Avaya Reports EPS of $0.13 for Second Fiscal Quarter of 2007



    
    -- Non-GAAP EPS Excluding Restructuring Charges was 14 Cents Compared to
11
    Cents in 2006

    -- GAAP Operating Income was $81 Million; Non-GAAP Operating Income
    Excluding Restructuring Charges was $91 Million

    -- Company Generated $205 Million in Operating Cash Flow

    -- Worldwide Product Sales Grew 8 Percent Year Over Year, Including 15
    Percent Growth in Converged Voice Applications
    

    BASKING RIDGE, N.J., April 25 /CNW/ -- Avaya Inc., (NYSE:   AV) a leading
global provider of business communications applications, software and
services, today announced net income of $57 million and earnings per share of
13 cents for the second fiscal quarter of 2007 on a U.S. generally accepted
accounting principles (GAAP) basis.  In the second fiscal quarter of 2006, the
company reported net income of $38 million and earnings per share of 8 cents
on a GAAP basis.  Excluding restructuring charges, non- GAAP net income for
the second fiscal quarter of 2007 was $64 million or 14 cents per share,
compared with $50 million or 11 cents per share for the same quarter in fiscal
2006.  (See chart accompanying release.)
    Avaya's second fiscal quarter 2007 revenues increased 4.5 percent to
$1.294 billion compared to $1.238 billion in the same period last year.  Sales
of products grew 8 percent year over year, led by a 15 percent increase in
sales of converged voice applications.
    "In the second quarter we generated strong growth across our strategic
initiatives -- IP telephony, applications and professional services -- while
maintaining our cost and expense management and delivering solid bottom line
results," said Lou D'Ambrosio, president and CEO, Avaya.  "As we move through
the second fiscal half of 2007, we remain focused on delivering value through
transforming our company around Intelligent Communications and creating
customer impact through market-leading communications solutions."
    The company reported operating income for the second fiscal quarter of
2007 of $81 million and non-GAAP operating income of $91 million.  In the
second fiscal quarter of 2006, the company reported operating income of $53
million and non-GAAP operating income of $73 million. (See chart accompanying
release.)
    Avaya generated $205 million in operating cash flow during the second
fiscal quarter of 2007 compared to $169 million in the second fiscal quarter
of 2006.  During the quarter, the company used $146 million in cash to acquire
Ubiquity Software Corporation and used $94 million in cash to repurchase
shares.

    
    Fiscal 2007 Year-To-Date Results
    
    For the first six months of fiscal 2007, Avaya earned GAAP net income of
$128 million and earnings per share of 28 cents compared to net income of $109
million and earnings per share of 23 cents for the first six months of fiscal

    2006.  Revenues for the first six months of fiscal 2007 were $2.574
billion compared to $2.487 billion last year.

    
    Second Fiscal Quarter Highlights
    
    Since the end of the last quarter, Avaya has made important strides in
extending its technology leadership including the following:

