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SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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FORM 10-K

|ý                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|For The Fiscal Year Ended September 30, 2003
|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
CORPORATION |  | I.R.S. EMPLOYER
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 registeredCommon Stock, par value $.01 per share

New York Stock ExchangeSeries A Junior Participating Preferred Stock Purchase Rights

New York Stock ExchangeLiquid 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 28, 2003, the aggregate market value of the voting common equity held by non-affiliates was approximately $5.2 billion.

At
November 28, 2003, 420,704,608 common shares were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

|Portions of the 2003 Annual Report to Shareholders                          |  | Parts I, II and IV
|--------------------------------------------------------------------------- |  | ------------------
|Portions of the Proxy Statement for the 2004 Annual Meeting of Shareholders |  | Part III          

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TABLE OF CONTENTS

|Item |  | Description                                                                           |  | Page
|---- |  | ------------------------------------------------------------------------------------- |  | ----
|     |  | PART I                                                                                |  |     
|1.   |  | Business                                                                              |  | 1   
|2.   |  | Properties                                                                            |  | 21  
|3.   |  | Legal Proceedings                                                                     |  | 22  
|4.   |  | Submission of Matters to a Vote of Security-Holders                                   |  | 24  
|     |  | PART II                                                                               |  |     
|5.   |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 25  
|6.   |  | Selected Financial Data                                                               |  | 25  
|7.   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 25  
|7A.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 25  
|8.   |  | Financial Statements and Supplementary Data                                           |  | 25  
|9.   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 25  
|9A.  |  | Controls and Procedures                                                               |  | 25  
|     |  | PART III                                                                              |  |     
|10.  |  | Directors and Executive Officers of the Registrant                                    |  | 26  
|11.  |  | Executive Compensation                                                                |  | 27  
|12.  |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 27  
|13.  |  | Certain Relationships and Related Transactions                                        |  | 27  
|14.  |  | Principal Accounting Fees and Services                                                |  | 27  
|     |  | PART IV                                                                               |  |     
|15.  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 28  

This
Annual Report on Form 10-K 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, 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



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, 2001, 2002 and 2003 was $6,793 million,
$4,956 million and $4,338 million, respectively. The decline in revenue is attributable primarily to 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, 2001, 2002 and 2003 of $352 million, $666 million and $88 million, respectively, and our accumulated
deficit, in the amount of $1,270 million as of September 30, 2003. Although revenue has declined over this three year period, the quarterly revenue trend in fiscal 2003 generally
stabilized. The stabilization of revenue can be attributed to our products and services that support converged communications. Specifically, revenue from the sale of our IP telephony systems increased
throughout fiscal 2003, mitigating the decline in sales of our traditional voice systems.

Notwithstanding
the quarterly revenue trend in fiscal 2003, 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 believe that enterprises may continue to be reluctant
to increase spending on enterprise communications technology significantly in the near term, we expect continued pressure on our ability to generate revenue.

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.

In
October 2003, we agreed to sell certain assets and liabilities of our Connectivity Solutions business, a global leader in structured cabling products, to CommScope, Inc.
Under the terms of the agreement, we will receive a purchase price of $263 million, subject to adjustment, consisting of approximately $210 million of cash, a note in the amount of
$18 million that is convertible into CommScope common stock one year after the closing, and CommScope common stock having a market value, at the time of the agreement, of $35 million. In
addition, CommScope assumed approximately $75 million of primarily employee-related liabilities of Connectivity Solutions. The waiting period applicable to the sale under the
Hart-Scott-Rodino Antitrust Improvements Act, as

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amended,
has expired. We expect the sale of Connectivity Solutions to close no later than the second quarter of fiscal 2004. Because the products offered by Connectivity Solutions do not fit
strategically with the rest of our product portfolio, we believe the sale will enable us to strengthen our focus on our core product offerings.

In
November 2003, we acquired substantially all of the assets and assumed certain liabilities of Expanets, Inc., a subsidiary of NorthWestern Corporation. Expanets is a
nationwide provider of networked communications and data products and services to small and mid-sized businesses and, prior to the acquisition, one of our largest dealers. Under the terms
of the asset purchase agreement, we paid NorthWestern approximately $55 million in cash. In addition, we paid approximately $39 million to creditors of Expanets to satisfy certain debt
obligations of Expanets and deposited approximately $13.5 million into an escrow account to satisfy certain liabilities of Expanets. The purchase price is subject to adjustment within
90 days after the closing.

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.

