and Medium Business Solutions segment markets these products to small and medium sized enterprises. Sales of maintenance contracts to service
enterprise voice communications systems are a significant component of revenue generated by our Services segment.

For
the fiscal years ended September 30, 2002, 2001 and 2000, the percentage of total revenue contributed by a class of similar products, applications or services which accounted
for 10% or more of our consolidated revenue is as follows:

|                                    |                                                                                                              | 2002 |    | 2001 |    | 2000 |   
|----------------------------------- | ------------------------------------------------------------------------------------------------------------ | ---- | -- | ---- | -- | ---- | --
|Converged Systems and Applications: |                                                                                                              |      |    |      |    |      |   
|                                    | Converged systems (including traditional voice communications systems and converged voice and data networks) |      | 28 | %    | 29 | %    | 33
|                                    | Customer relationship management                                                                             |      | 10 | %    | 10 | %    | 7 
|Services:                           |                                                                                                              |      |    |      |    |      |   
|                                    | Maintenance services                                                                                         |      | 24 | %    | 19 | %    | 21
|Connectivity Solutions              |                                                                                                              |      |    |      |    |      |   
|                                    | SYSTIMAX structured cabling                                                                                  |      | 8  | %    | 10 | %    | 8 



Our Converged Systems and Applications segment is focused on the sale of communications products and applications to our large enterprise customers. Our primary
offerings for this segment include converged voice and data networks and traditional voice communications systems, customer relationship management offerings and unified communications applications. A
critical component of our strategy is our focus on the migration of our customers' traditional voice communications systems to a converged network that provides for the integration of voice, data,
video and other application traffic on a single unified network. Internet Protocol, or IP, telephony systems integrate voice and data

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communications
traffic for transmission across a single network infrastructure based on IP technology. Internet protocol is a type of protocol, or set of standardized procedures, for the formatting
and timing of transmission of communications traffic between two pieces of equipment.

We
believe the implementation of a converged network can provide significant benefits to an enterprise in a number of ways. These benefits include:



In
particular, we believe the evolution of converged networks is leading to converged communications, which is characterized by the integration of real time communication applications, such as
telephony operations and administration, call processing and call routing, and store and forward communications applications, such as voice messaging, email and unified communication, with business
applications, such as customer relationship management and supply chain management, to increase productivity and support end-user needs more efficiently.

Converged Systems.We are the U.S. leader in traditional voice telephony and enterprise telephony, which we define as the
market for traditional voice telephony and IP telephony in the aggregate. We have the third largest share of each of the U.S. IP telephony market, the global enterprise market and the global IP
telephony markets.

In
February 2002, we announced the next generation of our Enterprise Class Internet Protocol Solutions, or ECLIPS, which includes:



We
also offer a portfolio of products to support converged network infrastructures which carry voice, video and data traffic over any of the protocols supported by the Internet on local
area, wide area and wireless networks including gigabit Ethernet, which facilitates the integration of the enterprise network, the service provider network and next generation switching systems such
as optical networking. These products, which include switches, virtual private networks and network management software are offered on a stand-alone basis, but are used primarily to support our
converged systems

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offerings.
Our family of converged network infrastructure products help provide a secure, reliable network infrastructure that enables deployment of IP-based communications applications.

Our
most advanced enterprise voice communications system is our DEFINITY® Enterprise Communications Server, which is offered worldwide in a variety of configurations,. Our
DEFINITY product line is a family of products that provides for a reliable enterprise network for voice communication that integrates seamlessly with the public subscriber telephony network, or PSTN,
the global collection of voice-oriented public telephone networks. It also offers integration with an enterprise's data network. Our DEFINITY servers support a variety of voice and data applications
such as call and customer contact centers, messaging and interactive voice response, or IVR, systems. IVR systems allow an individual to access information in the enterprise's computer databases or
conduct transactions by voice or using a touch-tone telephone. IVR systems are often used in conjunction with an automated attendant service to determine how the call should be routed
given the caller's needs. Our DEFINITY servers support computer telephony integration applications, which are advanced applications that assist in the making, receiving and managing of telephone
calls. Our DEFINITY servers facilitate the ongoing transition at many enterprises from traditional voice telephony systems to advanced systems that integrate voice and data traffic and deploy
increasingly sophisticated communications applications.

Customer Relationship Management.Our customer relationship management organization is focused on applications that:



Our
offerings are essential components of many customer relationship management applications, including:



Our
core customer relationship management, or CRM, product offerings are software and hardware systems and software applications for customer contact centers (including call centers)
which are the foundation of many CRM offerings. We use the term call centers to refer to applications that primarily manage an enterprise's interactions with customers via the telephone, and the term
contact centers to refer to applications that allow customers to interact with an enterprise using multiple mediums of communication, including electronic mail, access from a Web site, Web chat and
collaboration, voice self-service, telephone calls and facsimiles. We are the leading provider of call center systems in North America and have the second largest share of the U.S. call
center market. Our strategy is to leverage this leadership position to market a broader suite of CRM applications.

Our
Avaya Call Center Solutions for MultiVantage® offer a suite of intelligent call routing alternatives that can accommodate single call centers or multiple
call centers through "virtual" routing over a converged network. Calls can be routed to customer care agents or self-service applications

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based
on a variety of criteria, or business rules, including call volume, workload, agent language or other expertise or across time zones or countries and in each case, routing is transparent to the
customer. Our contact center offerings include Avaya Interaction Center, which manages interactions across a variety of communication channelsincluding Web,
e-mail and advanced telephony systems. Avaya Interaction Center allows customers to contact the enterprise through their preferred mode of communication and, together with our
other contact center components, helps enhance the customer's experience with the enterprise. Our Operational Analyst offering provides detailed and summary reporting to assist in efficiently and
effectively managing the contact center's operations. Operational Analyst also provides business relevant analytical reporting that help facilitate business decisions relevant to contact center
operations.

Avaya
CRM is supported by a professional services team of consultants who are dedicated to assisting enterprises in improving their customer relationship management, technology and
execution. Our services range from designing and implementing an enterprise's customer relationship management technology strategy to setting up and integrating software applications that an
enterprise purchases from us as part of its customer contact center. Our consultants also work with our sales force in selling our customer relationship management applications. Typically, a customer
that purchases our customer relationship management applications purchases consulting services from us. We also provide subject matter advice to systems integrators as part of an overall customer
relationship management strategy, as well as to provide guidance to achieve the integration of multi-vendor offerings.

Unified Communication.We define Unified Communication as a family of applications that allow individuals to collaborate and
communicate more effectively and to move more quickly in a networked infrastructure through a variety of communications devices, including telephones, computers or personal digital assistants. Our
Unified Communication offerings include our voice messaging and unified messaging products, our IP-based unified communication solution and other multimedia collaboration tools. Unified
messaging is an advanced messaging solution that delivers the convenience and benefits of combining the storage of more than one type of message, including voice, facsimile and email.

We
are the worldwide leader in sales of voice messaging, unified messaging and unified communication applications. Our messaging systems are configured both as stand-alone servers or as
embedded software or hardware in communications servers. Many of our messaging systems are compatible with the voice communications systems of other vendors so that an enterprise may choose our
messaging system as the standard for all its locations.

We
offer a wide variety of voice messaging and unified messaging applications designed to serve the telephone call answering, facsimile, voice and unified messaging communications needs
of enterprises. Unified messaging facilitates access to messages through the most convenient device, including Internet browsers, LAN-based personal computers and wireline or wireless
telephones, using text-to-speech technology for telephonic e-mail retrieval. These products are marketed under a number of brands, including our primary brands,
Octel® Messaging and INTUITY AUDIX® Messaging. The ease and speed of our voice and facsimile messaging can improve an enterprise's efficiency by allowing messages
to be sent instantly to teams, groups or an entire workforce across multiple locations. All of our messaging servers can be networked, over the Internet or public or private voice networks, to provide
enterprise-wide voice and facsimile messaging through a single system.

Our
unified messaging capability, which accommodates voice, facsimile and email messages, is available for our Octel Messaging and INTUITY AUDIX systems and is also provided by our
innovative Avaya Unified Messenger for Microsoft® Exchange, developed in cooperation with Microsoft Corporation. The Avaya Unified Messenger system is a unified messaging system software
solution that stores voice and facsimile messages directly in a user's Microsoft Exchange electronic mailbox and enables user access to this mailbox by telephone or fax machine or a Microsoft Exchange
interface on the user's personal computer.

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Our
unified communication offering, Avaya Unified Communication Center, includes the following features:



Our
Small and Medium Business Solutions segment develops, markets and sells communications products and applications, including IP telephony, traditional voice systems, unified
communication and
contact center applications, for small and medium-sized businesses as well as the branch offices of large enterprises. Traditional voice communications systems designed for small and medium-sized
businesses are also known as key and hybrid telephony systems. We have the second largest market share in the U.S. key/hybrid voice market, although the market leader's share in this market is less
than 1% greater than our current share. We have only recently introduced an IP telephony solution designed to serve the needs of small and medium-sized businesses.

We
launched Avaya IP Office, our IP telephony solution for small and medium-sized enterprises, in Europe in January 2002 and in North America in May 2002. IP
Office can be deployed for enterprises with 2 to 256 stations and features full voice and data remote access, call distribution and alternate call routing for low cost and highest voice quality. In
addition, the IP Office applications suite offer voice mail, unified messaging, wireless capability and an array of contact center management tools designed for the small and medium-sized enterprise.

Our
key and hybrid voice communications systems are our Merlin MAGIX system, which offers telephony, messaging, wireless and call center capability to enterprises with up to 200 stations
and our Partner ACS system, which offers telephony, messaging and wireless to smaller enterprises with up to 40 stations. Our Avaya INDeX system is marketed primarily in Europe, Australia and Japan
and can accommodate up to 1,088 stations. All of these systems can be IP enabled.



Our Services organization provides standard and customized services to enterprises in the following areas:



We
are the leading U.S. provider of maintenance services for enterprise voice communications systems.

We
deliver our service offerings through our Network Consulting Services, Managed Services, Data Services, Technical Services and Field Services organizations. Our Network Consulting
team offers

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network
planning and design services. Our Managed Services organization helps enterprises focus on core competencies by managing their internal voice communications systems and helps service providers
grow revenues by providing end-to-end messaging and unified communication applications. Our Data Services team can assist the enterprise with the design, implementation,
installation, maintenance and management of its data network. Installation and repair of our products are performed primarily by our Field Services organization. Technical support and maintenance
under contracts for our voice communications products are provided by our Technical Services and Field Services organizations.



We market our SYSTIMAX® SCS product line of structured cabling systems primarily to enterprises of various sizes for wiring phones, workstations,
personal computers, local area networks and other communications devices through their buildings or across their campuses and our ExchangeMAX® product line primarily to central offices of
service providers, such as telephone companies or Internet service providers. We also offer electronic cabinets to enclose and protect an enterprise's electronic devices and equipment.

SYSTIMAX structured cabling systems.We are the worldwide leader in sales of structured cabling systems to enterprises. We
primarily market these products under the brand name SYSTIMAX. Our SYSTIMAX cabling systems provide a single cabling solution for a network that integrates voice, video, data and building controls on
one network through an infrastructure of copper or fiber cabling and associated connecting apparatus. The SYSTIMAX copper and fiber apparatus products can be customized to fit a customer's needs.