    Avaya completed the acquisition of Ubiquity Software Corporation, whose
product is one of the leading software platforms for the development and
delivery of SIP solutions, a critical industry standard.  Ubiquity develops
and markets SIP-based communications software for fixed and mobile
communications service providers, systems integrators, independent software
vendors and channel partners. Ubiquity's range of products has been developed
to take advantage of the telecommunications industry's migration toward all-IP
networks.
    Avaya introduced a new solution that addresses the challenges businesses
face in responding faster, smarter and more effectively in today's "always-on"
world. It embeds Avaya Intelligent Communications capabilities into all types
of business processes, resulting in new Communications Enabled Business
Processes (CEBP) that help automate and manage the human collaboration
required to conduct business. Comprised of new software and services, the CEBP
solution enables enterprises to enhance operational efficiency, worker
productivity and customer satisfaction.
    Avaya announced broad enhancements to its IP telephony portfolio, with
the next generation of its industry-leading IP telephony platform,
Communications Manager 4.0, and availability of its complete line of
next-generation Avaya one-X(TM) Deskphones. Avaya Communication Manager 4.0
allows enterprise customers to build larger, more flexible communication
networks and delivers industry-leading business continuity capabilities
addressing the need for secure, highly available communications. The phones
will have new standards- based SIP firmware, providing an open,
standards-based platform for greater interoperability and investment
protection.
    The new Avaya one-X(TM) Portal, is a Web-based interface that enables
employees to easily and securely access Avaya telephony, messaging, mobility
and conferencing applications. The Avaya one-X(TM) Portal improves
productivity, user control and business continuity by consolidating
communications applications and directories into a single user interface that
can be accessed and managed from any PC or MAC. The Portal simplifies access
to advanced communications that can improve responsiveness and collaboration
while reducing costs to the business.  It increases the control users have
over their communications by enabling them to define with whom they will
interact in real time.
    Avaya will collaborate with Lenovo Group Ltd. on IP and unified
communications solutions that combine both companies' technologies. The joint
solution will enable Lenovo's integrated fingerprint reader and Password
Manager technologies, for the first time, to support Avaya's IP Softphone
solution to boost user authentication with a swipe of a finger. The
combination will help prevent unauthorized calls from the PC, and prevent
unauthorized access to the user's contact list and call history. The companies
will work together to enhance the IP communications experience on ThinkPad
notebooks, giving business users the highest levels of security, usability and
quality of service as they place and receive phone calls from their notebook
PCs.
    The new Avaya Customer Interaction Suite capabilities will enable
businesses to deliver superior customer service in a cost-effective manner by
putting the enterprise at the service of the customer.  The new capabilities
allow customers to be served by the most capable resources throughout the
enterprise using new capabilities such as streaming video while providing a
complete view of the customer experience.  Avaya's new capabilities include
the integration of live or streaming video, delivering a richer experience for
those customers interacting through PCs or smart mobile devices. New analytics
capabilities allow enterprises to manage and tailor the customer experience
through the use of real-time monitoring and historical data analysis tools.
    Avaya added to its Unified Communications portfolio to make it easier for
users of Microsoft Corp. products to communicate and collaborate from the
application, location and device that works best for them.  Avaya Unified
Communications Solutions for Microsoft users integrate Avaya's sophisticated
telephony, conferencing and messaging applications with Microsoft Office
Communicator, Office Outlook, Office Sharepoint, Internet Explorer and
Microsoft Live Meeting applications and Windows Mobile 5.0 to provide new
value for users at the desktop or on a mobile device.
    Avaya joined the Google Enterprise Professional(TM) program to develop
new capabilities for small businesses around Google's enterprise products.  As
part on this program, Avaya will develop, market and support offers that
integrate Avaya's advanced communications solutions for small businesses with
the Google Apps(TM) Premier Edition, a subscription services solution for
email, instant messaging, calendar and Web publishing services.
    The company made significant additions to its suite of Unified
Communications solutions for the IBM Lotus(R) platform.  The solutions
represent integration with the most current versions of Lotus solutions in
addition to extending Avaya's voice communications deeper into the Lotus
collaborative environment.
    Avaya announced significant enhancements to its suite of converged IP
telephony solutions specially designed for small and mid-size businesses
(SMBs).  Two versions of software for Avaya IP Office, the company's flagship
solution for SMBs, and a new IP Office 500 communications server deliver a
solution that enables SMBs to buy only what they need today, while easily
adding users or functionality via software licenses that are also compatible
with existing IP Office solutions.

    
    Forward-Looking Statements
    
    Certain statements made in this press release and in the earnings
conference call are forward-looking statements within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
These statements regarding Avaya's expected performance and outlook for
operating results are based on current expectations, forecasts and assumptions
that involve risks and uncertainties that could cause actual outcomes and
results to differ materially. These risks and uncertainties include, but are
not limited to:

    
    -- price and product competition, including from competitors who may offer
       products and applications similar to those we offer as part of another
       offering, and from current leaders in information technology which
       benefit from the convergence of enterprise voice and data networks;
    -- rapid or disruptive technological development, including the effects of
       the technology shift from traditional TDM to IP telephony;
    -- dependence on new product development;
    -- customer demand for our products and services, including risks
       specifically associated with the services business and, in particular,
       the maintenance and rental and managed services lines of business,
       primarily due to renegotiations of customer contracts and changes in
       scope, pricing erosion and cancellations;
    -- supply issues related to our outsourced manufacturing operations,
       logistics, distribution or components;
    -- risks related to inventory, including warranty costs, obsolescence
       charges, excess capacity, material and labor costs, and our
       distributors' decisions regarding their own inventory levels;
    -- general industry and market conditions and growth rates and general
       domestic and international economic conditions including interest rate
       and currency exchange rate fluctuations;
    -- the economic, political and other risks associated with international
       sales and operations, including increased exposure to currency
       fluctuations and to European economies as a result of a large
       percentage of our business being conducted in Europe;
    -- the ability to successfully integrate acquired companies, which may
       require significant management time and attention;
    -- the ability to attract and retain qualified employees;
    -- control of costs and expenses, including difficulties in completing
       restructuring actions in a timely and efficient manner due to labor
       laws and required approvals;
    -- U.S. and non-U.S. government regulation; and
    -- the ability to form and implement alliances.
    

    For a further list and description of such risks and uncertainties,
please refer to the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors" sections of Avaya's
filings with the SEC, including, but not limited to, its annual report on Form
10-K and quarterly reports on Form 10-Q, which are available at
http://www.sec.gov. Avaya disclaims any intention or obligation to update or
revise any forward- looking statements, whether as a result of new
information, future events or otherwise.

    
    Use of Non-GAAP Financial Measures
    
    In an effort to provide investors with additional information regarding
the company's results as determined by accounting principles generally
accepted in the United States (GAAP), the company has also disclosed non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP
earnings per share and net cash in this press release, in the conference call
and in the supplementary materials accompanying the conference call discussing
second quarter earnings results.
    These non-GAAP financial measures are not in accordance with, or an
alternative for, generally accepted accounting principles in the United States
and they have limitations in that they do not reflect all amounts associated
with Avaya's results of operations as determined in accordance with GAAP.
These measures should only be used in evaluating Avaya's results of operations
together with the corresponding GAAP measures.
    Avaya believes that the presentation of non-GAAP operating income, non-
GAAP operating margin, non-GAAP net income and non-GAAP earnings per share,
which exclude the impact of restructuring charges, acquisition-related charges
and certain income tax items, provides meaningful supplemental information
regarding Avaya's performance.  These non-GAAP financial measures also help
investors compare Avaya's financial results for the current quarter to its
financial results for prior quarters and the prior fiscal year.  In addition,
Avaya's management uses these measures when reviewing the Company's financial
results and to further understand the Company's operating performance.
Management believes that the presentation of net cash in the supplementary
materials accompanying the conference call provides useful information to
investors about the Company's ability to satisfy its debt obligations with
currently available funds.
    The reconciliation of these non-GAAP measures to their most directly
comparable GAAP financial measures is included at the end of this press
release and as part of the supplementary materials accompanying the conference
call in a table entitled "Reconciliation of Non-GAAP Financial Measures."  The
supplementary materials are available on the Avaya investor relations website
at http://www.avaya.com/investors and will be included in a subsequent filing
of a Form 8-K with the SEC.

    
    Conference Call and Webcast
    
    Avaya will host a conference call with a listen-only Q&A session to
discuss these results at 5:00 p.m. EDT on Wednesday, April 25, 2007.  To
ensure you are on the call from the start, we suggest you access the call
10-15 minutes early by dialing:
    
    Within and outside the United States: 706-634-2454.
    
    For those unable to participate, there will be a playback available from
8:00 p.m. EDT April 25 through May 1, 2007.  For the replay, if you are
calling from within the United States, please dial 800-642-1687.  If you are
calling from outside the United States, please dial 706-645-9291.  The
passcode for the replay is 1950002.
    WEBCAST Information: Avaya will webcast this conference call live, with a
listen-only Q&A session.  To ensure that you are on the webcast, we suggest
that you access our website (http://www.avaya.com/investors) 10-15 minutes
prior to the start.  Supplementary materials accompanying the conference call
are available at the same location.  Following the live webcast, a replay will
be available on our archives at the same web address.

    
    About Avaya
    
    Avaya delivers Intelligent Communications solutions that help companies
transform their businesses to achieve marketplace advantage. More than 1
million businesses worldwide, including more than 90 percent of the FORTUNE
500(R), use Avaya solutions for IP Telephony, Unified Communications, Contact
Centers and Communications-Enabled Business Processes. Avaya Global Services
provides comprehensive service and support for companies, small to large. For
more information visit the Avaya Web site, http://www.avaya.com.