For
the fiscal year ended September 30, 2003, revenue from our Enterprise Communications Group, Small and Medium Business Solutions, Services and Connectivity Solutions segments
were 40.1%, 5.2%, 42.2% and 12.5%, respectively, of our total revenue. The performance of our two largest segments, Enterprise Communications Group and Services, typically has the greatest impact on
our consolidated operating results. Because many of our customers who purchase products and applications from our Enterprise Communications Group segment purchase contracts to service those products
and applications from our Services segment, the performance of our Services segment is related to the performance of our Enterprise Communications Group segment. Our Small and Medium Business
Solutions segment currently represents a small portion of our total revenue and in October 2003 we agreed to sell our Connectivity Solutions segment so that we can strengthen our focus on our
other offerings. Please see Note 16 to our Consolidated Financial Statements for the year ended September 30, 2003, which is incorporated by reference from our 2003 Annual Report to
Shareholders, for financial information regarding our operating segments.

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 "Enterprise Communications Group," we are focused on the migration of our customers' networks from traditional voice communications systems to IP telephony
systems. If we are successful in implementing our strategy, sales of IP telephony systems will become a larger component of our total revenue in the future, as adoption of IP telephony by enterprises
becomes more widespread. Our Enterprise Communications Group segment markets traditional voice

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and
IP telephony systems 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, 2003, 2002 and 2001, 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:

Percentage of Consolidated Revenue2003

2002

2001Enterprise Communications Group:Converged systems (including traditional voice communications systems and IP telephony systems)

20
%
23
%
23
%Applications

12
%
12
%
12
%Services:Management services

31
%
31
%
26
%Connectivity SolutionsSYSTIMAX® structured cabling products

10
%
8
%
10
%




Our Enterprise Communications Group segment is focused on the sale of communications systems, products and applications to our large enterprise customers. Our
primary offerings for this segment include IP telephony systems and traditional voice communications systems, contact center offerings, a core component of customer relationship management, unified
communications applications and appliances, such as telephone sets. 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 containing both wired and wireless elements. IP telephony systems
integrate voice and data 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:



Converged Systems.We are a worldwide leader in traditional voice telephony, IP telephony and enterprise telephony, which we
define as the market for traditional voice telephony and IP telephony in the aggregate. Sales of telephony products and systems by our Enterprise Communications Group and

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Small
and Medium Business Solutions segments are combined for purposes of these market leadership calculations.

Our
suite of IP telephony offerings includes:



In
November 2003, we announced a strategic alliance agreement with Extreme Networks Inc. to jointly develop and market converged communications solutions. Under the
alliance, we will resell Extreme's data networking products on a stand-alone basis and as part of our suite of IP telephony offerings. Extreme will also provide planning, design, implementation and
management services support to our Services organization. We will continue to offer our own line of data networking products and related services and support in addition to Extreme's portfolio.
Extreme will also continue to sell its data networking products through its multinational distribution channels.

We
also offer traditional voice communications systems, although the market for these systems is declining and we are focused on the migration of our customers' traditional voice
communications systems to IP telephony systems.

Communications Applications.Our Communications Applications organization is focused on applications that facilitate and
enhance interaction in an enterprise with customers, partners, suppliers and employees. This organization is currently focused on infrastructure and applications for multi-media contact centers and
unified communications.

Contact Centers.Our contact center 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 Western Europe. Our strategy is to leverage this leadership position to market a broader suite of CRM applications.

Our
Avaya Contact Center Solutions® 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 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.

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Unified Communication.We define Unified Communication as a family of applications that allow individuals to collaborate and
communicate more effectively and to navigate 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 and unified messaging. 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. a single system. In addition, our Avaya Unified Messenger system for Microsoft® Exchange 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. The Avaya Unified Messenger® SolutionIBM Lotus Domino Version application enhances the functionality
of a user's Lotus Domino e-mail messaging by providing the user with one mailbox for their voice, e-mail and fax messages.

Our
unified communication offering, Avaya Unified Communication Center, provides a user with ability to



Communications Appliances.We recently formed a new division within our Enterprise Communications Group segment referred to
as Communications Appliances. Communications Appliances consists mainly of hardware such as telephone sets and software that resides on alternative endpoints, such as our IP Softphone, which provides
the functionality of a digital telephone on a personal computer or handheld device. To date, our appliances have typically been sold as components of a larger sale of a converged system.



Our Small and Medium Business Solutions segment develops, markets and sells communications products and applications, including IP telephony, traditional voice
systems and unified communication and contact center applications for small and medium-sized businesses.

Avaya
IP Office, our IP telephony solution for small and medium-sized enterprises, 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

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applications
suite offers voice mail, unified messaging, wireless capability and an array of contact center management tools designed for the small and medium-sized enterprise.