ExchangeMAX structured cabling systems.We sell our ExchangeMAX structured cabling systems primarily to central offices of
service providers such as telephone companies, original equipment manufacturers and third-party engineering, furnish and install vendors. Central offices are locations that house switches to serve the
subscribers of a service provider. Our ExchangeMAX systems are used to connect transmission and switching within the central office environment to the PSTN and include coaxial and fiber cable used for
voice frequency and digital and fiber distribution networks.

Electronic cabinets.An electronic cabinet is a sturdy environmental enclosure designed to house electronics devices and
passive equipment, both in the outside plant and inside buildings. Such enclosures are designed to meet the specific needs of each equipment manufacturer's equipment and devices, including thermal
characteristics, and are used mostly by service providers to protect wireless access equipment, switching equipment and broadband electronic equipment.

Customers, Sales and Distribution



Our customers include a broad set of enterprises ranging from large, multinational enterprises to small and mid-sized enterprises to governments and
schools. We have thousands of customers, and no single end user customer represented more than 10% of our revenue for fiscal 2002 and 2001 although sales to our largest dealer, Expanets Inc.,
were approximately 10% of revenue for the fiscal year ended September 30, 2001.



Our distribution strategy is to serve our customers through our direct sales forces and our indirect sales channel, which consists of our global network of
distributors, dealers, value-added resellers and system integrators.

Converged Systems and Applications.We sell our Converged Systems and Applications products and applications to enterprise
customers through our direct sales channel and our global network of distributors, dealers, solutions providers and systems integrators. Outside the U.S., we employ a direct

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sales
force in major areas with large enterprises while customers and geographic areas are served through our indirect sales channel.

Small and Medium Business Solutions.We serve our Small and Medium Business Solutions customers primarily through our network
of dealers and value-added resellers as well as through service providers. We also sell our products and applications for this segment to other providers of communications products to be incorporated
into their offerings. We will utilize a direct sales presence in support of the smaller offices of our larger enterprise customers and for our largest dealers and service providers.

Services.Our Services segment serves customers through our direct sales force and indirect channel partners, including
alliance partners, service providers, distributors and resellers. In addition, sales opportunities for our Services segment will often arise from sales of our products and applications through our
Converged Systems and Applications and Small and Medium Business Solutions segments.

Connectivity Solutions.Our SYSTIMAX structured cabling systems are sold primarily indirectly through a worldwide network of
distributors. Our ExchangeMAX structured cabling systems and electronic cabinets are sold to service providers, original equipment manufacturers and distributors.

Research and Development

We invested $459 million, or approximately 9.3% of our total revenue, in fiscal 2002 and $536 million, or approximately 7.9% of our total revenue,
in fiscal 2001, in research and development. Each of our operating segments has an independent research and development organization. In addition, the research and development efforts of our operating
segments are supported by Avaya Labs Research, a world-class basic research organization of approximately 80 professionals focused on technologies that will result in innovative products and services.
The primary focus of Avaya Labs Research is the development of technologies and products for our Converged Systems and Applications segment and, to a lesser extent, our Services segment.

We
plan on using our substantial investment in research and development to develop new systems and software related to business communications applications, customer relationship
management innovations, messaging applications, personalized information portals, business infrastructure and architectures, Web centers, hosted offerings, data networks and services for Avaya's
customers. These
new systems and software will augment our current product offerings so that, together with our strategic alliances and services, we can offer our customers comprehensive advanced communications
products and applications. We are also developing self-service interfaces and tools for use by our customers and indirect channel partners. Avaya Labs Research will continue to seek
opportunities to work with technology leaders from other companies and educational and research institutions to develop uniform technological standards as the building blocks for future communications
and related enterprise systems.

Manufacturing and Supplies

We have outsourced all of the manufacturing operations related to our Converged Systems and Applications and Small and Medium Business Solutions. Substantially
all of these operations have been outsourced to Celestica Inc. Our outsourcing agreement with Celestica expires in May 2005. The agreement may be renewed by Celestica for one year after expiration of
the term and thereafter, will automatically renew for successive one year terms unless either party elects to terminate the agreement by giving notice to the other party six months prior to the
expiration of the renewal term. The remaining portions of our manufacturing operations, other than the manufacturing of our Connectivity Solutions product offerings, are outsourced to a number of
other contract manufacturers. Currently, we are engaged in the manufacturing of our Connectivity Solutions product offerings in three facilities located in the United States, Australia and Ireland as
well as in a facility in China operated by a joint venture in which we own a 60% interest.

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The
success of our manufacturing initiative depends on the willingness and ability of contract manufacturers to produce our products. We may experience significant disruption to our
operations by outsourcing so much of our manufacturing. If our contract manufacturers terminate their relationships with us or are unable to fill our orders on a timely basis, we may be unable to
deliver our products to meet our customers' orders, which could delay or decrease our revenue.

We
believe we have adequate sources for the supply of the components of our products and for the finished products that we purchase from third parties.

Competition

The market for communications systems, applications and services is quickly evolving, highly competitive and subject to rapid technological change. Because we
offer a wide range of systems, applications and services for several types of enterprises, we have a broad range of competitors. Many of our competitors are substantially larger than we are and have
significantly greater financial, sales,
marketing, distribution, technical, manufacturing and other resources. Competition for our Converged Systems and Applications offerings include products manufactured or marketed by a number of large
communications equipment suppliers, including Nortel Networks Corporation, Cisco Systems, Inc., Siemens Aktiengesellschaft, Alcatel S.A. and NEC Corporation, as well as by a number of other
companies, some of which focus on particular segments of the market such as customer relationship management. Some of the other competitors for our Converged Systems and Applications offerings include
Aspect Communication Corporation and Captaris Inc. Our Small and Medium Business Solutions segments has many competitors, including Cisco, Nortel, Alcatel, NEC, Matsushita Electric Corporation
of America, Inter-Tel, Incorporate and 3Com Corp., although the market for these products is fragmented. Our structured cabling systems' primary competitors are ADC
Telecommunications, Inc., Telect Corporation, Siecor Corporation, Marconi plc, Nordx/CDT, Commscope, Inc. and Belden Inc. Our Services segment competes with Cisco
Systems, Inc., NextiraOne, LLC, Norstan, Inc., Nortel Networks Corporation, Siemens Aktengesellschaft, Ericsson, Ameritech Corporation and Verizon Communications Inc as well as many
consulting firms. We expect to face increasing competitive pressures from both current and future competitors in the markets we serve.

Technological
developments and consolidation within the communications industry result in frequent changes to our group of competitors. The principal competitive factors applicable to
our products include:



Patents, Trademarks and Other Intellectual Property

In connection with the distribution, Lucent assigned to us its rights to a number of patents, trademarks, copyrights, trade secrets and other intellectual
property directly related to and important to our business. In addition, Lucent and its subsidiaries have also granted rights and licenses to those of their patents, trademarks, copyrights, trade
secrets and other intellectual property which enable us to manufacture, market and sell all our products. Further, Lucent has conveyed to us numerous sublicenses under patents of third parties.

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We currently hold more than 1,700 U.S. patents and patent applications as a result of patents and patent applications assigned to us by Lucent in connection with the distribution,
together with patents issued and patent applications we have filed since the distribution and have obtained through acquisitions. In addition, we hold corresponding non-US patents and
patent applications, as well as numerous trademarks, both in the United States and in foreign countries. There are no time restrictions applicable to the patents assigned to us by Lucent. We have
entered into a cross license with Lucent in connection with these patents.

Our
intellectual property policy is to protect our products and processes by asserting our intellectual property rights where appropriate and prudent. We will also obtain patents,
copyrights, and other intellectual property rights used in connection with our business when practicable and appropriate.

Employees

As of September 30, 2002, we employed approximately 18,800 full-time employees, of which approximately 11,900 are management and
non-union-represented employees and approximately 6,700 are U.S. union-represented employees covered by collective bargaining agreements. On May 31, 1998 Lucent entered into
collective bargaining agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers. In connection with the distribution, we assumed the obligations
under the agreements with respect to our union-represented employees. Each agreement is effective until May 31, 2003 unless the parties reach a mutual agreement to amend its term. We believe
that we generally have a good relationship with our employees and the unions that represent them.

In
October 2000, we entered into an agreement with the unions representing our U.S. Services employees to offer eligible employees the ability to retire from Lucent as of
September 30, 2000 and continue working as on-call support service technicians at Avaya. The agreement was intended to give us the flexibility to match our workforce needs with our
customers' cyclical service demands for the design, installation and maintenance of their communications systems. This agreement is effective until May 31, 2003.

Backlog

Our backlog, which represents the aggregate of the sales price of orders received from customers, but not yet recognized as revenue, was approximately
$270 million and $320 million on September 30, 2002 and September 30, 2001, respectively. The majority of these orders are fulfilled within two months. However, all orders
are subject to possible rescheduling by customers. Although we believe that the orders included in the backlog are firm, some orders may be cancelled by the customer without penalty, and we may elect
to permit cancellation of orders without penalty where management believes it is in our best interests to do so.

Environmental, Health and Safety Matters

We are subject to a wide range of governmental requirements relating to employee safety and health and to the handling and emission into the environment of
various substances used in our operations. We are subject to certain provisions of environmental laws, particularly in the United States, governing the cleanup of soil and groundwater contamination.
Such provisions impose liability for the costs of investigating and remediating releases of hazardous materials at our currently or formerly owned or operated sites. In certain circumstances, this
liability may also include the cost of cleaning up historical contamination, whether or not caused by us. We are currently conducting investigation and/or cleanup of known contamination at
approximately seven of our facilities either voluntarily or pursuant to government directives. None of the sites is reasonably likely to generate environmental costs that will be individually
material. There are no known third parties who may be responsible for investigation and/or cleanup at these sites and therefore, for purposes of assessing the

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adequacy
of our financial reserves for these liabilities, we have not assumed that we will recover amounts from any third party, including under any insurance coverage or indemnification arrangement.
We do not separately track recurring costs of managing hazardous substances and pollutants in ongoing operations, but do not believe them to be material.

It
is often difficult to estimate the future impact of environmental matters, including potential liabilities. We have established financial reserves to cover environmental liabilities
where they are probable and reasonably estimable. Reserves for estimated losses from environmental matters are undiscounted and consist primarily of estimated remediation and monitoring costs and are,
depending on the site, based primarily upon internal or third-party environmental studies and the extent of contamination and the type of required cleanup. We are not aware of, and have not included
in our reserves any provision for, any unasserted environmental claims.

The
reliability and precision of estimates of our environmental costs may be affected by a variety of factors, including whether the remediation treatment will be effective,
contamination sources have been accurately identified and assumptions regarding the movement of contaminants are accurate. In
addition, estimates of environmental costs may be affected by changes in law and regulation, including the willingness of regulatory authorities to conclude that remediation and/or monitoring
performed by us is adequate.