    
                                  Avaya Inc.
                      Consolidated Statements of Income
    (Unaudited; Dollars and Shares in Millions, except per share amounts)


                                            For the three    For the six
                                            months ended     months ended
                                              March 31,        March 31,
                                            2007    2006     2007     2006
       REVENUE
          Sales of products                 $639    $593   $1,258   $1,184
          Services                           509     492    1,018      996
          Rental and managed services        146     153      298      307
                                           1,294   1,238    2,574    2,487
       COST
          Sales of products                  301     275      590      552
          Services                           324     319      648      641
          Rental and managed services         71      66      139      127
                                             696     660    1,377    1,320
       GROSS MARGIN                          598     578    1,197    1,167

       OPERATING EXPENSES
          Selling, general and
           administrative                    393     399      782      784
          Research and development           114     106      228      203
          Restructuring charges, net          10      20       16       20
       TOTAL OPERATING EXPENSES              517     525    1,026    1,007

       OPERATING INCOME                       81      53      171      160

       Other income, net                       7       6       13       11
       Interest expense                        -      (2)       -       (3)

       INCOME BEFORE INCOME TAXES             88      57      184      168

       Provision for income taxes             31      19       56       59

       NET INCOME                            $57     $38     $128     $109

       EARNINGS PER SHARE - BASIC          $0.13   $0.08    $0.28    $0.23

       EARNINGS PER SHARE - DILUTED        $0.13   $0.08    $0.28    $0.23

       Weighted Average Shares
        Outstanding - Basic                  453     466      453      469
       Weighted Average Shares
        Outstanding - Diluted                457     472      458      475



                                    Avaya Inc.
                           Consolidated Balance Sheets
                   As of March 31, 2007 and September 30, 2006
            (Unaudited; Dollars in Millions, except per share amounts)


                                      March 31, 2007   September 30, 2006(a)
      ASSETS
      Current assets:
        Cash and cash equivalents           $829                 $899
        Accounts receivable less
         allowances of $52 and $57
         as of March 31, 2007 and
         September 30, 2006,
         respectively                        887                  871
        Inventory                            282                  285
        Deferred income taxes, net           162                  153
        Other current assets                 204                  151
        TOTAL CURRENT ASSETS               2,364                2,359

        Property, plant and
         equipment, net                      644                  668
        Deferred income taxes, net           740                  787
        Intangible assets (b)                290                  263
        Goodwill (c)                       1,105                  941
        Other assets                         203                  182
             TOTAL ASSETS                 $5,346               $5,200

      LIABILITIES
      Current liabilities:
        Accounts payable                    $398                 $418
        Payroll and benefit obligations      365                  377
        Deferred revenue                     303                  286
        Business restructuring reserve        76                   98
        Other current liabilities            246                  249
        TOTAL CURRENT LIABILITIES          1,388                1,428

        Benefit obligations                1,349                1,321
        Deferred income taxes, net            83                   77
        Other liabilities                    267                  288
        TOTAL NON-CURRENT LIABILITIES      1,699                1,686

        Commitments and contingencies

      STOCKHOLDERS' EQUITY
        Common stock, par value $0.01 per
         share, 1.5 billion shares
         authorized, 450,645,215 and
         452,203,778 issued (including
         1,058,297 and 461,429 treasury
         shares) as of March 31, 2007 and
         September 30, 2006, respectively      5                    5
        Additional paid-in capital         2,622                2,637
        Retained earnings                    276                  148
        Accumulated other
         comprehensive loss                 (631)                (698)
        Less treasury stock at cost          (13)                  (6)
        TOTAL STOCKHOLDERS' EQUITY         2,259                2,086
             TOTAL LIABILITIES AND
              STOCKHOLDERS' EQUITY        $5,346               $5,200


      Notes to the Balance Sheets:
      (a) Certain prior year amounts have been reclassified to conform to the
          current period presentation.

      (b) Intangible assets include $176 million related to Tenovis, $41
          million related to Ubiquity, $24 million related to Spectel, $6
          million related to Nimcat and $3 million related to Traverse as of
          March 31, 2007.