Traditional
voice communications systems designed for small and medium-sized businesses are also knows as Key and hybrid telephony systems. 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, Professional Services, Technical Services and Field Services organizations. Our
Network Consulting team offers 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. Our
Professional
Services team provides custom implementation of our communications applications to meet indivicual customer needs. Technical support and maintenance under contracts for our voice communications
products are provided by our Technical Services and Field Services organizations.



We are the worldwide leader in sales of structured cabling systems for enterprises. We market these products primarily for enterprises of various sizes for wiring
phones, workstations, personal computers and local area networks through their buildings or across their campuses 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.

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

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the
central office environment to the public telephone network and include coaxial and fiber cable used for voice frequency and digital and fiber distribution networks.

We
sell our electronic cabinets mostly to service providers to protect wireless access equipment, switching equipment and broadband electronic equipment. An electronic cabinet is a
sturdy environmental enclosure designed to house electronics devices and passive equipment, both in the outside plant and inside buildings.

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 customer represented more than 10% of our revenue for fiscal 2003 and 2002. For fiscal 2001, sales to Expanets were approximately 10% of our
revenue.



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.

Enterprise Communications Group.We sell our Enterprise Communications Group products and applications worldwide to
enterprise customers through our direct sales channel and our global network of distributors, dealers, and systems integrators.

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 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 frequently arise from sales of our products and applications through
our Enterprise Communications Group 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 $363 million, or approximately 8.4% of our total revenue, in fiscal 2003 and $459 million, or approximately 9.3% of our total revenue,
in fiscal 2002, in research and development. Each of our operating segments has an independent product development organization. In addition, the research and development efforts of our operating
segments are supported by Avaya Labs Research, a world-class applied research organization of approximately 60 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 Enterprise Communications Group segment and, to a lesser extent, our Services segment.

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We plan on using our substantial investment in research and development to develop new systems and software related to communications applications, multi-media contact center
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 Enterprise Communications Group and Small and Medium Business Solutions segments.
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. These facilities and the interest in the joint venture in China will be transferred
to CommScope upon the closing of the sale of Connectivity Solutions.

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 Enterprise Communications Group 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 of our
Enterprise Communications Group 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., General Cable, Corning Inc., Marconi plc, Nordx/CDT and Belden Inc. Our Services segment competes primarily with
NextiraOne, LLC, Norstan, Inc., Siemens Aktiengesellschaft,

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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.

We
currently hold approximately 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. After the completion of the sale of Connectivity Solutions, we will
hold approximately 1,150 U.S. patents and patent applications. In addition, we hold corresponding non-U.S.
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, 2003, we employed approximately 16,900 full-time employees, of which approximately 10,500 are management and
non-union-represented employees and approximately 6,400 are U.S. union-represented employees covered by collective bargaining agreements. Approximately 940 of our union-represented
employees are variable workers under the arrangement described below.

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Effective
June 1, 2003, we renewed our collective bargaining agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers. The
renewed agreements are for a term of three years, ending May 31, 2006. The agreements provide for a 3% per year wage increase for employees during the duration of the agreements, and a 3%
increase per year to employees' pension benefits for the duration of the agreements. The agreements also included additional cost sharing by employees and retirees for certain medical health benefit
co-payments.

The
renewed collective bargaining agreements continue our variable workforce arrangement that gives eligible employees who retired from Lucent as of September 30, 2000 the ability
to continue working as on-call support service technicians at Avaya. This arrangement is 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.

We
believe that we generally have a good relationship with our employees and the unions that represent them.

Backlog

Our backlog for product sales generated by our direct sales channel, which represents the aggregate of the sales price of orders received from customers, but not
yet recognized as revenue, was approximately $76 million and $88 million on September 30, 2003 and September 30, 2002, 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 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
nor will environmental costs for all sites in the aggregate be 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 adequacy of 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. Although we do not separately track recurring costs of managing hazardous substances and pollutants in ongoing operations, we 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 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

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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 environmental reserves on a quarterly basis. For the fiscal years ended September 30, 2003 and 2002, respectively, no amounts were charged to our
Statements of Operations for environmental costs as reserves were deemed to be adequate. Expenditures for environmental matters for the fiscal years ended September 30, 2003 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.

Contribution and Distribution Agreement Between Lucent and Our Company

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 caused its subsidiaries to transfer, the assets of its enterprise networking businesses. In general, we assumed
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 contingencies primarily 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.

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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.



