8-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 8-K

                           CURRENT REPORT PURSUANT TO
                           SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       Date of Report (Date of earliest event reported): February 20, 2001


                                   AVAYA INC.
             (Exact name of registrant as specified in its charter)


              Delaware                  1-15951               22-3713430
     (State or other jurisdiction      (Commission         (IRS Employer
        of incorporation)              File Number)      Identification No.)


              211 Mount Airy Road
              Basking Ridge, NJ                                 07920
      (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (908) 953-6000



ITEM 5.  OTHER EVENTS

The following is an excerpt from remarks to be made by Garry K. McGuire,
Chief Financial Officer of Avaya Inc., a Delaware corporation, on a
conference call to be held on February 20, 2001 with respect to the
outsourcing transaction described in Exhibit 99.1 attached hereto:

We expect to incur restructuring and related charges of approximately $150
million pre-tax in fiscal 2001. The largest components of those charges are
benefits, pension enhancements and severance payments. In addition, over the
next six fiscal quarters, we will incur approximately $49 million pre-tax in
one-time implementation costs, and approximately $59 million pre-tax in
recurring costs as we transfer assets and help Celestica gear up for production.

$19 million of that $59 million is applicable to fiscal 2001. $40 million of the
$59 million is applicable to fiscal 2002, and we believe that it will be more
than offset by our expected savings.

Excluding the temporary impact of the ramp-up period of this agreement - and
also excluding our recent acquisition of VPNet Technologies - our EPS target
from ongoing operations in fiscal 2001 would be affected by the $19 million
charge that I referenced above, or 4 cents per share on a normalized basis,
associated with increased period expense on a going-forward basis.

As a result, by 2002, we expect a net positive impact on EPS from ongoing
operations as a result of this agreement. In addition, thereafter we expect to
realize net savings of approximately $400 million pre-tax over the remaining
term of the contract, $150 million of which we expect to be realized in the last
year of the agreement.

In conjunction with the implementation of the supply agreement, we will
reclassify some logistics costs such as transportation and warehousing from the
SG&A line into COGS. The effect of this reclassification will be slightly
revised start points for some of the metrics in which we've targeted improvement
over the next two to three years.

Our gross margin starting point at spinoff, for example, was 43.9% of revenue
based on fiscal 2000 ongoing results. As a result of the reclassification,
we've adjusted it retroactively to 42.1%. We still intend to deliver the 1.5%
to 2.5% improvement in gross margins that we've described as our 2-3 year
target range. Most of that improvement will come from the continued shift in
our product mix from lower-margin traditional core products to higher-margin
growth products, and from a hardware-intensive product line to a richer
software offering.

We expect the impact of the agreement on gross margins to be slightly negative
in fiscal 2001, while slightly positive beginning in year two of the agreement.
Overall, this agreement gives us increased confidence in our ability to achieve
the margin improvement goals we've already described, despite the changes in
product over time in a fast-moving industry.

Reclassification also affects the starting point for our targeted improvements
in SG&A. From the 33.5% original starting point based on fiscal 2000 ongoing
results, we are now assuming a restated starting point of 31.7%. This brings our
revised target range to between 21.7% and 24.7%.

Excluding the ramp-up of this agreement and the effect of VPNet that I referred
to, we remain confident in our previously stated outlook for 2001, which is for
revenue growth in the mid- single digits and more than double net income.



ITEM 7.   EXHIBITS

99.1       Press release, dated February 20, 2001



                                   SIGNATURES

           Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                        AVAYA INC.


Date: February 20, 2001                 By: /s/ Charles D. Peiffer
                                            ------------------------------------
                                        Name: Charles D. Peiffer
                                        Title: Controller



                                  EXHIBIT INDEX



EXHIBIT
NUMBER               DESCRIPTION
- ------               -----------
                  
99.1                 Press release, dated February 20, 2001

EX-99.1

                                                                    Exhibit 99.1


News Release

For Media Inquiries:

Paula Horii                                          Lydia Whitefield
908-953-6633                                               908-953-2728
phorii@avaya.com                                           lwhitefield@avaya.com

For Investor Inquiries:
Derrick Vializ
908-953-7500
vializ@avaya.com

AVAYA AGREES TO OUTSOURCE MOST MANUFACTURING TO CELESTICA
AS PART OF AVAYA'S  OVERALL RESTRUCTURING PLAN

FOR IMMEDIATE RELEASE:  TUESDAY, FEBRUARY 20, 2001

           BASKING RIDGE, N.J. - Avaya Inc. (NYSE: AV), a global leader in
business communications solutions and services, today announced an agreement to
outsource most of the manufacturing of its communications systems and software
to Toronto-based Celestica Inc. (NYSE: TSE: CLS), a global leader in the
electronics manufacturing services industry. The move will allow Avaya to reduce
inventories, fixed costs and capital expenditures while continuing to invest in
next generation enterprise solutions and services, the company said.