      (c) Goodwill includes $619 million related to Tenovis, $123 million
          related to Ubiquity, $64 million related to Spectel, $26 million
          related to Nimcat and $8 million related to Traverse as of March 31,
          2007.



                                      Avaya Inc.
                                  Operating Segments
                             Revenue and Operating Income
                                   Quarterly Trend
                          (Unaudited; Dollars in Millions)

    REVENUE

                     For the Fiscal Year Ended       For the Fiscal Year Ended
                         September 30, 2006             September 30, 2007
                    Q1     Q2     Q3     Q4    YTD     Q1     Q2  Q3 Q4   YTD
    Global
     Communications
     Solutions     $661   $661   $704   $760 $2,786   $682   $698       $1,380
    Avaya Global
     Services       588    577    593    604  2,362    598    596        1,194
       Total
        Avaya    $1,249 $1,238 $1,297 $1,364 $5,148 $1,280 $1,294 $- $- $2,574


    OPERATING INCOME

                      For the Fiscal Year Ended      For the Fiscal Year Ended
                         September 30, 2006              September 30, 2007
                     Q1     Q2     Q3     Q4    YTD     Q1     Q2 Q3 Q4   YTD
    Global
     Communications
     Solutions      $43    $32    $36    $86   $197    $22    $38          $60
    Avaya Global
     Services        60     41     34     36    171     53     56          109
    Corporate: (A)    4    (20)   (42)   (47)  (105)    15    (13)           2
      Total
       Avaya       $107    $53    $28    $75   $263    $90    $81 $- $-   $171
    

    (A) The segments are managed as two individual businesses and, as a
result, include certain allocated costs and expenses of shared services, such
as information technology, human resources, legal and finance.  At the
beginning of each fiscal year, the amount of certain corporate overhead
expenses, including targeted annual incentive awards, to be charged to
operating segments is determined and fixed for the entire year in the annual
plan.  The annual incentive award accrual is adjusted quarterly based on
actual year to date results and those estimated for the remainder of the year.
This adjustment of the annual incentive award accrual, as well as any other
over/under absorption of corporate overheads against plan is recorded and
reported within the Corporate caption.



    
                                Avaya Inc.
                    Condensed Statements of Cash Flows
             For the Six Months Ended March 31, 2007 and 2006
                     (Unaudited; Dollars in Millions)

                                              For the six       For the six
                                              months ended      months ended
                                              March 31, 2007    March 31, 2006
     Net cash provided by operating
      activities of continuing operations          $222             $275

     Net cash (used for) investing
      activities of continuing operations          (245)(a)          (99)(a)

     Net cash (used for) financing
      activities of continuing operations           (66)(b)         (179)(b)

     Effect of exchange rate changes on
      cash and cash equivalents                      19               (2)

     Net (decrease) in cash and cash equivalents    (70)              (5)

     Cash and cash equivalents at
      beginning of the period                       899              750

     Cash and cash equivalents at
      end of the period                            $829             $745


     (a)  Includes capital expenditures of $46 and $54 and capitalized
          software development costs of $41 and $37 for the six months ended
          March 31, 2007 and 2006, respectively.

          The six months ended March 31, 2007 also include $146 used for the
          acquisition of Ubiquity and $15 used for the acquisition of Traverse
          Networks.

     (b)  Includes $94 and $193 related to the repurchase of Avaya common
          stock for the six months ended March 31, 2007 and 2006,
          respectively.



                                  Avaya Inc.
                         Supplemental Revenue Tables
                       (Unaudited, Dollars in Millions)

    Revenue by Geography
                                              Second Fiscal Quarter
                                                      Mix
                                 Dollars in
      2Q06   3Q06   4Q06   1Q07  millions  2007   2006  2007  2006   Change

      $719   $753   $788   $732  U.S.      $746   $719   58%  58%  $27    3.8%

                                 Outside
                                  the U.S:
       182    182    183    186   Germany   178    182   14%  15%   (4)  -2.2%

                                 EMEA -
                                  Europe/
                                  Middle
                                  East/
                                  Africa
                                 (Excluding
       174    205    208    203   Germany)  190    174   14%  14%   16    9.2%