In addition, in connection with the distribution, 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)

Our
disclosure and analysis in this report and in our 2003 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 2003 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.

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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:



Set
forth below is a detailed discussion of certain of these risks and other risks affecting our business. The categorization of risks set forth below is meant to help you better
understand the risks facing our business and is 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 years 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 fiscal years ended September 30, 2000, 2001, 2002 and 2003 was $7,732 million, $6,793 million, $4,956 million and $4,338 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, 2002 and 2003 of $375 million, $352 million, $666 million and $88 million, respectively, and our accumulated deficit in
the amount of $1,270 million as of September 30, 2003.

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 and our quarterly revenue trend in fiscal 2003 generally stabilized,
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 believe that enterprises may continue to be reluctant to increase spending on enterprise communications technology
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 will continue to be adversely affected.

In
addition, because our product sales and sales of maintenance contracts for those products were significantly higher in prior years, the aggregate value of maintenance contracts and
the related revenue for our Services segment that are subject to renewal in fiscal 2004 are larger than in prior years. If we are unable to renew a significant portion of these contracts, our revenue
will be adversely affected.

If
these or other conditions cause our revenue to decline and we cannot reduce costs on a timely basis or at all, our operating results will be adversely affected.

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, the market segments
for these traditional systems to continue to decline. We are implementing a strategy to capitalize on the higher growth opportunities in our market, including IP telephony systems, multimedia contact
center 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 Enterprise Communications Group 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. Our Services segment may also be adversely affected to the extent that Services revenues are related to sales of these
products and applications.

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We may not be able to successfully integrate the assets we recently acquired from Expanets and even if we are successful, such integration will likely require
significant resources and management attention.

In
November 2003, we acquired substantially all of the assets and assumed certain liabilities of Expanets, a subsidiary of NorthWestern and, prior to the acquisition, one of our
largest dealers. We are currently in the process of integrating the Expanets assets into our businesses. We expect this integration to be extremely complex for several reasons, including the
following:



As
a result of these factors, we may not successfully integrate Expanets' businesses into ours. Even if we are successful, the integration will require significant resources and
management attention, which may, during the integration period, divert our attention from our existing businesses or otherwise adversely affect our revenue and operating results, including the revenue
and operating results of the businesses we acquired from Expanets. In addition, these factors may make it difficult to complete the audits of Expanets financial statements required under
Regulation S-X within the required timeframe. Failure to file the audited financial statements within the required time period could jeopardize our eligibility to use
Form S-3 thereby inhibiting our ability to access the capital markets on a timely basis.

In
addition, none of the manufacturers that previously supplied communications products to the more than 25 businesses acquired by Expanets have given their consent to the transfer to us
from Expanets of the supply contracts with those manufacturers. Because we will not have a source of product supply for these businesses, we will not generate revenue from these businesses and
accordingly, expect to either sell or shut down these businesses. The failure to generate revenue from these businesses will likely cause the amount of revenue generated by the assets we acquired from
Expanets to be less than the amount of revenue historically reported by Expanets. In addition, if we are unable to sell or shut down these businesses in a timely manner, we may incur significant costs
and our operating results may be adversely affected.

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 IP

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telephony systems, 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 IP telephony systems and other advanced communications products
and applications. In order to implement this change, we must:



If
we do not successfully implement this change in focus, our operating results may be adversely affected. Moreover, 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:



We face intense competition from our historical competitors and recent entrants into the enterprise communications market.

Historically,
our product businesses other than Connectivity Solutions have competed against other providers of enterprise voice communications systems such as Nortel Networks
Corporation, Siemens Aktiengesellschaft, Alcatel S.A. and NEC Corporation. As we change the focus of our company to concentrate on the development and marketing of advanced communications systems,
such as IP telephony systems that converge voice, data and other traffic across a single unified network, we face intense competition from these providers of voice communications systems as well as
from data networking companies such as Cisco Systems, Inc. and 3Com Corp. In addition, because the market for our products is subject to rapid technological change, as the market evolves we may
face competition in the future from companies that do not currently compete in the enterprise communications market.

Several
of these existing competitors have, and many of our future competitors may have, greater financial, personnel and capacity resources than we and as a result, these competitors
may be in a stronger position to respond quickly to potential acquisitions and other market opportunities, new or emerging technologies and changes in client requirements. Competitors with greater
financial resources also may be able to offer lower prices, additional products or services or other incentives that we cannot match or do not offer.

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Our cash needs include making payments on and refinancing our indebtedness and funding working capital, capital expenditures, strategic acquisitions, business
restructuring liabilities, 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, including the risks described in this
Form 10-K.