We
assess the adequacy of our environmental reserves on a quarterly basis. During each of the fiscal years ended September 30, 2001 and 2002, no amounts were charged to the
Statement of Operations for environmental costs as reserves were deemed to be adequate. Expenditures for environmental matters for each of the fiscal years ended September 30, 2001 and 2002
were not material to our financial position, results of operations or cash flows. Payment for the environmental costs covered by the reserves may be made over a 30-year period. Although we
believe that our current reserves are adequate to cover known environmental liabilities, due to the uncertainties described above, there can be no assurance that the actual amount of environmental
liabilities will not exceed the amount of reserves for such matters or will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Relationship Between Lucent And Our Company After The Distribution

In connection with the distribution, we entered into a Contribution and Distribution Agreement and a number of ancillary agreements with Lucent for the purpose of
accomplishing the contribution to us of Lucent's enterprise networking business and the distribution. These agreements govern the relationship between Lucent and us subsequent to the distribution and
provide for the allocation of employee benefit, tax and other liabilities and obligations attributable to periods prior to the distribution.

In
addition, the current Federal Tax Allocation Agreement and the current State and Local Income Tax Allocation Agreement by and among Lucent and its subsidiaries governing the
allocation of income taxes among Lucent and its subsidiaries continues to apply to us for taxable periods prior to and including the distribution. The material agreements related to the distribution
are incorporated by reference as exhibits to this Annual Report on Form 10-K and the summaries of any such agreements set forth below are qualified in their entirety by reference to
the full text of such agreements.

Contribution and Distribution Agreement

The Contribution and Distribution Agreement sets forth the agreements between us and Lucent with respect to the principal corporate transactions required to
effect the distribution, and other agreements governing the relationship between Lucent and us.



To effect the contribution, Lucent transferred, or agreed to transfer, or to cause its subsidiaries to transfer, the assets of its enterprise networking
businesses. In general, we assumed, or agreed to

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assume,
and perform and fulfill all of the liabilities of the contributed businesses in accordance with their respective terms. Pursuant to the Contribution and Distribution Agreement, the
distribution was effected as of 11:59 p.m. on September 30, 2000.



The Contribution and Distribution Agreement provides for a full and complete release and discharge of all liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the date of the Contribution and Distribution
Agreement, between or among us or any of our subsidiaries or affiliates, on the one hand, and Lucent or any of its subsidiaries or affiliates other than us, on the other hand, except as expressly set
forth in the Contribution and Distribution Agreement.

We
have agreed to indemnify, hold harmless and defend Lucent, each of its affiliates and each of their respective directors, officers and employees, from and against certain liabilities
relating to, arising out of or resulting from the contribution and the distribution or any material breach by us of the Contribution and Distribution Agreement or any of the ancillary agreements.
Lucent has agreed to indemnify, hold harmless and defend us, each of our affiliates and each of our respective directors, officers and employees from and against all liabilities related to Lucent's
businesses other than the contributed businesses and any material breach by Lucent of the agreement or any of the ancillary agreements. Also, each party has indemnified the other party and its
affiliates, subject to limited exceptions, against any claims of patent, copyright or trademark infringement or trade secret misappropriation with respect to any product, software or other material
provided by or ordered from such party.



The Contribution and Distribution Agreement provides for liability sharing by us and Lucent with respect to contingenciesprimarily relating to our respective
businesses or otherwise assigned to each of us. The Contribution and Distribution Agreement requires Lucent to bear 50% of all losses in excess of
$50 million incurred by us in connection with a contingent liability primarily related to our businesses. In addition, we are required to bear 10% of all losses in excess of $50 million
incurred by Lucent in connection with a contingent liability primarily related to Lucent's businesses.

The
Contribution and Distribution Agreement also provides that we will bear 10% and Lucent will bear 90% of all losses incurred in connection with shared contingent liabilities, which
are defined as:



Lucent
will assume the defense of, and may seek to settle or compromise, any third party claim that is a shared contingent liability, and those costs and expenses will be included in the
amount to be shared by us and Lucent.

The
Contribution and Distribution Agreement provides that we and Lucent will have the exclusive right to any benefit received with respect to any contingent gain that primarily relates
to the business of, or that is expressly assigned to, us or Lucent, respectively.

Please
see "Legal Proceedings" for a description of certain matters involving Lucent for which we have assumed responsibility under the Contribution and Distribution Agreement.

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Subject to Lucent's ability to terminate some of the rights, including important intellectual property rights granted to us and our affiliates under the ancillary
agreements, the Contribution and Distribution Agreement provides that none of Lucent, us, or our respective subsidiaries or affiliates will have any duty to refrain from engaging in similar activities
or lines of business, or from doing business with any potential or actual supplier or customer of any other person.



The Contribution and Distribution Agreement provides, generally, for the grant by Lucent to us of a sublicense under numerous third-party intellectual property
license agreements. The Patent and Technology License agreement provides similar grants to us from Lucent's subsidiary, Lucent Technologies GRL Corporation, with respect to third party patent license
agreements executed by that subsidiary.



In the event that, at any time prior to the third anniversary of the distribution, there is a change of control of us as defined in the Contribution and
Distribution Agreement, then Lucent could terminate or cause us to reconvey some of the rights, including important intellectual property rights, granted to us under the Intellectual Property
Agreements.

Commercial Agreements

We and Lucent entered into a Global Purchase and Service Agreement, a General Sales Agreement, a Microelectronics Product Purchase Agreement, two Reseller
Agreements, a Master Subcontracting Agreement, a Master Services Agreement and an Original Equipment Manufacturing and Value Added Reseller Agreement. The pricing terms for the products and services
covered by the Global Purchase and Service Agreement and all other ancillary commercial agreements reflected current market prices at the time of the transaction. Each of these agreements commenced
October 1, 2000 and has a three-year term, subject to extension.

Intellectual Property Agreements

We entered into a series of agreements with Lucent pursuant to which Lucent transferred to us the primary trademarks used in the sale of our products and
services, except for Lucent's name and logo and the Bell Laboratories name; we and Lucent divided ownership of technology, patents, patent applications and non-U.S. counterparts between us
and Lucent; and we and Lucent granted cross-licenses to each other with respect to patents and technology.

Tax Sharing Agreement

We and Lucent entered into a Tax Sharing Agreement which governs Lucent's and our respective rights, responsibilities and obligations after the distribution with
respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes that are clearly attributable to the business of one party will be borne solely by
that party, and other pre-distribution taxes will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. In addition, the Tax Sharing Agreement addresses the
allocation of liability for taxes that are incurred as a result of restructuring activities undertaken to implement the distribution. If the distribution fails to qualify as a tax-free
distribution under Section 355 of the Internal Revenue Code because of an acquisition of our stock or assets, or some other actions of ours, then we will be solely liable for any resulting
corporate taxes.

Forward Looking Statements

(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

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Our
disclosure and analysis in this report and in our 2002 Annual Report to Shareholders contain some forward-looking statements. Forward-looking statements give our current expectations
or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may
provide oral or written forward-looking statements in other materials we release to the public.

Any
or all of our forward-looking statements in this report, in the 2002 Annual Report to Shareholders and in any other public statements we makemay turn out to
be wrong. They can be affected by
inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary materially.

Except
as may be required under the federal securities laws, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q and 8-K reports to the SEC. Also note that
we provide the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our businesses. These are factors that we think could cause our actual results to
differ materially from expected and historical results. Other factors besides those listed here could also adversely affect us. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.

The
risks and uncertainties referred to above include, but are not limited to:



The
categorization of risks set forth below is meant to help you better understand the risks facing our business and are not intended to limit your consideration of the possible effects
of these risks to the listed categories. Any adverse effects related to the risks discussed below may, and likely will, adversely affect many aspects of our business.



Our revenue has declined significantly during the past several quarters and if business capital spending, particularly for enterprise
communications products, applications and services, does not improve or deteriorates, our revenue may continue to decline and our operating results may be adversely affected.

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Our
revenue for the quarter ended September 30, 2002 was $1,152 million, a decrease of 20.1%, or $290 million, from $1,442 million for the quarter ended
September 30, 2001, a sequential decrease of 5.5%, or $67 million, from $1,219 million for the quarter ended June 30, 2002, and a decrease of 9.9%, or $127 million,
from $1,279 for the quarter ended March 31, 2002.

Our
operating results are significantly affected by the impact of economic conditions on the willingness of enterprises to make capital investments, particularly in enterprise
communications technology and related services. Although general economic conditions have shown some signs of improvement recently, we have seen a continued decline in spending on enterprise
communications technology and services by our customers. We believe that enterprises continue to be concerned about their ability to increase revenues and thereby increase their profitability.
Accordingly, they have tried to maintain or improve profitability through cost reduction and reduced capital spending. Because we do not believe that enterprise communications spending will improve
significantly in the near term, we expect continued pressure on our ability to generate revenue.

To
the extent that enterprise communications spending does not improve or deteriorates, our revenue and operating results will continue to be adversely affected and we may not be able to
comply with the financial covenants included in our credit facility.

Revenue generated by our traditional business, enterprise voice communications systems, has been declining for the last several years and if we do not
successfully implement our strategy to expand our sales in market segments with higher growth rates, our revenue and operating results may continue to be adversely affected.

We
have been experiencing declines in revenue from our traditional business, enterprise voice communications systems. We expect, based on various industry reports, a low growth rate or
no growth in the future in the market segments for these traditional systems. We are implementing a strategy to capitalize on the higher growth opportunities in our market, including converged voice
and data network products, customer relationship management applications and unified communication applications. This strategy requires us to make a significant change in the direction and operations
of our company to focus on the development and sales of these products and applications.

Our
traditional enterprise voice communications systems and the advanced communications products and applications described above are a part of our Converged Systems and Applications and
Small and Medium Business Solutions segments. If we are unsuccessful in implementing our strategy, the contribution to our results from these segments may decline, reducing our overall operating
results and thereby requiring a greater need for external capital resources and our Services segment may be adversely affected to the extent that Services revenues are related to sales of these
products and applications.

We are significantly changing the focus of our company in order to concentrate on the development and marketing of advanced communications products and
applications, including converged voice and data network products, and this change in focus may not be successful or may adversely affect our business.

We
are making a significant change in the direction and strategy of our company to focus on the development and sales of converged voice and data networks and other advanced
communications products and applications. In order to implement this change, we must:



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If
we do not successfully implement this change in focus, our operating results may be adversely affected. However, even if we successfully address these challenges, our operating
results may still be adversely affected if the market opportunity for advanced communications products and applications, including converged voice and data network products, does not develop in the
ways that we anticipate. Because this market opportunity is in its early stages, we cannot predict whether:



The
recent introduction of new IP telephony products demonstrates some of the risks associated with entering new markets or introducing new technologies. According to a recent industry
study, shipments of IP telephony products dropped sequentially for the first time in the first calendar quarter of 2002. Some industry analysts have indicated that the recent introduction of the next
generation of our ECLIPS portfolio of IP hardware and software may have caused many enterprises who were
considering implementing IP telephony systems to reconsider their deployment plans while they evaluate our ECLIPS announcement as well a subsequent product announcement from a key competitor.



Our cash needs include making payments on and refinancing our indebtedness and funding working capital, capital expenditures, strategic acquisitions, business
restructuring charges related expenses, employee benefit obligations and for general corporate purposes. Our ability to satisfy our cash needs depends on our ability to generate cash from operations
and access the financial markets, both of which are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Our
ability to generate cash from operations is affected by the terms of our credit agreement, the indenture governing our LYONs, and the indenture governing our Senior Secured Notes.
These instruments impose, and any future indebtedness may impose, various restrictions and covenants, including financial covenants, that may limit our ability to respond to market conditions, provide
for unanticipated capital investments, make strategic acquisitions or take advantage of business opportunities.

