Lucent Technologies Announces Change in Global Manufacturing Strategy

- Focus will be on high-end process manufacturing and systems integration - Will increase use of contract manufacturing

Murray Hill, NJ. To more effectively meet the rapidly changing needs of its customers, Lucent Technologies (NYSE: LU) announced today it will transition its global equipment manufacturing operations to focus on high-end process manufacturing and systems integration, including new product introductions, supply chain management and system testing.

The company, including its New Enterprise Networks Group which is being spun off, indicated that it will expand its relationships with contract manufacturing partners. Lucent said this step would enable it to respond more quickly to changes in customers demands and allow it to focus its capital in other critical areas.

"Our markets and our technologies have changed dramatically in the past few years, and our manufacturing strategy needs to as well," said Richard McGinn, chairman and CEO of Lucent Technologies. "Today there are companies whose sole business is manufacturing sophisticated electronics equipment. They can provide us with the high-quality products and flexibility we need to increase our speed to market and improve our cash flow. We will concentrate our resources in the areas where we add the most value, such as R&D, systems integration, customer support, network design, consulting and installation, as well as high-end process manufacturing."

McGinn said manufacturing will remain an important part of Lucent s operations, especially high-end process manufacturing done at semiconductor, optoelectronic and fiber optic plants where it would be virtually impossible to duplicate that level of high-tech manufacturing capability.

Lucent also will establish several facilities as systems integration houses that will pull together the networking solutions for customers by assembling and integrating products from contract manufacturing partners with the offerings from Lucent s software and network design centers. Lucent also plans on increasing its emphasis on the professional services business as it meets growing demand for the installation of complex service provider networks. "We are actively working with our unions and the nation s leading contract manufacturers. We intend to transition our people and facilities in a way that maximizes opportunities for employees, minimizes the impact on our communities and meets Lucent s needs for more flexible manufacturing capabilities," said McGinn.

The company is looking at a range of approaches, including the possibility of having a contract manufacturer and/or an employee group assume a facility and the people and have Lucent contract with them to produce the product. McGinn noted that expanding the use of contract manufacturers also would have a positive impact on return on assets and cash flow.

"We estimate that we can improve cash flow from operations significantly over the next few years mainly through reductions in inventory and reduced capital expenditures," McGinn said. "This will give us the financial flexibility we need to aggressively follow through on our business strategy of focusing on the high-growth areas in the communications networking markets."

Lucent has more than 30,000 employees engaged in manufacturing in the United States at 17 locations. There are about 7,000 manufacturing employees in the Enterprise Networks Group, which is being spun off. About 12,000 employees in five facilities are involved in Lucent s high-end process manufacturing operations in the U.S., which are being retained. The company has not yet determined how many employees it will need for the systems integration houses, and it hopes to place a significant portion with contract manufacturers in its existing facilities. The company estimates that most of the transition will be completed in the next 18 to 24 months.

About Lucent Technologies

By the end of September, Lucent Technologies will spin off its enterprise communications systems, business cabling and LAN-based data networking businesses into a separate $8 billion company focused on delivering next-generation communications networks for enterprises. The new company will be the worldwide leader in messaging and call centers, the U.S. leader in voice communications systems, and will have the largest sales and services force in the industry.

Lucent Technologies, headquartered in Murray Hill, N.J., USA, designs and delivers the systems, software, silicon and services for next-generation communications networks for service providers and enterprises. Backed by the research and development of Bell Labs, Lucent focuses on high-growth areas such as optical and wireless networks; Internet infrastructure; communications software; communications semiconductors and optoelectronics; Web-based enterprise solutions that link private and public networks; and professional network design and consulting services. For more information on Lucent Technologies, visit its Web site at http://www.lucent.com.

Contact:
Mary Ward, 908-582-7658, or home, 732-424-0215, or maryward@lucent.com, or
Bill Price, 908-582-4820, or home, 973-515-5038, or
williamprice@lucent.com, both of Lucent Technologies