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. In February 2002, September 2002 and April 2003, we amended our credit facility in order to ensure our compliance with the
financial covenants. If we are unable to comply with our financial covenants and cannot amend or obtain a waiver of 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 LYONs and the Senior Secured Notes could be accelerated.
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 B+ and our long-term senior unsecured debt is rated B by Standard & Poor's, each with a stable 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.

Our substantial amount of debt could limit our ability to obtain additional financing, limit our ability to react to changes in business conditions and require us
to divert financial resources from investments in our business to servicing our debt.

We
have a substantial amount of debt. At September 30, 2003, we had approximately $1,192 million in cash and $953 million of debt outstanding on a consolidated basis
and $250 million available under our credit agreement.

Our
substantial amount of debt and other obligations could have important consequences to you. For example, it could:



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The
agreements governing our debt limit, but do not prohibit, us from incurring additional debt, and we may incur a significant amount of additional debt in the future. If new debt is
added to our current debt levels, these related risks could increase.

Our
ability to make scheduled payments on or to refinance our debt and other obligations will depend on our financial and operating performance, which, in turn, is subject to prevailing
economic conditions and to certain financial, business and other factors beyond our control. If our cash flow and capital resources are insufficient to fund our debt service and other obligations, we
may be forced to reduce or delay scheduled expansion plans and capital expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot assure you that
our operating performance, cash flow and capital resources will be sufficient to pay our debt obligations when they become due. In the event that we are required to dispose of material assets or
operations or restructure our debt or other obligations, we cannot assure you as to the terms of any such transactions or how soon any such transaction could be completed.



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 the geographical mix of earnings or the recording of increased deferred tax asset valuation allowances in the future could affect our operating
results.

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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.

If
the geographic distribution of our earnings and losses are unfavorable in the future, our effective tax rate could be adversely affected. In addition, based on our assessment of our
deferred tax assets as of September 30, 2003, we determined, based on certain available tax planning strategies, that $439 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.



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 Enterprise Communications Group and Small and Medium Business Solutions segments. Substantially all of these
operations have been outsourced to Celestica Inc. Our ability to realize the intended benefits of our manufacturing outsourcing initiative depends 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 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 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.

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

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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.

In
addition, we rely on the security of our information systems, among other things, to protect our proprietary information and information of our customers. If we do not maintain
adequate security procedures over our information systems, we may be susceptible to computer hacking, cyberterrorism or other unauthorized attempts by third parties to access our proprietary
information or that of our customers. The failure to protect our proprietary information could seriously harm our business and future prospects or expose us to claims by our customers that we did not
adequately protect their proprietary information.



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, 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 are or may be obligated to indemnify or share the cost with Lucent. In March 2003, Lucent announced that it had entered into a $420 million
settlement of all pending shareholder and related litigation described under "Legal Proceedings-Lucent Securities Litigation." Certain cases which are the subject of the settlement are shared
contingent liabilities under the Contribution and Distribution Agreement and accordingly, we are responsible for 10% of the liabilities attributable to those cases, including 10% of the legal costs
associated with the portion of the litigation for which we share liability. In the second quarter of fiscal 2003, we recorded a charge of $25 million representing our estimate of our liability
in this matter. We recently reached agreement with Lucent to pay $24 million in shares of our common stock in full satisfaction of our obligations under the settlement. The terms of the
settlement will be subject to a fairness hearing scheduled for December 2003.

We
cannot assure you we will not have to make other indemnification or 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.

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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 terms acceptable to us or at all. We also may be subject to significant
damages or an injunction against us or 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 products, 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.

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 a 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, 2003, we operated manufacturing facilities in Omaha, Nebraska, Bray, Ireland and Pinkenba, Australia and a warehouse facility in
Singapore. We also have 544 offices, including 150 storage locations, located in 51 countries and 19 research and development facilities located in Australia, India, Israel, Singapore, the United
Kingdom 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 on leased property. Our real property portfolio consists of aggregate floor space of approximately 9.7 million square feet, of which approximately 4.7 million square feet
is owned and approximately 5 million square feet is leased. Our lease terms range from

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monthly
leases to 17 years. We believe that all of our facilities and equipment are in good condition and are well maintained.

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, 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, our former parent, 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 us 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 been certified in the West Virginia state court matter. The certified class in the West Virginia matter 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 free Year 2000-compliant solution. The Fourth Circuit Court of Appeals recently denied the defendant's attempt to have the
Federal District Court in West Virginia retain jurisdiction in this matter. This matter is now in West Virginia state court. 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 this case at this time. The federal court in the California action has
issued an opinion and order granting class certification. 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 defendants. The federal court in the California action has issued an order
staying the action pending the outcome of the West Virginia matter. 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 the outcome of these actions will have a material adverse effect on our financial position, results of operations or cash flows. These cases have
required in the past, and may require in the future, 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.