If
we do not generate sufficient cash from operations, we will need to access the financial markets. External financing may not be available to us on acceptable terms or at all. Under
the terms of any external financing, we may incur higher than expected financing expenses, and become subject to additional restrictions and covenants. In addition, our ability to obtain external
financing is affected by the terms of our debt agreements. Our existing debt agreements include covenants that limit our ability to incur additional indebtedness. In addition, our credit facility
requires us to comply with certain financial covenants. We have in the past been required to seek amendments of our credit facilities in order to ensure our compliance with the financial covenants. If
we are unable to comply with our financial covenants and cannot amend or waive those covenants, an event of default under the credit facility would occur. If a default occurs, the lenders under our
credit facility could accelerate the maturity of our debt obligations and terminate their commitments to lend to us. If such a default occurs when our debt obligations under the credit facility exceed
$100 million, our debt obligations in respect of the $200 million interest rate swaps, the LYONs and the Senior Secured Notes could be

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accelerated.
In addition, although we currently have a $561 million five-year credit facility, the terms of the facility require mandatory commitment reductions over the remaining
term of the facility and additional commitment reductions upon the issuance of debt, sales of assets or repurchase or redemption of the LYONs, thereby reducing our available liquidity. Currently there
are no funds drawn under our credit facility.

Our
ability to obtain external financing and, in particular, debt financing, is also affected by our debt ratings, which are periodically reviewed by the major credit rating agencies.
Our corporate credit is rated BB- and our long-term senior unsecured debt is rated B by Standard & Poor's, each with a negative outlook, and our long-term
senior unsecured debt is rated B3 by Moody's with a negative outlook. Any increase in our level of indebtedness or deterioration of our operating results may cause a further reduction in our current
debt ratings. These downgrades, among other factors, could impair our ability to secure additional financing on acceptable terms, and we cannot assure you that we will be successful in raising any of
the new financing on acceptable terms.

Holders of our common stock could experience substantial dilution if holders of our LYONs require us to repurchase a significant portion of our LYONs in
October 2004.

Holders
of our LYONs may require us to purchase all or a portion of their LYONs on October 31, 2004, 2006 and 2011 at a price equal to the sum of the issue price and accrued
original issue discount on the LYONs as of the applicable purchase date. Under the terms of the indenture governing the LYONs, we may, at our option, elect to pay the purchase price in cash or,
subject to certain conditions, in shares of common stock or any combination of cash and common stock, although our existing credit facility prohibits us from using more than $100 million to
redeem or repurchase the LYONs. If the trading price of our common stock does not improve or deteriorates and we pay a substantial portion of the purchase price of any LYONs we are required to
purchase in October 2004 in shares of our common stock, our stockholders could may suffer significant dilution.

The value of the assets in our pension plans has decreased significantly in fiscal 2002 and as a result, we will likely incur additional expense and funding
obligations that may have an adverse effect on our financial position, results of operations and cash flows.

The
recent decline in the global equity markets has resulted in a decrease in the value of the assets in our pension plans. This decline will likely adversely affect our related
accounting results in future periods through higher pension expense, additional minimum liabilities with corresponding reductions in stockholders' equity, and increased cash funding requirements.
Based on the value of the assets in our pension plans as of January 1, 2002, we will be required to fund approximately $45 million to the plans in fiscal 2003. We estimate that for
fiscal 2004, we will be required to fund more than $45 million to our pension plans.

Our largest dealer may not be able to satisfy in full its obligations to us under a short-term line of credit.

As
of September 30, 2002, Expanets Inc., currently our largest dealer, owed us approximately $35 million under a short-term line of credit we provided to
Expanets in 2001. The remaining balance under the line of credit was originally due on December 31, 2002 and under the terms of the related credit agreement, may be offset by certain
obligations we have to Expanets related to the March 2000 sale of our primary distribution function for voice communications systems for small and medium-sized enterprises to Expanets. We have
had, and continue to have, discussions with Expanets regarding operational issues related to the March 2000 sale. Although these issues are unrelated to Expanets' and Northwestern's obligations under
the credit agreement, because of the importance to us of our relationship with Expanets and the customer base served by Expanets, in December 2002, we agreed to extend the term of the credit agreement
to February 2003.

Outstanding
amounts under the line of credit are secured by Expanets' accounts receivable and inventory. In addition, Expanets' parent company, NorthWestern Corporation, has guaranteed
up to $50 million of Expanets' obligations under the credit agreement. A default by NorthWestern of its

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guarantee
obligations under the credit agreement would constitute a default under Expanets' dealer agreement with Avaya, resulting in a termination of the non-competition provisions
contained in such agreement and permitting us to sell products to Expanets' customers.

There
can be no assurance that Expanets will be able to comply with the remaining terms of the credit agreement. In the event Expanets is unable to comply with the terms of the credit
agreement and a default occurs, it may be costly and time consuming to exercise the remedies available to us. We cannot assure you that the exercise of such remedies will yield an amount sufficient to
satisfy in full all of Expanets' obligations to us.



Disruption of, or changes in the mix of, our product distribution model or customer base could affect our revenues and gross
margins.

If
we fail to manage distribution of our products and services properly, or if our distributors' financial condition or operations weaken, our revenues and gross margins could be
adversely affected. Furthermore, a change in mix of direct sales and indirect sales could adversely affect our revenues and gross margins.

We
use a variety of channels to bring our products to customers, including direct sales, distributors, dealers, value-added resellers and system integrators. Since each distribution
channel has a distinct profile, the failure to achieve the most advantageous balance in the delivery model for our products and services could adversely affect our gross margins and operating results.

We
must manage inventory effectively, particularly with respect to sales to distributors. Distributors may increase orders during periods of product shortages, cancel orders if their
inventory is too high, or delay orders in anticipation of new products. Distributors also may adjust their orders in response to the supply of our products and the products of our competitors that are
available to the distributor and to seasonal fluctuations in end-user demand. If we have excess inventory, we may have to reduce our prices and write down inventory, which in turn could
result in lower gross margins. In addition, if sales through indirect channels increase, this may lead to greater difficulty in forecasting the mix of our products, and to a certain degree, the timing
of orders from our customers.

Changes in effective tax rates or the recording of increased deferred tax asset valuation allowances in the future could affect our operating
results.

Our
effective tax rates in the future could be adversely affected by earnings being lower or losses being higher than anticipated in countries where we have tax rates that are lower than
the U.S. statutory rate and earnings being higher or losses lower than anticipated in countries where we have tax rates that are higher than the U.S. statutory tax rate, changes in our net deferred
tax assets valuation allowance, or by changes in tax laws or interpretations thereof.

For
example, during fiscal 2002 our effective tax rate was adversely effected by an unfavorable geographic distribution of earnings and losses and we recorded an increase in our net
deferred tax assets valuation allowance of $364 million. If the geographic distribution of our earnings and losses continues to be unfavorable in the future, our effective tax rate could be
adversely affected. In addition, based on our assessment of our deferred tax assets, we determined, based on certain available tax planning strategies, that $532 million of our deferred tax
assets will more likely than not be realized in the future and no valuation allowance is currently required for this portion of our deferred tax assets. Should we determine in the future that it is no
longer more likely than not that these assets will be realized, we will be required to record an additional valuation allowance in connection with these deferred tax assets and our operating results
would be adversely affected in the period such determination is made.

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We have restructured our business to respond to industry and market conditions, however, the assumptions underlying our restructuring
efforts may prove to be inaccurate and we may have to restructure our business again in the future.

In
response to changes in industry and market conditions, we have restructured our business in the past, are currently restructuring our business and may again restructure our business
in the future to achieve certain cost savings and to strategically realign our resources. We have based our restructuring plans on certain assumptions regarding the cost structure of our business and
the nature, severity and duration of the current slowdown in enterprise communications technology spending which may not prove to be accurate. We will continue to assess our cost structure and
restructuring efforts based on an ongoing assessment of industry conditions.

Our
restructuring initiatives may not be sufficient to meet the changes in industry and market conditions, and such conditions may continue to deteriorate or last longer than we expect.
In addition, we may not be able to successfully implement our restructuring initiatives and may be required to refine, expand or extend our restructuring initiatives, which may result in additional
charges. Furthermore, our workforce reductions may impair our ability to realize our current or future business objectives. Lastly, costs incurred in connection with restructuring actions may be
higher than the estimated costs of such actions and/or may not lead to the anticipated cost savings. As a result, our restructuring efforts may not result in our return to profitability within the
currently expected timeframe.

Our collective bargaining agreements expire during fiscal 2003 and the renegotiation of these agreements may adversely affect our operating
results.

Our
collective bargaining agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers and the labor agreement related to our variable
Services workforce each expire on May 31, 2003. If we are unsuccessful in renegotiating new labor agreements, our operations may be disrupted and our operating results may be adversely
affected. Even if we successfully renegotiate these agreements, the terms of any new agreements may be less favorable than our current labor agreements, thereby adversely affecting our operating
results.

We depend on contract manufacturers to produce most of our products and if these manufacturers are unable to fill our orders on a timely and reliable basis, we
will likely be unable to deliver our products to meet customer orders or satisfy their requirements.

We
have outsourced all of the manufacturing operations related to our Converged Systems and Applications and Small and Medium Business Solutions. Substantially all of these operations
have been outsourced to Celestica Inc. Our ability to realize the intended benefits of our manufacturing outsourcing initiative will depend on the willingness and ability of Celestica and our other
contract manufacturers to produce our products. We may experience significant disruption to our operations by outsourcing so much of our manufacturing. If Celestica or the other contract manufacturers
terminates its relationship with us or is unable to fill our orders on a timely basis, we may be unable to deliver our products to meet our customers' orders, which could delay or decrease our revenue
or otherwise have an adverse effect on our operations.

The termination of strategic alliances or the failure to form additional strategic alliances could limit our access to customers and harm our reputation with
customers.

Our
strategic alliances are important to our success because they provide us the ability to offer comprehensive advanced communications products and applications, reach a broader
customer base and strengthen brand awareness. We may not be successful in creating new strategic alliances on acceptable terms or at all. In addition, most of our current strategic alliances can be
terminated under various circumstances, some of which may be beyond our control. Further, our alliances are generally non-exclusive, which means our partners may develop alliances with
some of our competitors. We may rely more on strategic alliances in the future, which would increase the risk to our business of losing these alliances.

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If we are unable to protect our proprietary rights, our business and future prospects may be harmed.

Although
we attempt to protect our intellectual property through patents, trademarks, trade secrets, copyrights, confidentiality and nondisclosure agreements and other measures,
intellectual property is difficult to protect and these measures may not provide adequate protection for our proprietary rights. Patent filings by third parties, whether made before or after the date
of our filings, could render our intellectual property less valuable. Competitors may misappropriate our intellectual property, disputes as to ownership of intellectual property may arise and our
intellectual property may otherwise become known or independently developed by competitors. The failure to protect our intellectual property could seriously harm our business and future prospects
because we believe that developing new products and technology that are unique to us is critical to our success. If we do not obtain sufficient international protection for our intellectual property,
our competitiveness in international markets could be significantly impaired, which would limit our growth and future revenue.



