Avaya Set for Further Restructuring in 2007

– Avaya Reports Fourth Fiscal Quarter and Fiscal Year 2006

– Sales increase but so does financial provision for further restructuring in 2007.

Avaya’s fourth fiscal quarter 2006 revenues increased five percent to $1.364 billion compared to $1.296 billion in the same period last year. Year-over-year revenues increased in both the company’s products and services segments, as well as across all geographic regions. Fiscal 2006 revenues were $5.148 billion compared to fiscal 2005 revenues of $4.902 billion.

Worldwide product sales rose nine percent compared to the same period last year, with IP line shipments increasing in the high 20 percent range.

“We finished fiscal 2006 with a strong quarter,” said Lou D’Ambrosio, president and CEO, Avaya. “The transition by enterprises to IP telephony and Intelligent Communications continued to drive growth in product sales and IP line shipments. Also in the quarter, we captured operating leverage from our revenue growth and generated strong cash flow. And we took action to more effectively align our resources to capture market opportunities and to improve our cost structure.

“As we move forward in fiscal 2007, we are focused on driving growth and extending our market leadership around Intelligent Communications, tenacious execution and productivity enhancements to deliver sustained value creation,” Mr. D’Ambrosio said.

As previously announced, during the fourth fiscal quarter Avaya incurred restructuring charges of $62 million pre-tax, primarily related to workforce reductions in the United States and Europe.

Avaya also said it expects to incur additional restructuring charges in the range of approximately $65 million to $75 million in the first half of fiscal 2007 related to workforce reductions. The savings from the fourth quarter of fiscal 2006 and first half of fiscal 2007 actions will be used to offset increased compensation-related expenses and to enhance and upgrade workforce skills, reinvest in the business to strengthen Avaya’s competitiveness and support revenue growth.

Once the company has completed these additional restructuring actions, Avaya believes it should be able to reasonably estimate and make an addition to its reserve for future post employment benefits.

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