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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. 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 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.

In
March 2003, Lucent announced that it had entered into a $420 million settlement of all pending shareholder and related litigation. Certain cases which are the subject of
the settlement are shared contingent liabilities under the Contribution and Distribution Agreement and accordingly, we are responsible for 10% of the liabilities attributable to those cases, including
10% of the legal costs associated with the portion of the litigation for which we share liability. In the second quarter of fiscal 2003, we recorded a charge of $25 million representing our
estimate of our liability in this matter. We recently reached agreement with Lucent to pay $24 million in shares of our common stock in full satisfaction of our obligations under the
settlement. The terms of the settlement will be subject to a fairness hearing scheduled for December 2003.



In July 2002, Communications Development Corporation, or CDC, 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. In
April 2003, CDC initiated the arbitration before the American Arbitration Association. The plaintiff alleges that as a result of agreements entered into between the plaintiff and us, 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, CDC may likely increase its commission demand. The parties are in the process of selecting arbitrators.



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, 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 were required to 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. We recently agreed with Lucent to pay $6 million in satisfaction of our
liability in this matter, although Lucent has notified us that we may be responsible for some additional costs that may be incurred in connection with the conclusion of the claims administration.
Based on our discussions with Lucent, we do not expect those additional costs to be material.

23

---



AudioFAX IP, LLC recently filed an action against us in the U.S. District Court for the Northern District of Georgia alleging that we have infringed five of its
patents relating to facsimile products in violation of federal patent laws. This matter is in the early stages of litigation and we cannot determine whether the outcome of this action will have a
material adverse effect on our financial position, results of operations or cash flows.

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.

24

---



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 included in our 2003 Annual Report.

Item 6.Selected Financial Data.

Information required by this item is incorporated by reference fromSelected Financial Dataincluded in our 2003
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
Operationsincluded in our 2003 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 Operationsincluded in our 2003
Annual Report.

Item 8.Financial Statements and Supplementary Data.

Information required by this item is incorporated by reference from theReport of Independent Auditorsand from
our consolidated financial statements and related notes included in our 2003 Annual Report.

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

None.

Item 9A.Controls and Procedures.

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known
to the officers who certify our 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, our principal executive officer and principal financial officer have
concluded that our 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 us in reports that we file or submit 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 our internal control over financial reporting during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially
affect our ability to record, process, summarize and report financial information.

25

---

PART III

Item 10.Directors and Executive Officers of the Registrant.

The following table sets forth information as of September 30, 2003 as to persons who serve as our executive officers.

|Name                  |  | Age |  | Position                                                                
|--------------------- |  | --- |  | ------------------------------------------------------------------------
|Donald K. Peterson    |  | 54  |  | Chairman and Chief Executive Officer                                    
|Stephan Clark         |  | 50  |  | Group Vice President, Connectivity Solutions                            
|Pamela F. Craven      |  | 49  |  | Senior Vice President, General Counsel and Secretary                    
|Louis J. D'Ambrosio   |  | 39  |  | Group Vice President, Avaya Global Services                             
|Maryanne DiMarzo      |  | 52  |  | Senior Vice President, Human Resources                                  
|David P. Johnson      |  | 43  |  | Group Vice President, Small and Medium Business Solutions               
|Thomas A. Lesica      |  | 44  |  | Group Vice President, Global IT and Business Operations                 
|Garry K. McGuire, Sr. |  | 56  |  | Chief Financial Officer and Senior Vice President, Corporate Development
|Michael Thurk         |  | 50  |  | Group Vice President, Enterprise Communications Group                   

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 2004 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, Avaya Global 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 1987.

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 July 31, 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 2000, Ms. DiMarzo was Human Resources Vice President of 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

26

---

("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.

Thomas A. Lesicahas been our Group Vice President, Global IT and Business Operations since June, 2003. From May 2000 until
June 2003, Mr. Lesica was the Chief Operations Officer and Chief Technology Officer of New Roads, Inc. From January 1999 to May 2000, he was the Senior Vice
President and Chief Information Officer of J. Crew Inc. From January 1997 to January 1999, he was the Chief Information Officer of Pepsi-Cola Company.