We may incur liabilities as a result of our obligation to indemnify, and to share certain liabilities with, Lucent
Technologies Inc. in connection with our spin-off from Lucent in September 2000.

Pursuant
to the contribution and distribution agreement we entered into with Lucent in connection with our spin-off from Lucent on September 30, 2000, Lucent
contributed to us substantially all of the assets, liabilities and operations associated with its enterprise networking businesses and distributed all of the outstanding shares of our common stock to
its stockholders. The contribution and distribution agreement, among other things, provides that, in general, we will indemnify Lucent for all liabilities including certain
pre-distribution tax obligations of Lucent relating to our businesses and all contingent liabilities primarily relating to our businesses or otherwise assigned to us. In addition, the
contribution and distribution agreement provides that certain contingent liabilities not directly identifiable with one of the parties will be shared in the proportion of 90% by Lucent and 10% by us.
The contribution and distribution agreement also provides that contingent liabilities in excess of $50 million that are primarily related to Lucent's businesses shall be borne 90% by Lucent and
10% by us and contingent liabilities in excess of $50 million that are primarily related to our businesses shall be borne equally by the parties.

Please
see "Legal Proceedings" for a description of certain matters involving Lucent for which we have assumed responsibility under the contribution and distribution agreement and a
description of other matters for which we may be obligated to indemnify or share the cost with Lucent. We cannot assure you we will not have to make indemnification or other cost sharing payments to
Lucent in connection with these matters or that Lucent will not submit a claim for indemnification or cost sharing to us in connection with any future matter. In addition, our ability to assess the
impact of matters for which we may have to indemnify or share the cost with Lucent is made more difficult by the fact that we do not control the defense of these matters.

We may be subject to litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products or
services.

We
cannot assure you that others will not claim that our proprietary or licensed products, systems and software are infringing their intellectual property rights or that we do not in
fact infringe those intellectual property rights. We may be unaware of intellectual property rights of others that may cover some of our technology. If someone claimed that our proprietary or licensed
systems and software infringed their intellectual property rights, any resulting litigation could be costly and time consuming and would divert the attention of management and key personnel from other
business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement also might require
us to enter into costly royalty or license agreements. However, we may be unable to obtain royalty or license agreements on

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terms
acceptable to us or at all. We also may be subject to significant damages or an injunction against use of our proprietary or licensed systems. A successful claim of patent or other intellectual
property infringement against us could materially adversely affect our operating results.

In
addition, third parties may claim that a customer's use of our product's, systems or software infringes the third party's intellectual property rights. Under certain circumstances, we
may be required to indemnify our customers for some of the costs and damages related to such an infringement claim. Any indemnification requirement could have a material adverse effect on our business
and our operating results.

Please
see "Legal Proceedings" for a description of patent infringement indemnification claims made by three customers of our managed services business.

If the distribution does not qualify for tax-free treatment, we could be required to pay Lucent or the Internal Revenue Service a substantial amount
of money.

Lucent
has received a private letter ruling from the Internal Revenue Service stating, based on certain assumptions and representations, that the distribution would not be taxable to
Lucent. Nevertheless, Lucent could incur significant tax liability if the distribution did not qualify for tax-free treatment because any of those assumptions or representations were not
correct.

Although
any U.S. federal income taxes imposed in connection with the distribution generally would be imposed on Lucent, we could be liable for all or a portion of any taxes owed for the
reasons described below. First, as part of the distribution, we and Lucent entered into a tax sharing agreement. This agreement generally allocates between Lucent and us the taxes and liabilities
relating to the failure of the distribution to be tax-free. Under the tax sharing agreement, if the distribution fails to qualify as a tax-free distribution to Lucent under
Section 355 of the Internal Revenue Code because of an issuance or an acquisition of our stock or an acquisition of our assets, or some other actions of ours, then we will be solely liable for
any resulting taxes to Lucent.

Second,
aside from the tax sharing agreement, under U.S. federal income tax laws, we and Lucent are jointly and severally liable for Lucent's U.S. federal income taxes resulting from the
distribution being taxable. This means that even if we do not have to indemnify Lucent under the tax sharing agreement, we may still be liable to the Internal Revenue Service for all or part of these
taxes if Lucent fails to pay them. These liabilities of Lucent could arise from actions taken by Lucent over which we have no control, including an issuance or acquisition of stock (or acquisition of
assets) of Lucent.

Item 2.Properties.

As of September 30, 2002, we operated three manufacturing facilities and one warehouse location in the United States and three other countries. We also
have 557 offices located in 52 countries and twelve research and development facilities located in Australia, India, Israel, France, Singapore, the United Kingdom and the United States. Our principal
manufacturing facilities are located in Australia, Ireland and the United States. We also have a 25.5% interest in a joint venture located in Gandhinagar, India and a 60% interest in a joint venture
in China. Both of these joint ventures are predominantly used as manufacturing sites and are mostly on owned property. Our facilities have aggregate floor space of approximately 11.5 million
square feet, of which approximately 4.5 million square feet is owned and approximately 7.0 million square feet is leased. Our lease terms range from monthly leases to 17 years. We
believe that all of our facilities and equipment are in good condition and are well maintained and able to operate at present levels.

Item 3.Legal Proceedings.

From time to time we are involved in legal proceedings arising in the ordinary course of business. Other than as described below, we believe there is no
litigation pending against us that could have,

24

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individually
or in the aggregate, a material adverse effect on our financial position, results of operations or cash flows.



Three separate purported class action lawsuits are pending against Lucent, one in state court in West Virginia, one in federal court in the Southern District of
New York and another in federal court in the Southern District of California. The case in New York was filed in January 1999 and, after being dismissed, was refiled in September 2000.
The case in West Virginia was filed in April 1999 and the case in California was filed in June 1999, and amended in 2000 to include Avaya as a defendant. We may also be named a party to
the other actions and, in any event, have assumed the obligations of Lucent for all of these cases under the Contribution and Distribution Agreement. All three actions are based upon claims that
Lucent sold products that were not Year 2000 compliant, meaning that the products were designed and developed without considering the possible impact of the change in the calendar from
December 31, 1999 to January 1, 2000. The complaints allege that the sale of these products violated statutory consumer protection laws and constituted breaches of implied warranties.

A
class has recently been certified in the West Virginia state court matter. The certified class in the West Virginia action includes those persons or entities that purchased, leased or
financed the products in question. In addition, the court also certified as a subclass all class members who had service protection plans or other service or extended warranty contracts with Lucent in
effect as of April 1, 1998, as to which Lucent failed to offer a Year 2000-compliant solution. The federal court in the New York action has issued a decision and order denying class
certification, dismissing all but certain fraud claims by one representative plaintiff. No class claims remain in the case at this time. The federal court in the California action has issued an
opinion and order granting class certification on a provisional basis, pending submission by plaintiffs of certain proof requirements mandated by the Y2K Act. The class includes any entities that
purchased or leased certain products on or after January 1, 1990, excluding those entities who did not have a New Jersey choice of law provision in their contracts and those who did not
purchase equipment directly from the defendants. The complaints seek, among other remedies, compensatory damages, punitive damages and counsel fees in amounts that have not yet been specified. At this
time, we cannot determine whether that the outcome of these actions will have a material adverse effect on our financial position, results of operations or cash flows. In addition, if these cases are
not resolved in a timely manner, they will require expenditure of significant legal costs related to their defense.



In November 2000, three purported class actions were filed against Lucent in the Federal District Court for the District of New Jersey alleging violations
of the federal securities laws as a result of the facts disclosed in Lucent's announcement on November 21, 2000 that it had identified a revenue recognition issue affecting its financial
results for the fourth quarter of fiscal 2000. The actions purport to be filed on behalf of purchasers of Lucent common stock during the period from October 10, 2000 (the date Lucent originally
reported these financial results) through November 21, 2000.

The
above actions have been consolidated with other purported class actions filed against Lucent on behalf of its stockholders in January 2000 and are pending in the Federal
District Court for the District of New Jersey. We understand that Lucent's motion to dismiss the Fifth Consolidated Amended and Supplemental Class Action Complaint in the consolidated action was
denied by the court in June 2002. As a result of the denial of its motion to dismiss, we understand that Lucent has filed a motion for partial summary judgment, seeking a dismissal of a portion
of the Fifth Consolidated Amended and Supplemental Class Action Complaint. The plaintiffs allege that they were injured by reason of certain alleged false and misleading statements made by Lucent in
violation of the federal securities laws. The consolidated cases were initially filed on behalf of stockholders of Lucent who bought Lucent common stock between October 26, 1999 and
January 6, 2000, but the consolidated

25

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complaint
was amended to include purported class members who purchased Lucent common stock up to December 20, 2000. A class has not yet been certified in the consolidated actions. The
plaintiffs in all these stockholder class actions seek compensatory damages plus interest and attorneys' fees.

We
understand that the federal district court in New Jersey has issued orders staying all securities actions, as well as those related to the securities cases, so the parties may discuss
a potential global settlement of claims. We also understand that the parties have had preliminary meetings to discuss settlement of these cases.

Any
liability incurred by Lucent in connection with these stockholder class action lawsuits may be deemed a shared contingent liability under the Contribution and Distribution Agreement
and, as a result, we would be responsible for 10% of any such liability, including 10% of the legal costs associated with the portion of the obligation for which we share liability. All of these
actions are still in the relatively early stages of litigation and an outcome cannot be predicted and, as a result, we cannot assure you that these cases will not have a material adverse effect on our
financial position, results of operations or cash flows.



In March 2001, Voxem, Inc. made formal demand for alleged royalty payments which it claims we owe as a result of a contract between the licensor and our
predecessors, initially entered into in 1995, and renewed in 1997. The contract provides for mediation of disputes followed by binding arbitration if the mediation does not resolve the dispute. The
licensor claims that we owe royalty payments for software integrated into certain of our products. The licensor also alleges that we have breached the governing contract by not honoring a right of
first refusal related to development of fax software for next generation products. This matter is currently in arbitration. At this point, an outcome in the arbitration proceeding cannot be predicted
and, as a result, there can be no assurance that this case will not have a material adverse effect on our financial position, results of operations or cash flows.



In January 2002, a complaint was filed in the Court of Chancery of the State of Delaware against us seeking to enjoin us from effectuating a reverse stock
split followed by a forward stock split described in our proxy statement for our 2002 Annual Meeting of Shareholders held on February 26, 2002. At the annual meeting, we obtained the approval
of our shareholders of each of three alternative transactions:



The
complaint alleges, among other things, that the manner in which we plan to implement the transactions, as described in our proxy statement, violates certain aspects of Delaware law
with regard to the treatment of fractional shares and the proposed method of valuing the fractional interests, and further, that the description of the proposed transactions in the proxy statement is
misleading to the extent it reflects such violations. The action purports to be a class action on behalf of all holders of less than 50 shares of our common stock. The plaintiff is seeking, among
other things, damages as well as injunctive relief enjoining us from effecting the transactions and requiring us to make corrective, supplemental disclosure. In June 2002, the court denied the
plaintiff's motion for summary judgment and granted our cross-motion for summary judgment. The plaintiff has appealed the Chancery Court's decision to the Delaware Supreme Court and, in
November 2002, the Delaware Supreme Court affirmed the lower court's ruling in our favor. Subsequently, the plaintiff filed a motion for re-hearing

26

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by
the Delaware Supreme Court, arguing that the court misapplied the law concerning fractional "shares" versus fractional "interests" to the facts of the case. We have filed our response to the
plaintiff's motion with the Delaware Supreme Court and await its ruling. We cannot provide assurance that this lawsuit will not impair our ability to implement any of the transactions.

