Lucent Technologies Reports Second Fiscal Quarter Results

Revenues for ongoing Lucent operations up 26 percent - Overall earnings per share increase 35 percent to 23 cents (25 cents, pro forma(1))

Murray Hill, NJ. Lucent Technologies (NYSE: LU) today said that reported net income for its second fiscal quarter ended March 31, 2000 rose 41 percent to $754 million or 23 cents a share (25 cents a share on a pro forma basis(1)). This compares with $535 million or 17 cents a share a year ago (19 cents a share, pro forma). Revenues increased 17 percent to $10.256 billion versus $8.783 billion a year ago.

Ongoing Lucent Operations*

Pro forma earnings per share(1) for ongoing Lucent operations, which exclude the parts of the enterprise networks business that are expected to be spun off later this year and the consumer products business, which was sold, rose 24 percent to 21 cents a share. Revenues for ongoing operations increased 26 percent to $8.325 billion versus $6.604 billion a year ago.

"Lucent is regaining its momentum this quarter with strong growth in wireless, Internet infrastructure -- including optical and data networking systems and optical fiber -- professional services and optoelectronics," said Richard McGinn, Lucent chairman and chief executive officer. He noted that revenues for both wireless and service provider Internet infrastructure increased by more than 50 percent.

He also said the company expects to see accelerating growth in optical networking based on strong contract momentum. Lucent announced more than $1 billion in new contracts for its optical networking products during the quarter. Overall contract backlog for ongoing operations increased by 25 percent year-over-year.

"We continue to take steps to sharpen our strategic focus and allow us to capitalize even more quickly on the fastest growth opportunities in communications networking," McGinn stated. He cited the company s recent announcements that it expects to spin off parts of its enterprise networks business (the new Enterprise Networks Group) and change its global manufacturing strategy (see separate news release today) as examples of these efforts.

Second Half of Fiscal 2000

McGinn said Lucent expects that revenues from ongoing operations will continue to grow in excess of 20 percent for the remaining two quarters of fiscal 2000 on a year-over-year basis. Given the slow start to the year, this is expected to result in full-year fiscal 2000 revenue growth of about 17 percent. Pro forma earnings per share growth for ongoing Lucent operations in fiscal 2000 is also expected to be about 17 percent, again reflecting the slow start to the year and extensive investments in growth markets like optical and optoelectronics, including the dilution associated with the acquisitions of Ortel and Agere. REVIEW OF OPERATIONS

Service Provider Networks

Revenues increased by 23 percent over the year-ago quarter to $6.470 billion, driven by sales of wireless, service provider Internet infrastructure, optical networking equipment and NetworkCare(R) Professional Services. Revenues were led by sales to wireless service providers, competitive and incumbent local exchange carriers, and long distance carriers.

Within the U.S., revenues increased 14 percent over the year-ago quarter. Revenues outside the U.S. increased about 48 percent and represented approximately 33 percent of revenues. Since the end of the first fiscal quarter, the Service Provider Networks group: · Announced the industry s most advanced portfolio of 10 gigabit optical networking products and an enhancement to its flagship 80-channel dense wavelength division multiplexing system, quadrupling to 320 the number of wavelengths the system can handle; · Entered into a venture with TeraBeam Networks to develop and deploy TeraBeam s fiberless optical networking system that provides high-speed data networking between local and wide area networks; · Announced more than $800 million in wireless contracts, including infrastructure contracts for 3G wireless broadband; · Was cited as the worldwide market share leader in the Frame Relay/ATM market in reports by five research firms, and as the worldwide leader in Voice-Over-Internet Protocol (VoIP); and · Announced that Lucent s Stinger DSL access system has been deployed by more than 40 service providers in more than a dozen countries since the product was launched last September. According to Dell Oro Group, Lucent leads the SDSL (symmetric digital subscriber line) segment with a 38 percent share of worldwide revenues.

Microelectronics & Communications Technologies

Revenues increased by 38 percent over the year-ago quarter to $1.741 billion, reflecting increased sales of optoelectronic components and optical fiber, as well as increased sales of customized chips for high-speed communications and data networking systems.

Within the U.S., revenues increased 56 percent over the year-ago quarter. Revenues outside the U.S. increased about 15 percent and represented approximately 37 percent of revenues. Key Microelectronics and Communications Technologies announcements in the quarter included: · Agreements to acquire Ortel, a leader in optoelectronic components for the cable television and data networking markets and Agere, a maker of semiconductors for next-generation networking; and the acquisition of certain assets of VTC, a maker of semiconductor components for disk drives; · A $30 million expansion of Lucent s optoelectronic components operations; and · Plans to invest more than $650 million during the next two years to expand its fiber optic cable manufacturing operations around the world.

Enterprise Networks

Revenues decreased by 8 percent from the year-ago quarter to $1.950 billion. Revenues were led by sales of the Definity(R) Enterprise Communications Server to large businesses, including those with call center applications. Those increases were offset by lower sales of messaging systems and Systimax(R) structured cabling solutions. Within the U.S., revenues decreased 10 percent over the year-ago quarter. Revenues outside the U.S. increased about 2 percent and represented approximately 24 percent of revenues.

Recently, the new Enterprise Networks Group sold its U.S. small and mid-sized business sales group to Expanets, a partner entity of NorthWestern Corporation, giving the new Enterprise Networks Group the most extensive indirect sales channel serving small and mid-sized businesses in the U.S.

Also, the new Enterprise Networks Group last week announced several major initiatives to provide next-generation systems and solutions for personalized eBusiness communication. By the end of September, Lucent Technologies expects to 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 spinoff is subject to several conditions, including receipt of a favorable tax ruling.

COST AND EXPENSES

As a percentage of revenue, gross margin was 42.1 percent compared with 48.2 percent in the year-ago quarter, reflecting a change in product mix and ramp up costs associated with capacity expansion in high growth areas. Gross margin for ongoing operations, excluding one-time events and acquired technology amortization, was 41.5 percent of revenues. Selling, general and administrative expenses (SG&A), excluding one-time events and goodwill and acquired technology amortization, were 19.2 percent of revenues in the quarter, compared to 22.3 percent a year ago. SG&A for ongoing operations, excluding one-time events and goodwill and acquired technology amortization, was 16.0 percent of revenues.

Research and development (R&D) spending was 10.7 percent of overall revenues for the quarter and 12.2 percent of revenues for ongoing operations. Net income for the quarter was driven primarily by revenue growth, a reduction in operating expenses and a continuing focus on reducing the company s effective tax rate.

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 .

This news release contains forward-looking statements 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 price and product competition, dependence on new product development, reliance on major customers, customer demand for our products and services, the ability to successfully integrate acquired companies, obtaining a favorable tax ruling for the spin-off of the new Enterprise Networks Group, any adjustments to preliminary estimates, control of costs and expenses, international growth, general industry and market interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see the reports filed by Lucent with the Securities and Exchange Commission. Lucent disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:
Jeff Baum, 908-582-7635, or home, 973-983-7086, or
jbaum@lucent.com, or Lynn Newman, 908-582-3193, or home, 973-993-8033, or lynnnewman@lucent.com,
both of Lucent Technologies Jeff Baum, 908-582-7635, or home, 973-983-7086, or
jbaum@lucent.com, or Lynn
Newman, 908-582-3193, or home, 973-993-8033, or lynnnewman@lucent.com,
both of Lucent Technologies
E-mail: lynnnewman@lucent.com
Web site: http://www.lucent.com