Garry K. McGuire, Sr.has been our Chief Financial Officer since September 30, 2000 and our Senior Vice President,
Corporate Development, since June 2003. 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 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, Enterprise Communications Group since August 1, 2002. Mr. Thurk was our
Group Vice 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 2004 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, 2003in our Proxy Statement for the 2004 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 2004 Annual Meeting of Shareholders.

Item 14.Principal Accounting Fees and Services.

Information required by this item is incorporated by reference from the discussion under the headingAudit Committee
Informationin our Proxy Statement for the 2004 Annual Meeting of Shareholders.

27

---

PART IV

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

|      |  |                                                                                      |  | Page(s) in Exhibit 13 2003
Annual Report
to Shareholders
|----- |  | ------------------------------------------------------------------------------------ |  | --------------------------------------------------------
|(i)   |  | Consolidated Statements of Operations                                                |  | 49                                                      
|(ii)  |  | Consolidated Balance Sheets                                                          |  | 50                                                      
|(iii) |  | Consolidated Statements of Changes in Stockholders' Equity and of Comprehensive Loss |  | 51                                                      
|(iv)  |  | Consolidated Statements of Cash Flows                                                |  | 52                                                      
|(v)   |  | Notes to Consolidated Financial Statements                                           |  | 53                                                      
|      |  | (2)    Financial Statement Schedules:                                                |  |                                                         
|(i)   |  | Schedule IIValuation and Qualifying Accounts                                        |  | Page 34 of
this Annual
Report on
Form 10-K              

28

---



REPORT OF INDEPENDENT AUDITORS 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 October 21, 2003, except for Note 20, as to which the date is December 11, 2003,
appearing in the 2003 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
Florham Park, New Jersey
October 21, 2003

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 |  |                                                                                                                                                                                                                                 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Contribution and Distribution Agreement+                                                                                                                                                                                        
|2.2            |  | Asset Purchase Agreement by and among Avaya Inc., CommScope, Inc. and SS Holdings, LLC, dated October 26, 2003*                                                                                                                 
|2.3            |  | Asset Purchase and Sale Agreement, dated as of October 29, 2003 (the "Expanets Agreement"), among Expanets, Inc., NorthWestern Corporation, NorthWestern Growth Corporation, NorthWestern Capital Corporation and Avaya Inc.(15)
|2.4            |  | Amendment No. 1 to the Expanets Agreement(15)                                                                                                                                                                                   
|2.5            |  | Amendment No. 2 to the Expanets Agreement(15)                                                                                                                                                                                   
|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)                                                                                                                              
|               |  |                                                                                                                                                                                                                                 

29

---

|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)                                                                                                                                                                                                                                    
|4.14  |  | Second Supplemental Indenture, dated as of March 28, 2002, between the Company and The Bank of New York, as Trustee(6)                                                                                                                                  
|4.15  |  | 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)+
|      |  |                                                                                                                                                                                                                                                         

30

---

|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)                                                                                                                                                                                                                                                                                                                           
|10.34 |  | Amended and Restated Five Year Revolving Credit Facility Agreement, dated as of April 30, 2003, among Avaya Inc., as Borrower, the Lenders party thereto, Citibank, N.A., as Agent, Citigroup Global Markets, Inc., as Lead Arranger, Bank One, NA,
JPMorgan Chase Bank and Deutsche Bank AG New York Branch, as Co-Syndication Agents and Co-Arrangers and Commerzbank AG, New York Branch as Co-Arranger*                        
|10.35 |  | Avaya Inc. Deferred Compensation Plan, as amended as of October 31, 2003*                                                                                                                                                                                                                                                                                                                                                          
|10.36 |  | Severance Agreement, dated as of September 1, 2003, between the Company and Donald K. Peterson*                                                                                                                                                                                                                                                                                                                                    
|10.37 |  | Avaya Inc. 2000 Long Term Incentive Plan, as amended as of November 1, 2003*                                                                                                                                                                                                                                                                                                                                                       
|10.38 |  | Avaya Inc. Long Term Incentive Plan for Management Employees, as amended as of November 1, 2003*                                                                                                                                                                                                                                                                                                                                   
|13    |  | The 2003 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."*                                                                                                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    

31

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|21   |  | List of Subsidiaries of Avaya Inc.*                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------
|23   |  | Consent of PricewaterhouseCoopers LLP*                                                              
|24   |  | Power of Attorney*                                                                                  
|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*    