In
April 2002, a complaint was filed against us in the Superior Court of New Jersey, Somerset County, in connection with the reverse/forward stock splits described above. The
action purports to be a class action on behalf of all holders of less than 50 shares of our common stock. The plaintiff is seeking, among other things, injunctive relief enjoining us from effecting
the transactions. In recognition of the then pending action in the Delaware Court of Chancery, the plaintiff voluntarily dismissed his complaint without prejudice, pending the outcome of the Delaware
action.



In July 2002, Communications Development Corporation, a British Virgin Islands Corporation, made formal demand for arbitration for alleged unpaid
commissions in an amount in excess of $10 million, stemming from the sale of products from our businesses that were formerly owned by Lucent involving the Ministry of Russian Railways. The
plaintiff alleges that as a result of agreements entered into between plaintiff and Avaya, it is owed commissions on sales by us to the Ministry of Russian Railways on a continuing basis. We believe
that the agreements relating to their claim have expired or do not apply to the products in question. As the sales of products continue, Communications Development Corporation may likely increase its
commission demand. This matter is currently proceeding to arbitration. The matter is in the early stages and an outcome in the arbitration proceeding cannot be predicted. As a result, there can be no
assurance that this case will not have a material adverse effect on our financial position, results of operations or cash flows.



In several class action cases (the first of which was filed on June 24, 1996), plaintiffs claim that AT&T and Lucent engaged in fraud and deceit in
continuing to lease residential telephones to consumers without adequate notice that the consumers would pay well in excess of the purchase price of a telephone by continuing to lease. The cases were
removed and consolidated in federal court in Alabama, and were subsequently remanded to their respective state courts (Illinois, Alabama, New Jersey, New York and California). In July 2001, the
Illinois state court certified a nationwide class of plaintiffs. The case in Illinois was scheduled for trial on August 5, 2002. Prior to commencement of trial, however, we had been advised
that the parties agreed to a settlement of the claims on a class-wide basis. The settlement was approved by the court on November 4, 2002. Claims from class members must be filed on
or about January 15, 2003.

Any
liability incurred by Lucent in connection with these class action cases will be considered an exclusive Lucent liability under the Contribution and Distribution Agreement between
Lucent and us and, as a result, we are responsible for 10% of any such liability in excess of $50 million. The amount for which we may be responsible will not be finally determined until the
class claims period expires.



A patent owner has sued three customers of our managed services business for alleged infringement of a single patent based on the customers' voicemail service.
These customers' voicemail service offerings are partially or wholly provided by our managed services business. As a consequence, these customers are requesting defense and indemnification from us in
the lawsuits under their managed services contracts. This matter is in the early stages and we cannot yet determine whether the outcome of this matter will have a material adverse effect on its
financial position, results of operations and cash flows.

27

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

During
the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K, no matter was submitted to a vote of security-holders.

PART II

Item 5.Market For Registrant's Common Equity and Related Stockholder Matters.

Information required by this item is incorporated by reference from Note 19 to the Consolidated Financial Statements on page 74 of our 2002 Annual Report.

Item 6.Selected Financial Data.

Information
required by this item is incorporated by reference fromSelected Financial Dataon page 17 of our 2002 Annual Report.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.

Information
required by this item is incorporated by reference fromManagement's Discussion and Analysis of Financial Condition and Results of
Operationson pages 18 through 41 of our 2002 Annual Report.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

Information required by this item is incorporated by reference from the discussion under the heading"Financial
Instruments"inManagement's Discussion and Analysis of Financial Condition and Results of Operationson pages 37 through 39 of
our 2002 Annual Report.

Item 8.Financial Statements and Supplementary Data.

Information required by this item is incorporated by reference from theReport of Independent Accountantson page
42 of our 2002 Annual Report and from our consolidated financial statements and related notes on pages 43 through 75 of our 2002 Annual Report.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10.Directors and Executive Officers of the Registrant.

The following table sets forth information as to persons who serve as our executive officers.

|Name                  |  | Age |  | Position                                                         
|--------------------- |  | --- |  | -----------------------------------------------------------------
|Donald K. Peterson    |  | 53  |  | Chairman and Chief Executive Officer                             
|Stephan Clark         |  | 49  |  | Group Vice President, Connectivity Solutions                     
|Pamela F. Craven      |  | 49  |  | Senior Vice President, General Counsel and Secretary             
|Louis J. D'Ambrosio   |  | 38  |  | Group Vice President, Worldwide Services                         
|Michael A. Dennis     |  | 44  |  | Senior Vice President, Services Strategy and Business Development
|Maryanne DiMarzo      |  | 51  |  | Senior Vice President, Human Resources                           
|David P. Johnson      |  | 42  |  | Group Vice President, Small and Medium Business Solutions        
|Garry K. McGuire, Sr. |  | 56  |  | Chief Financial Officer and Senior Vice President, Operations    
|                      |  |     |  |                                                                  

28

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|Michael Thurk |  | 50 |  | Group Vice President, Converged Systems and Applications
|------------- |  | -- |  | --------------------------------------------------------

Information
about our Directors, including Mr. Peterson, is incorporated by reference from the discussion under Proposal 1 set forth in our Proxy Statement for the 2003 Annual
Meeting of Shareholders.

Stephan Clarkhas been our Group Vice President, Connectivity Solutions since August 1, 2002. From September 30, 2000 until
July 31, 2002, Mr. Clark was our Vice President, Connectivity Solutions. From January 2000 until September 30, 2000, he was responsible for global management of Lucent
Technologies Inc.'s ("Lucent") Connectivity Solutions business. From 1994 to 1999, Mr. Clark served as Sales and Marketing Vice President for Lucent's Power Systems business.

Pamela F. Cravenhas been our Senior Vice President, General Counsel and Secretary since August 1, 2002. From September 30,
2000 until July 31, 2002, Mrs. Craven was our Vice President, General Counsel and Secretary. Mrs. Craven was a director of Avaya from its inception until September 30, 2000
and was Vice President, General Counsel and Secretary of Lucent Technologies Inc.'s ("Lucent") Enterprise Networks Group from March 2000 until September 30, 2000.
Mrs. Craven served as Vice President, Law for Lucent from November 1995 to April 2000 and was also Secretary of Lucent from February 1, 1999 until April 2000.

Louis J. D'Ambrosiohas been our Group Vice President, Worldwide Services, since December 19, 2002. Prior to December 19,
2002, Mr. D'Ambrosio served in a number of executive positions with International Business Machines Corporation, including most recently as Vice President of Worldwide, Sales and Global
Operations-Software Business. Mr. D'Ambrosio joined IBM in 1985.

Michael A. Dennishas been our Senior Vice President, Services Strategy and Business Development since December 19, 2002. From
August 1, 2002 through December 18, 2002, Mr. Dennis was our Group Vice President, Worldwide Services. Mr. Dennis was our Vice President of Worldwide Operations and
Services from September 30, 2000 until July 31, 2002. Mr. Dennis was Vice President of U.S. Services for Lucent Technologies Inc.'s ("Lucent") Enterprise Networks Group
from April 2000 until September 30, 2000. He joined AT&T Corp. in July 1981 and moved to Lucent following its spin-off in 1996. Mr. Dennis has held various
positions at Lucent including Sales Vice President and Field Services Vice President.

Maryanne DiMarzohas been our Senior Vice President, Human Resources since August 1, 2002. Ms. DiMarzo was our Vice
President, Human Resources from September 30, 2000 until June 30, 2002. Ms. DiMarzo was Vice President, Human Resources, for Lucent Technologies Inc.'s ("Lucent")
Enterprise Networks Group from April 2000 until September 30, 2000. From 1997 until March 200,
Ms. DiMarzo was Human Resources Vice Presidentof the Corporate Centers at Lucent.

David P. Johnsonhas been our Group Vice President, Small and Medium Business Solutions since August 1, 2002. Mr. Johnson
was our Vice President of Worldwide Sales from September 30, 2000 until July 31, 2002. Mr. Johnson was Vice President of Worldwide Sales for Lucent Technologies Inc.'s
("Lucent") Enterprise Networks Group from April 2000 until September 30, 2000. He joined AT&T Corp. in 1982 and moved to Lucent following its spin-off in 1996.
Mr. Johnson has held various positions at Lucent, including International President of Enterprise Networks and Regional President of Asia/Pacific Region.

Garry K. McGuire, Sr.has been our Chief Financial Officer since September 30, 2000 and our Senior Vice President, Operations,
since January 1, 2002. Mr. McGuire was Chief Financial Officer for Lucent Technologies Inc.'s ("Lucent") Enterprise Networks Group from May 2000 until September 30,
2000. Mr. McGuire was a consultant to Kleiner, Perkins, Caufield and Byers/Broadband Office from August 1999 to December 1999. He was President and Chief Executive Officer of
Williams

29

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Communications
Solutions, LLC, from April 1997 to July 1999, and was President of Nortel Communications Systems, LLC ("Nortel"), from September 1995 until April 1997.

Michael Thurkhas been our Group Vice President, Converged Systems and Applications since August 1, 2002. Mr. Thurk was our
GroupVice President, Systems, from January 2002 until July 31, 2002. From June 1998 until December 2001, Mr. Thurk held various positions at Ericsson
Datacom Inc., including President and Executive Vice President, Division Data Backbone and Optical Networks. Mr. Thurk was President of Xyplex Networks from June 1996 until
June 1998.

Item 11.Executive Compensation

Information required by this item is incorporated by reference from the discussion under the headingExecutive Compensation and Other
Informationin our Proxy Statement for the 2003 Annual Meeting of Shareholders.

Item 12.Security Ownership of Certain Beneficial Owners and Management.

Information required by this item is incorporated by reference from the discussion under the headingSecurity Ownership of Certain
Beneficial Owners and Managementand under the headingExecutive
Compensation and Other Information- Equity Compensation Plan Information as of September 30, 2002in our Proxy Statement for the 2003 Annual Meeting of Shareholders.

Item 13.Certain Relationships and Related Transactions.

Information required by this item is incorporated by reference from the discussion under the headingCorporate Governance and Related
Matters, Certain Relationships and Related Party Transactionsin our Proxy Statement for the 2003 Annual Meeting of Shareholders.

Item 14.Controls and Procedures.

We
have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers
who certify the Company's financial reports and to other members of senior management and the Board of Directors.

Based
on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, the principal executive officer and principal financial officer of
Avaya Inc. have concluded that Avaya Inc.'s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934) are effective to ensure that the information required to be disclosed by Avaya Inc. in reports that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms.

There
were no significant changes in Avaya Inc.'s internal control over financial reporting during Avaya Inc.'s fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect the Company's ability to record, process, summarize and report financial information.