           Avaya will receive approximately $200 million for the assets it is
transferring to Celestica. The transaction is expected to close in phases
beginning in the third fiscal quarter of 2001 and is subject to regulatory
approvals and ratification of the labor agreement between the International
Brotherhood of Electrical Workers and Celestica.

           Under the strategic manufacturing agreement, which is worth
approximately $4 billion over its five-year term, Avaya will outsource to
Celestica the manufacturing of its large business systems in Westminster, Colo.,
along with the operation of its repair and distribution facilities in Little
Rock, Ark. As part of the agreement, Celestica will manufacture in its other
facilities the small business systems that Avaya currently makes in Shreveport,
Louisiana. Avaya's operations in Shreveport will be phased out by the end of the
fiscal year, the company said.

               "Avaya's agreement with Celestica completes a key part of our
restructuring and begins a new chapter in our strategy for reinvestment and
growth," said Don Peterson, Avaya president and CEO. "Avaya's move to contract
manufacturing with Celestica, an industry leader in electronic manufacturing
services, ensures that our customers will continue to enjoy the quality and
reliability of our traditional flagship products. At the same time, it allows us
greater flexibility and focus on designing and developing the next generation



of enterprise solutions and services such as converged voice and data networks,
customer relationship management (CRM) and unified communications."

           "Celestica is delighted to expand its communications customer base
with the addition of Avaya," said Eugene Polistuk, chairman and CEO, Celestica.
"Not only does this relationship add a new senior communications customer to
Celestica but it brings with it a highly skilled employee base, experienced in
manufacturing mission-critical communications programs. This intellectual asset
base will further leverage Celestica's plans for future growth in data and voice
communications."

           Avaya said it expects to incur restructuring and related charges of
approximately $150 million pre-tax in fiscal 2001 in conjunction with this
outsourcing agreement. The company said that over the next six fiscal
quarters, it would also incur approximately $49 million pre-tax in one-time
implementation costs and approximately $59 million pre-tax in recurring
costs. Once the agreement is fully implemented at the end of fiscal 2002,
Avaya expects to realize net savings of approximately $400 million pre-tax
over the remaining term of the contract, $150 million of which will be
realized in the last year of the agreement.

           About 1,400 Avaya employees are expected to join Celestica as part of
this transaction. Avaya has approximately 1,055 people in Westminster who will
become Celestica employees. The company manufactures such large business systems
as the DEFINITY(R) Enterprise Communications Server there. An additional 4,150
people work for Avaya in Colorado, in the areas of research and development and
sales and services, and they will remain with Avaya.

           There are approximately 320 Avaya employees in Avaya's repair,
distribution and warehouse facilities in Little Rock, and they will become
Celestica employees.

           In Shreveport, Avaya has approximately 900 employees where the
company manufactures such small business systems as Merlin MAGIX(TM)
Integrated System and the PARTNER-Registered Tradmark- Advanced
Communications System. As Avaya phases out its operations in Shreveport,
employees may apply for employment opportunities elsewhere at Avaya,
Celestica and Lucent Technologies and will be eligible for career transition
support that includes training, career counseling, outplacement support and
other benefits, the company said.

ABOUT AVAYA



           Avaya, headquartered in Basking Ridge, N.J., USA, is a leading
provider of communications systems for enterprises, including businesses,
government agencies and other organizations. Avaya offers converged voice and
data, customer relationship management, messaging, voice multi-service
networking and structured cabling products and services. Avaya is a worldwide
leader in sales of messaging and structured cabling systems and a U.S. leader in
sales of enterprise voice communications and call center systems. Avaya intends
to use its leadership positions in enterprise communications systems and
software, its broad portfolio of products and services, and strategic alliances
with other technology and consulting services leaders to offer its customers
comprehensive eBusiness solutions.

ABOUT CELESTICA

           With more than 29,000 employees worldwide, Celestica operates 34
manufacturing and design facilities in the United States, Canada, Mexico, the
United Kingdom, Ireland, Italy, the Czech Republic, Thailand, Hong Kong, China,
Malaysia and Brazil. Celestica provides a broad range of services including
design, prototyping, assembly, testing, product assurance, supply chain
management, worldwide distribution and after-sales service. Its customers
include industry leading original equipment manufacturers (OEMs), primarily in
the information technology and communications sectors.

           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, but are not limited to,
price and product competition, rapid technological development, dependence on
new product development, the successful introduction of new products, the mix
of our products and services, customer demand for our products and services,
economic, political and other risks associated with international sales and
operations, U.S. and foreign government regulation, general industry and
market conditions and growth rates and general domestic and international
economic conditions including interest rate and currency exchange rate
fluctuations. In addition, Avaya's ability to realize cost savings from the
contract manufacturing arrangement is dependent on a variety of factors
including, but not limited to the successful implementation of the contract
manufacturing arrangement and Celestica's ability to achieve manufacturing
efficiencies. For a further list and description of such risks and
uncertainties, see the reports filed by Avaya with the Securities and
Exchange Commission. 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.