---

32

---



33

---





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

|Column A                               |  | Column B |     | Column C |   | Column D |  | Column E |     | 
|-------------------------------------- |  | -------- | --- | -------- | - | -------- |  | -------- | --- | 
|
|Year 2003                              |  |          |     |          |   |          |  |          |     | 
|Allowance for doubtful accounts        |  | $        | 27  |          | $ | 10       |  | $        |    | 
|Deferred tax asset valuation allowance |  |          | 612 |          |   | 118      |  |          | 93  | 
|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  |          |   |         |  |          |    | 

34

---

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:       
|                  |  |           
|December 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:                |  |                                                                          |  |                  
|*Donald K. Peterson                         |  | Chairman and Chief Executive Officer                                     |  | December 12, 2003
|Principal Financial Officer:                |  |                                                                          |  |                  
|/s/GARRY K. MCGUIRE SR.Garry K. McGuire Sr. |  | Chief Financial Officer and Senior Vice President, Corporate Development |  | December 12, 2003
|Principal Accounting Officer:               |  |                                                                          |  |                  
|/s/AMARNATH K. PAIAmarnath K. Pai           |  | Vice President, Finance Operations and Controller                        |  | December 12, 2003
|Directors:                                  |  |                                                                          |  |                  
|*Bruce Bond                                 |  | Director                                                                 |  | December 12, 2003
|*Joseph P. Landy                            |  | Director                                                                 |  | December 12, 2003
|                                            |  |                                                                          |  |                  

---

|*Mark Leslie         |  | Director |  | December 12, 2003
|-------------------- |  | -------- |  | -----------------
|*Philip Odeen        |  | Director |  | December 12, 2003
|*Daniel C. Stanzione |  | Director |  | December 12, 2003
|*Paula Stern         |  | Director |  | December 12, 2003
|*Anthony Terracciano |  | Director |  | December 12, 2003
|*Ronald Zarrella     |  | Director |  | December 12, 2003

|*By: |  | /s/GARRY K. MCGUIRE SR.Garry K. McGuire Sr. Attorney-in-Fact |  |  |  | 
|---- |  | ------------------------------------------------------------ |  |  |  | 

---

EXHIBIT INDEX

|Exhibit
Number |  |                                                                                                                                                                                                                                  |  | Page
Number
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|2.1            |  | Contribution and Distribution Agreement+                                                                                                                                                                                         |  |            
|2.2            |  | Asset Purchase Agreement by and among Avaya Inc., CommScope, Inc. and SS Holdings, LLC, dated October 26, 2003*                                                                                                                  |  |            
|2.3            |  | Asset Purchase and Sale Agreement, dated as of October 29, 2003 (the "Expanets Agreement"), among Expanets, Inc., NorthWestern Corporation, NorthWestern Growth Corporation, NorthWestern Capital Corporation and Avaya Inc.(15) |  |            
|2.4            |  | Amendment No. 1 to the Expanets Agreement(15)                                                                                                                                                                                    |  |            
|2.5            |  | Amendment No. 2 to the Expanets Agreement(15)                                                                                                                                                                                    |  |            
|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+                                                                                                                                                                                                                                                                                                                                                                                                        |  | 
|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)                                                                                                                                                                                                                                                                          |  | 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 

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|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)                                                                                                                                                                                                                                                                                                    |  | 
|10.34 |  | Amended and Restated Five Year Revolving Credit Facility Agreement, dated as of April 30, 2003, among Avaya Inc., as Borrower, the Lenders party thereto, Citibank, N.A., as Agent, Citigroup Global Markets, Inc., as Lead Arranger, Bank One, NA,
JPMorgan Chase Bank and Deutsche Bank AG New York Branch, as Co-Syndication Agents and Co-Arrangers and Commerzbank AG, New York Branch as Co-Arranger* |  | 
|10.35 |  | Avaya Inc. Deferred Compensation Plan, as amended as of October 31, 2003*                                                                                                                                                                                                                                                                                                                                   |  | 
|10.36 |  | Severance Agreement, dated as of September 1, 2003, between the Company and Donald K. Peterson*                                                                                                                                                                                                                                                                                                             |  | 
|10.37 |  | Avaya Inc. 2000 Long Term Incentive Plan, as amended as of November 1, 2003*                                                                                                                                                                                                                                                                                                                                |  | 
|10.38 |  | Avaya Inc. Long Term Incentive Plan for Management Employees, as amended as of November 1, 2003*                                                                                                                                                                                                                                                                                                            |  | 
|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.*                                                                                                                                                                                                                                                                                                                                                                         |  | 
|23    |  | Consent of PricewaterhouseCoopers LLP*                                                                                                                                                                                                                                                                                                                                                                      |  | 
|24    |  | Power of Attorney*                                                                                                                                                                                                                                                                                                                                                                                          |  | 
|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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