                                 Total
       356    387    391    389   EMEA      368    356   28%  29%   12    3.4%

                                 APAC -
                                  Asia
        99     87    110     88   Pacific   111     99    9%   8%   12   12.1%

                                 Americas,
        64     70     75     71   non-U.S.   69     64    5%   5%    5    7.8%

                                 Total
                                  outside
       519    544    576    548   the U.S.  548    519   42%  42%   29    5.6%

                                 Total
    $1,238 $1,297 $1,364 $1,280  revenue $1,294 $1,238  100% 100%  $56    4.5%


    Revenue by Type
                                              Second Fiscal Quarter
                                                      Mix
                                 Dollars in
      2Q06   3Q06   4Q06   1Q07  millions  2007   2006  2007  2006   Change

                                 Sales of
      $593   $636   $690   $619   products $639   $593   49%  48%  $46    7.8%

                                 Services
       492    507    514    509    (b)      509    492   39%  40%   17    3.5%

                                 Rental and
                                  managed
                                  services
       153    154    160    152   (a), (b)  146    153   12%  12%   (7)  -4.6%

                                 Total
    $1,238 $1,297 $1,364 $1,280  revenue $1,294 $1,238  100% 100%  $56    4.5%


    Sales of Products by Channel
                                              Second Fiscal Quarter
                                                      Mix
                                 Dollars in
      2Q06   3Q06   4Q06   1Q07  millions  2007   2006  2007  2006   Change

                                 Direct
      $250   $277   $302   $259   (b)      $277   $250   43%  42%  $27   10.8%

                                 Indirect
       343    359    388    360   (b)       362    343   57%  58%   19    5.5%

                                 Total
                                  sales of
      $593   $636   $690   $619   products $639   $593  100% 100%  $46    7.8%


    GCS Revenue by Class
                                              Second Fiscal Quarter
                                                      Mix
                                 Dollars in
      2Q06   3Q06   4Q06   1Q07  millions  2007   2006  2007  2006   Change

                                 Large
                                  Communic-
                                  ations
      $414   $455   $483   $435   Systems  $440   $414   63%  63%  $26    6.3%

                                 Small
                                  Communic-
                                  ations
        94     92     96     85   Systems    84     94   12%  14%  (10) -10.6%

                                 Converged
                                  Voice
                                  Applic-
       141    144    169    151   ations    162    141   23%  21%   21   14.9%

        12     13     12     11  Other       12     12    2%   2%    -    0.0%

                                 Total
                                  revenue -
      $661   $704   $760   $682   GCS      $698   $661  100% 100%  $37    5.6%


    AGS Revenue by Class
                                              Second Fiscal Quarter
                                                      Mix
                                 Dollars in
      2Q06   3Q06   4Q06   1Q07  millions  2007   2006  2007  2006   Change

                                 Product
                                  Support
                                  Services
      $401   $402   $404   $411   (b)      $412   $401   69%  70%  $11    2.7%

                                 Consulting
                                  and Systems
                                  Integra-
        89    106    111     98   tion (b)   97     89   16%  15%    8    9.0%

                                 Global
                                  Managed
                                  Services
        86     84     89     89   (b)        87     86   15%  15%    1    1.2%


                                 Services -
         1      1      -      -   Other (b)   -      1    0%   0%   (1)-100.0%

                                 Total
                                  revenue -
      $577   $593   $604   $598   AGS      $596   $577  100% 100%  $19    3.3%


    (a) The services portion falls within the global managed services line in
        the AGS Revenue by Class chart and the product portion is spread among
        the applicable line items in the GCS Revenue by Class chart.

    (b) Prior year revenue amounts have been reclassified to conform to
        current interim period presentation.



