Avaya Reports Revenues, Sees Softness in Market

Avaya's second fiscal quarter 2005 revenues increased 21% to $1.222 billion compared to revenue of $1.006 billion in the second fiscal quarter of 2004. The revenue increase reflected the impact of recent acquisitions and revenue growth outside of the U.S. The company said U.S. product and services revenues declined year-over-year. Avaya's overall IP product sales rose nearly 30% year-over-year. Outside of the U.S., IP product sales rose more than 50% compared to the year ago period.


Avaya reported income from continuing operations of $36 million or seven cents per diluted share in the second fiscal quarter of 2005. These results include six cents of dilution related to the results of operations from the Tenovis acquisition. In the same quarter last year the company reported income from continuing operations of $103 million or 22 cents per diluted share. Included in the $103 million were one-time items that had a net favorable impact of $63 million or 13 cents per diluted share.


Avaya said it expects its performance in the second half will improve with sequential increases in the third fiscal quarter in revenues and profitability and with revenue growth and profitability accelerating in the fourth fiscal quarter. However, the company believes it will not meet its previously stated goals for growing revenues, operating income and operating margin in fiscal 2005.


"Although our performance this quarter was not up to our expectations, we're confident in the opportunity in IP telephony and our competitive advantage," said Don Peterson, chairman and CEO, Avaya. "Three key factors affected our overall performance: our implementation of a new go-to-market model in the U.S., which has created some disruption affecting U.S. sales, the impact of the Tenovis integration and early signs of potential softness in the U.S. technology market."


Avaya also announced a stock repurchase plan of up to $500 million of its outstanding shares of common stock over the next two years.