30

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PART IV

Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

|      |  |                                                                                               |  | Page(s) in our 2002
Annual Report
to Shareholders
|----- |  | --------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|(i)   |  | Consolidated Statements of Operations                                                         |  | 61                                               
|(ii)  |  | Consolidated Balance Sheets                                                                   |  | 62                                               
|(iii) |  | Consolidated Statements of Changes in Stockholders' Equity and of Comprehensive Income (Loss) |  | 63                                               
|(iv)  |  | Consolidated Statements of Cash Flows                                                         |  | 64                                               
|(v)   |  | Notes to Consolidated Financial Statements                                                    |  | 65-120                                           



|(i) |  | Schedule IIValuation and Qualifying Accounts |  | Page 36 of
this Annual
Report on
Form 10-K
|--- |  | --------------------------------------------- |  | ------------------------------------------

31

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REPORT OF INDEPENDENT ACCOUNTANTS ON  FINANCIAL STATEMENT SCHEDULE

To
the Board of Directors of Avaya Inc.:

Our
audits of the consolidated financial statements referred to in our report dated November 27, 2002 appearing in the 2002 Annual Report to Shareholders of Avaya Inc.
(which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule
listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.

/s/
PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers
LLP
New York, New York
November 27, 2002

Separate
financial statements of subsidiaries not consolidated and 50 percent or less owned persons are omitted since no such entity constitutes a "significant subsidiary"
pursuant to the provisions of Regulation S-X, Article 3-09.



The
following documents are filed as Exhibits to this Annual Report on Form 10-K or incorporated by reference herein:

|Exhibit
Number |  |                                                                                                                                                                  
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|2              |  | Contribution and Distribution Agreement                                                                                                                         
|3.1            |  | Restated Certificate of Incorporation of Avaya Inc.                                                                                                             
|3.2            |  | Amended and Restated By-laws of Avaya Inc., as amended on July 18, 2002(4)                                                                                       
|4.1            |  | Specimen Common Stock certificate                                                                                                                               
|4.2            |  | Restated Certificate of Incorporation of Avaya Inc. (incorporated by reference as Exhibit 3.1 hereto)                                                           
|4.3            |  | Amended and Restated By-laws of Avaya Inc. (filed as Exhibit 3.2 hereto)(4)                                                                                      
|4.4            |  | Rights Agreement between Avaya Inc. and The Bank of New York, as Rights Agent                                                                                   
|4.5            |  | Amendment No. 1 to Rights Agreement between Avaya Inc. and the Bank of New York as Rights Agent (5)                                                              
|4.6            |  | Form of Certificate of Designations of Series A Junior Participating Preferred Stock (attached as Exhibit A to the Rights Agreement filed as Exhibit 4.4 hereto)
|4.7            |  | Form of Right Certificate (attached as Exhibit B to the Rights Agreement incorporated by reference as Exhibit 4.4 hereto)                                       
|4.8            |  | Preferred Stock Certificate(1)                                                                                                                                   
|4.9            |  | Series A Warrant(1)                                                                                                                                              
|4.10           |  | Series B Warrant(1)                                                                                                                                              
|4.11           |  | Form of Indenture between Avaya Inc. and The Bank of New York, as Trustee(1)                                                                                     
|               |  |                                                                                                                                                                  

32

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|4.12  |  | Form of Supplemental Indenture between the Company and The Bank of New York, as Trustee, relating to the Liquid Yield Options Notes due 2021 (Zero Coupon-Senior)(3)                                                                                                                                                                                                                                                               
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.13  |  | Series C Warrant(13)                                                                                                                                                                                                                                                                                                                                                                                                               
|10.22 |  | Second Supplemental Indenture, dated as of March 28, 2002, between the Company and The Bank of New York, as Trustee(6)                                                                                                                                                                                                                                                                                                             
|10.23 |  | Form of Global Note(6)                                                                                                                                                                                                                                                                                                                                                                                                             
|10.1  |  | Contribution and Distribution Agreement (incorporated by reference as Exhibit 2 hereto)                                                                                                                                                                                                                                                                                                                                           
|10.2  |  | Interim Services and Systems Replication Agreement                                                                                                                                                                                                                                                                                                                                                                                
|10.3  |  | Employee Benefits Agreement                                                                                                                                                                                                                                                                                                                                                                                                       
|10.4  |  | Tax Sharing Agreement                                                                                                                                                                                                                                                                                                                                                                                                             
|10.5  |  | Avaya Inc. Short Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                              
|10.6  |  | Avaya Inc. 2000 Long Term Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                          
|10.7  |  | Avaya Inc. 2000 Long Term Incentive Plan Restricted Stock Unit Award Agreement                                                                                                                                                                                                                                                                                                                                                    
|10.8  |  | Avaya Inc. 2000 Long Term Incentive Plan Nonstatutory Stock Option Agreement                                                                                                                                                                                                                                                                                                                                                      
|10.9  |  | Avaya Inc. Deferred Compensation Plan                                                                                                                                                                                                                                                                                                                                                                                             
|10.10 |  | Employment Agreement of Mr. Peterson, dated August 8, 1995                                                                                                                                                                                                                                                                                                                                                                        
|10.11 |  | Avaya Inc. Supplemental Pension Plan                                                                                                                                                                                                                                                                                                                                                                                              
|10.12 |  | Avaya Inc. 2000 Stock Compensation Plan for Non-Employee Directors                                                                                                                                                                                                                                                                                                                                                                
|10.13 |  | Trademark License Agreement                                                                                                                                                                                                                                                                                                                                                                                                       
|10.14 |  | Patent and Technology License Agreement                                                                                                                                                                                                                                                                                                                                                                                           
|10.15 |  | Technology Assignment and Joint Ownership Agreement                                                                                                                                                                                                                                                                                                                                                                               
|10.16 |  | Development Project Agreement                                                                                                                                                                                                                                                                                                                                                                                                     
|10.17 |  | Preferred Stock and Warrant Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                    
|10.18 |  | Certificate of Designations, Preferences and Rights of Series B Convertible Participating Preferred Stock of Avaya Inc. (attached as Exhibit A to the Preferred Stock and Warrant Purchase Agreement incorporated by reference as Exhibit 10.17
hereto)                                                                                                                                                                           
|10.20 |  | 364-Day Competitive Advance and Revolving credit facility Agreement, dated as of August 28, 2001 among Avaya Inc., Citibank, N.A., as Agent, Salomon Smith Barney, as Lead Arranger, The Chase Manhattan Bank and Deutsche Bank AG New York Branch and
Credit Suisse First Boston, as Co-Syndication Agents, and the Lenders party thereto(7)                                                                                      
|10.24 |  | Five Year Competitive Advance and Revolving credit facility Agreement, dated as of September 25, 2000 among Lucent Technologies Inc., Avaya Inc., Citibank, N.A., as Agent, Salomon Smith Barney, as Lead Arranger, Bank One, NA, The Chase Manhattan Bank
and Deutsche Bank AG New York and/or Cayman Islands Branches, as Co-Syndication Agents and Co-Arrangers, Commerzbank AG, as Co-Arranger and the Lenders party thereto(8)
|10.25 |  | Letter Amendment No. 1, dated as of August 10, 2001, to the Five Year Credit Agreement by and among Avaya Inc., Citibank, N.A., As Agent and the Lenders party thereto(2)                                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    

33

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|10.26 |  | Severance Agreement, dated as of September 1, 2001, between the Company and Donald K. Peterson(9)                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.27 |  | Stock Purchase Agreement by and among the Company and the Warburg Entities, dated as of March 10, 2002(10)                                                                                                                             
|10.28 |  | Conversion Agreement by and among the Company and the Warburg Entities, dated as of March 10, 2002(10)                                                                                                                                 
|10.29 |  | Security Agreement, dated as of March 25, 2002, among the Company, certain subsidiaries of the Company and The Bank of New York, as Collateral Trustee.(6)                                                                             
|10.30 |  | Collateral Agreement, dated as of March 25, 2002, among the Company, certain subsidiaries of the Company and The Bank of New York, as Collateral Trustee.(6)                                                                           
|10.31 |  | Avaya Involuntary Separation Plan for Senior Officers(11)                                                                                                                                                                              
|10.32 |  | Amended and Restated Five Year Competitive Advance and Revolving Credit Facility Agreement, dated as of September 3, 2002 among Avaya Inc., the lenders party to the Credit Agreement and Citibank, N.A., as Agent for such lenders(12)
|10.33 |  | Backstop Agreement, by and among the Company and the Warburg Entities, dated as of December 28, 2002(13)                                                                                                                               
|13    |  | The 2002 Annual Report to Shareholders, which, except for those portions incorporated by reference, is furnished solely for the information of the Commission and is not deemed "filed."*                                              
|21    |  | List of Subsidiaries of Avaya Inc.(14)                                                                                                                                                                                                 
|23    |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                                                                                                 
|24    |  | Power of Attorney(14)                                                                                                                                                                                                                  
|31.1  |  | Certification of Chief Executive Officer pursuant to Section 302 of the SarbanesOxley Act of 2002.*                                                                                                                                   
|31.2  |  | Certification of Chief Financial Officer pursuant to Section 302 of the SabranesOxley Act of 2002.*                                                                                                                                   
|32.1  |  | Certification of Donald K. Peterson pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                         
|32.2  |  | Certification of Garry K. McGuire Sr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*                                                                                                                                       

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34

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35

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AVAYA INC. AND SUBSIDIARIES    SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS    (dollars in millions)

|Column A                               |  | Column B |    | Column C |   | Column D |  | Column E |     | 
|-------------------------------------- |  | -------- | -- | -------- | - | -------- |  | -------- | --- | 
|
|Year 2002                              |  |          |    |          |   |          |  |          |     | 
|Allowance for doubtful accounts        |  | $        | 68 |          | $ | 53       |  |          |    | 
|Deferred tax asset valuation allowance |  |          | 49 |          |   | 364      |  |          | 202 | 
|Year 2001                              |  |          |    |          |   |          |  |          |     | 
|Allowance for doubtful accounts        |  | $        | 62 |          | $ | 53       |  | $        |    | 
|Deferred tax asset valuation allowance |  |          | 49 |          |   |         |  |          |    | 
|Year 2000                              |  |          |    |          |   |          |  |          |     | 
|Allowance for doubtful accounts        |  |          | 58 |          |   | 36       |  |          |    | 
|Deferred tax asset valuation allowance |  |          | 73 |          |   |         |  |          |    | 

36

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) 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.

| |  | AVAYA INC.
| |  | ----------
| |  | By:       

August 12,
2003

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated.

|Signature                                            |  | Title                                                                    |  | Date           
|---------------------------------------------------- |  | ------------------------------------------------------------------------ |  | ---------------
|Principal Executive Officer:                         |  |                                                                          |  |                
|/s/DONALD K. PETERSONDonald K. Peterson              |  | Chairman and Chief Executive Officer                                     |  | August 12, 2003
|Principal Financial Officer:                         |  |                                                                          |  |                
|/s/GARRY K. MCGUIRE SR.Garry K. McGuire Sr.          |  | Chief Financial Officer and Senior Vice President, Corporate Development |  | August 12, 2003
|Principal Accounting Officer:                        |  |                                                                          |  |                
|/s/AMARNATH K. PAIAmarnath K. Pai                    |  | Vice President, Finance Operations and Controller                        |  | August 12, 2003
|Directors:                                           |  |                                                                          |  |                
|Bruce Bond                                           |  | Director                                                                 |  |                
|Joseph P. Landy                                      |  | Director                                                                 |  |                
|/s/GARRY K. MCGUIRE SR.,
ATTORNEY-IN-FACTMark Leslie |  | Director                                                                 |  | August 12, 2003
|                                                     |  |                                                                          |  |                