                                    Avaya Inc.
                           Supplemental Revenue Tables
                         (Unaudited, Dollars in Millions)

    Revenue by Geography
                                           Six Months Ended March 31,
                                                       Mix
    Dollars in millions               2007    2006  2007  2006      Change
    U.S.                            $1,478  $1,453   57%   58%   $25     1.7%
    Outside the U.S:
       Germany                         364     368   14%   15%    (4)   -1.1%
       EMEA - Europe/Middle
        East/Africa
        (Excluding Germany)            393     352   15%   14%    41    11.6%
       Total EMEA                      757     720   29%   29%    37     5.1%
       APAC - Asia Pacific             199     186    8%    8%    13     7.0%
       Americas, non-U.S.              140     128    6%    5%    12     9.4%
       Total outside the U.S.        1,096   1,034   43%   42%    62     6.0%
    Total revenue                   $2,574  $2,487  100%  100%   $87     3.5%

    Revenue by Type
                                           Six Months Ended March 31,
                                                       Mix
    Dollars in millions               2007    2006  2007  2006      Change
    Sales of products               $1,258  $1,184   49%   47%   $74     6.3%
    Services                         1,018     996   39%   40%    22     2.2%
    Rental and managed services (a)    298     307   12%   13%    (9)   -2.9%
    Total revenue                   $2,574  $2,487  100%  100%   $87     3.5%

    Sales of Products by Channel
                                           Six Months Ended March 31,
                                                       Mix
    Dollars in millions               2007    2006  2007  2006      Change
    Direct (b)                        $536    $518   43%   44%   $18     3.5%
    Indirect (b)                       722     666   57%   56%    56     8.4%
    Total sales of products         $1,258  $1,184  100%  100%   $74     6.3%

    GCS Revenue by Class
                                           Six Months Ended March 31,
                                                       Mix
    Dollars in millions               2007    2006  2007  2006     Change
    Large Communications Systems      $875    $827   63%   62%   $48     5.8%
    Small Communications Systems       169     183   12%   14%   (14)   -7.7%
    Converged Voice Applications       313     292   23%   22%    21     7.2%
    Other                               23      20    2%    2%     3    15.0%
    Total revenue - GCS             $1,380  $1,322  100%  100%   $58     4.4%

    AGS Revenue by Class
                                           Six Months Ended March 31,
                                                       Mix
    Dollars in millions               2007    2006  2007  2006     Change
    Product Support Services (b)      $823    $813   69%   70%   $10     1.2%
    Consulting and Systems
     Integration (b)                   195     184   16%   16%    11     6.0%
    Global Managed Services (b)        176     167   15%   14%     9     5.4%
    Services - other (b)                 -       1    0%    0%    (1) -100.0%
    Total revenue - AGS             $1,194  $1,165  100%  100%   $29     2.5%


    (a) The services portion falls within the managed services line in the AGS
        Revenue by Class chart and the product portion is spread among the
        applicable line items in the GCS Revenue by Class chart.

    (b) Prior year revenue amounts have been reclassified to conform to
        current interim period presentation.



                                     Avaya Inc.
                   Reconciliation of Non-GAAP Financial Measures
       (Unaudited; Dollars and Shares in Millions, except per share amounts)

                                           For the three     For the three
       Operating Income:                    months ended      months ended
                                             March 31,         March 31,
                                                2007              2006

       GAAP Operating Income                    $81               $53
       GAAP Operating Margin                    6.3%              4.3%

       Item Included in Operating Income:
            Restructuring charges, net          (10)              (20)

       Non-GAAP Operating Income                $91               $73
       Non-GAAP Operating Margin (Non-
        GAAP Operating Income / Revenue)        7.0%              5.9%


                                           For the three     For the three
       Net Income:                          months ended      months ended
                                             March 31,         March 31,
                                                2007              2006

       GAAP Net Income                          $57               $38

       Item Included in Net Income:
            Restructuring charges, net,
             after tax                           (7)              (12)

       Non-GAAP Net Income                      $64               $50

       Diluted Shares                           457               472

       Non-GAAP EPS (Non-GAAP Net Income /
        Diluted Shares)                       $0.14             $0.11
       GAAP EPS                               $0.13             $0.08
    

    Avaya defines non-GAAP operating income, non-GAAP operating margin, non-
GAAP net income and non-GAAP earnings per share as excluding the impact of
restructuring charges, acquisition-related charges and certain income tax
items.






For further information:

For further information: Media, Lynn Newman, +1-908-953-8692, mobile, 
+1-908-672-1321, lynnnewman@avaya.com, or Investors, Matthew Booher, 
+1-908-953-7500, mbooher@avaya.com, both of Avaya Inc. Web Site:
http://www.avaya.com                  http://www.avaya.com/investors

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AVAYA INC.

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