37

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|/s/GARRY K. MCGUIRE SR.,
ATTORNEY-IN-FACTPhilip Odeen        |  | Director |  | August 12, 2003
|------------------------------------------------------------ |  | -------- |  | ---------------
|/s/GARRY K. MCGUIRE SR.,
ATTORNEY-IN-FACTDaniel C. Stanzione |  | Director |  | August 12, 2003
|/s/GARRY K. MCGUIRE SR.,
ATTORNEY-IN-FACTPaula Stern         |  | Director |  | August 12, 2003
|Anthony Terracciano                                          |  | Director |  |                
|/s/GARRY K. MCGUIRE SR.,
ATTORNEY-IN-FACTRonald Zarrella     |  | Director |  | August 12, 2003

38

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EXHIBIT INDEX

|Exhibit
Number |  |                                                                                                                                                                      |  | Page
Number
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|2              |  | Contribution and Distribution Agreement                                                                                                                             |  |            
|3.1            |  | Restated Certificate of Incorporation of Avaya Inc.                                                                                                                 |  |            
|3.2            |  | Amended and Restated By-laws of Avaya Inc., as amended on July 18, 2002(4)                                                                                           |  |            
|4.1            |  | Specimen Common Stock certificate                                                                                                                                   |  |            
|4.2            |  | Restated Certificate of Incorporation of Avaya Inc. (incorporated by reference as Exhibit 3.1 hereto)                                                               |  |            
|4.3            |  | Amended and Restated By-laws of Avaya Inc. (filed as Exhibit 3.2 hereto)(4)                                                                                          |  |            
|4.4            |  | Rights Agreement between Avaya Inc. and The Bank of New York, as Rights Agent                                                                                       |  |            
|4.5            |  | Amendment No. 1 to Rights Agreement between Avaya Inc. and the Bank of New York as Rights Agent(5)                                                                   |  |            
|4.6            |  | Form of Certificate of Designations of Series A Junior Participating Preferred Stock (attached as Exhibit A to the Rights Agreement filed as Exhibit 4.4 hereto)    |  |            
|4.7            |  | Form of Right Certificate (attached as Exhibit B to the Rights Agreement incorporated by reference as Exhibit 4.4 hereto)                                           |  |            
|4.8            |  | Preferred Stock Certificate(1)                                                                                                                                       |  |            
|4.9            |  | Series A Warrant(1)                                                                                                                                                  |  |            
|4.10           |  | Series B Warrant(1)                                                                                                                                                  |  |            
|4.11           |  | Form of Indenture between Avaya Inc. and The Bank of New York, as Trustee(1)                                                                                         |  |            
|4.12           |  | Form of Supplemental Indenture between the Company and The Bank of New York, as Trustee, relating to the Liquid Yield Options Notes due 2021 (Zero Coupon-Senior)(3) |  |            
|4.13           |  | Series C Warrant (13)                                                                                                                                                |  |            
|10.22          |  | Second Supplemental Indenture, dated as of March 28, 2002, between the Company and The Bank of New York, as Trustee(6)                                               |  |            
|10.23          |  | Form of Global Note(6)                                                                                                                                               |  |            
|10.1           |  | Contribution and Distribution Agreement (incorporated by reference as Exhibit 2 hereto)                                                                             |  |            
|10.2           |  | Interim Services and Systems Replication Agreement                                                                                                                  |  |            
|10.3           |  | Employee Benefits Agreement                                                                                                                                         |  |            
|10.4           |  | Tax Sharing Agreement                                                                                                                                               |  |            
|10.5           |  | Avaya Inc. Short Term Incentive Plan                                                                                                                                |  |            
|10.6           |  | Avaya Inc. 2000 Long Term Incentive Plan                                                                                                                            |  |            
|10.7           |  | Avaya Inc. 2000 Long Term Incentive Plan Restricted Stock Unit Award Agreement                                                                                      |  |            
|10.8           |  | Avaya Inc. 2000 Long Term Incentive Plan Nonstatutory Stock Option Agreement                                                                                        |  |            
|10.9           |  | Avaya Inc. Deferred Compensation Plan                                                                                                                               |  |            
|10.10          |  | Employment Agreement of Mr. Peterson, dated August 8, 1995                                                                                                          |  |            
|10.11          |  | Avaya Inc. Supplemental Pension Plan                                                                                                                                |  |            
|10.12          |  | Avaya Inc. 2000 Stock Compensation Plan for Non-Employee Directors                                                                                                  |  |            
|10.13          |  | Trademark License Agreement                                                                                                                                         |  |            
|               |  |                                                                                                                                                                      |  |            

39

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|10.14 |  | Patent and Technology License Agreement                                                                                                                                                                                                                                                                                                                                                                                            |  | 
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|10.15 |  | Technology Assignment and Joint Ownership Agreement                                                                                                                                                                                                                                                                                                                                                                                |  | 
|10.16 |  | Development Project Agreement                                                                                                                                                                                                                                                                                                                                                                                                      |  | 
|10.17 |  | Preferred Stock and Warrant Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                     |  | 
|10.18 |  | Certificate of Designations, Preferences and Rights of Series B Convertible Participating Preferred Stock of Avaya Inc. (attached as Exhibit A to the Preferred Stock and Warrant Purchase Agreement incorporated by
reference as Exhibit 10.17 hereto)                                                                                                                                                                            |  | 
|10.20 |  | 364-Day Competitive Advance and Revolving credit facility Agreement, dated as of August 28, 2001 among Avaya Inc., Citibank, N.A., as Agent, Salomon Smith Barney, as Lead Arranger, The Chase Manhattan Bank and Deutsche
Bank AG New York Branch and Credit Suisse First Boston, as Co-Syndication Agents, and the Lenders party thereto(7)                                                                                       |  | 
|10.24 |  | Five Year Competitive Advance and Revolving credit facility Agreement, dated as of September 25, 2000 among Lucent Technologies Inc., Avaya Inc., Citibank, N.A., as Agent, Salomon Smith Barney, as Lead Arranger, Bank One,
NA, The Chase Manhattan Bank and Deutsche Bank AG New York and/or Cayman Islands Branches, as Co-Syndication Agents and Co-Arrangers, Commerzbank AG, as Co-Arranger and the Lenders party thereto(8) |  | 
|10.25 |  | Letter Amendment No. 1, dated as of August 10, 2001, to the Five Year Credit Agreement by and among Avaya Inc., Citibank, N.A., As Agent and the Lenders party thereto(2)                                                                                                                                                                                                                                                           |  | 
|10.26 |  | Severance Agreement, dated as of September 1, 2001, between the Company and Donald K. Peterson(9)                                                                                                                                                                                                                                                                                                                                   |  | 
|10.27 |  | Stock Purchase Agreement by and among the Company and the Warburg Entities, dated as of March 10, 2002(10)                                                                                                                                                                                                                                                                                                                          |  | 
|10.28 |  | Conversion Agreement by and among the Company and the Warburg Entities, dated as of March 10, 2002(10)                                                                                                                                                                                                                                                                                                                              |  | 
|10.29 |  | Security Agreement, dated as of March 25, 2002, among the Company, certain subsidiaries of the Company and The Bank of New York, as Collateral Trustee.(6)                                                                                                                                                                                                                                                                          |  | 
|10.30 |  | Collateral Agreement, dated as of March 25, 2002, among the Company, certain subsidiaries of the Company and The Bank of New York, as Collateral Trustee.(6)                                                                                                                                                                                                                                                                        |  | 
|10.31 |  | Avaya Involuntary Separation Plan for Senior Officers(11)                                                                                                                                                                                                                                                                                                                                                                           |  | 
|10.32 |  | Amended and Restated Five Year Competitive Advance and Revolving Credit Facility Agreement, dated as of September 3, 2002 among Avaya Inc., the lenders party to the Credit Agreement and Citibank, N.A., as Agent for such
lenders(12)                                                                                                                                                                                             |  | 
|10.33 |  | Backstop Agreement, by and among the Company and the Warburg Entities, dated as of December 28, 2002(13)                                                                                                                                                                                                                                                                                                                            |  | 
|13    |  | The 2002 Annual Report to Shareholders, which, except for those portions incorporated by reference, is furnished solely for the information of the Commission and is not deemed "filed."*                                                                                                                                                                                                                                           |  | 
|21    |  | List of Subsidiaries of Avaya Inc.(14)                                                                                                                                                                                                                                                                                                                                                                                              |  | 
|23    |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                                                                                                                                                                                                                                                                                              |  | 
|24    |  | Power of Attorney(14)                                                                                                                                                                                                                                                                                                                                                                                                               |  | 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 

40

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|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the SarbanesOxley Act of 2002.* |  | 
|---- |  | ---------------------------------------------------------------------------------------------------- |  | 
|31.2 |  | Certification of Chief Executive Officer pursuant to Section 302 of the SarbanesOxley Act of 2002.* |  | 
|32.1 |  | Certification of Donald K. Peterson pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*       |  | 
|32.2 |  | Certification of Garry K. McGuire Sr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*     |  | 

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|    |  | Incorporated by reference from Avaya's Registration Statement on Form 10 (Reg. No. 1-15951), declared effective by the Securities and Exchange Commission on September 15, 2000. |  | 
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|*    |  | Filed herewith                                                                                                                                                                   |  | 
|(1)  |  | Incorporated by reference from Avaya's Registration Statement on Form S-3 (Reg. No. 333-57962), declared effective by the Commission on May 24, 2001.                            |  | 
|(2)  |  | Incorporated by reference from Avaya's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.                                                                        |  | 
|(3)  |  | Incorporated by reference from Avaya's Registration Statement on Form 8-A dated October 30, 2001.                                                                                |  | 
|(4)  |  | Incorporated by reference from Avaya's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.                                                                        |  | 
|(5)  |  | Incorporated by reference from Avaya's Current Report on Form 8-K dated February 27, 2002.                                                                                       |  | 
|(6)  |  | Incorporated by reference from Avaya's Current Report on Form 8-K dated March 28, 2002.                                                                                          |  | 
|(7)  |  | Incorporated by reference from Avaya's Annual Report on Form 10-K for the year ended September 30, 2001.                                                                         |  | 
|(8)  |  | Incorporated by reference from Avaya's Annual Report on Form 10-K for the year ended September 30, 2000.                                                                         |  | 
|(9)  |  | Incorporated by referemce from Avaya's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001.                                                                    |  | 
|(10) |  | Incorporated by reference from Avaya's Current Report on Form 8-K dated March 11, 2002.                                                                                          |  | 
|(11) |  | Incorporated by referemce from Avaya's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.                                                                        |  | 
|(12) |  | Incorporated by reference from Avaya's Quarterly Report on Form 8-K dated September 4, 2002.                                                                                     |  | 
|(13) |  | Incorporated by reference from Avaya's Registration Statement on Form S-4 filed on December 23, 2002.                                                                            |  | 
|(14) |  | Incorporated by reference from Avaya's Annual Report on Form 10-K for the year ended September 30, 2002, filed December 23, 2002.                                                |  | 

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