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): April 26, 2006

AVAYA INC.

(Exact name of registrant as specified in its charter)

Delaware	1-15951	22-3713430
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer 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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (See General Instruction A.2.):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

In accordance with SEC Release No. 33-8126, the following information is furnished under Item 2.02, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On April 26, 2006, Avaya Inc. (the “Company”) issued a press release reporting financial results for the fiscal quarter ended March 31, 2006 and held a public webcast in connection with the issuance of the press release. A copy of the charts related to such presentation and certain other information is attached as Exhibit 99.1 hereto and incorporated into this Form 8-K by reference. These materials are also available on the Avaya investor relations website at http://investors.avaya.com/.

Item 9.01. Financial Statements and Exhibits.

(c)Exhibits.

99.1Presentation of Avaya Inc. dated April 26, 2006

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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: April 26, 2006	By:		/s/ Garry K. McGuire
		Name: Garry K. McGuire
		Title:		Chief Financial Officer and
				Senior Vice President,
				Corporate Development

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EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
99.1	Presentation of Avaya Inc. dated April 26, 2006.

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EX-99.1

Exhibit 99.1

Searchable text section of graphics shown above

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Q2 FY2006
Earnings Conference Call

April 26, 2006

© 2006 Avaya Inc. All rights reserved.

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Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current expectations or forecasts of future events. Actual future results may vary materially. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed and you are cautioned not to place undue reliance on these forward-looking statements.

The risks and uncertainties referred to above include, but are not limited to: supply issues related to our outsourced manufacturing operations; price and product competition; rapid or disruptive technological development, including the effects of the technology shift from traditional TDM to IP telephony; dependence on new product development; the mix of our products and services; customer demand for our products and services, including risks specifically associated with the services business and, in particular, the maintenance and rental and managed services lines of business, primarily due to renegotiations of customer contracts and changes in scope, pricing pressures and cancellations; general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations; risks related to inventory, including warranty costs, obsolescence charges, excess capacity, material and labor costs, and our distributors’ decisions regarding their own inventory level; the economic, political and other risks associated with international sales and operations, including increased exposure to currency fluctuations and to European economies as a result of our acquisition of Tenovis; the ability to successfully integrate acquired companies, including Tenovis, which has required significant management time and attention; the ability to attract and retain qualified employees; control of costs and expenses; U.S. and non-U.S. government regulation; and the ability to form and implement alliances.

For a further list and description of such risks and uncertainties, see the reports filed by Avaya with the SEC, which are available at www.sec.gov, particularly the information contained in Part I, Item 1, entitled “Forward Looking Statements”, of our fiscal 2005 Form 10-K and in Part I, Item 2, entitled “Forward Looking Statements” of our Form 10-Q for the first quarter of fiscal 2006 . 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.

Presentation:  Unless indicated otherwise, all results are presented in accordance with accounting principles generally accepted in the United States (GAAP).

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Q2 FY2006 Results

•IP line shipments up in mid 30% range and sales of products rose 9% year over year

•U.S. sales of products grew 14%

•Product supply issues, erosion in rental and maintenance businesses had negative impact

•Gross margin rose to 46.7% compared with 46.1% a year ago

•Operating income was $53 million

•Includes restructuring charge of $20 million

•Net income was $38 million or 8 cents per diluted share

•Includes $13 million after-tax or 3 cents per diluted share impact of the restructuring charge

•Cash flow from operations was $169 million up $73 million year over year

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Revenue Summary
Year over Year Change

	As Reported		Constant Currency
Revenue
Sales of products	9.2	%	11.2	%
Services	- 2.2	%	- 1.0	%
Rental and managed services	- 12.7	%	- 7.5	%
Total	1.3	%	3.4	%

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Revenue
Quarterly Trend

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Revenue by Geography

Dollars in millions	Q2 FY06		Q2 FY05		YoY Change		YoY Change at Constant Currency
U.S.	$	719	$	689	4.4	%	4.3	%
Outside the U.S.:
EMEA - Europe/Middle East/Africa	356		387		-8.0	%	-1.0	%
APAC - Asia Pacific	99		89		11.2	%	14.1	%
Americas, non-U.S.	64		57		12.3	%	5.9	%
Total outside the U.S.	519		533		-2.6	%	2.3	%
Total revenue	$	1,238	$	1,222	1.3	%	3.4	%

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Revenue by Channel

Dollars in millions	Q2 FY06		Q2 FY05		YoY Change
Direct	$	250	$	265	-5.7	%
Indirect	340		278		23.4	%
Total sales of products	$	593	$	543	9.2	%

Revenue mix	Q2 FY06		Q2 FY05
Direct	42	%	49	%
Indirect	58	%	51	%
Total sales of products	100	%	100	%

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Gross Margin and Operating Expenses

Dollars in millions	Q2 FY06			Q2 FY05			YoY Change
Revenue
Sales of products	$	593		$	543		9.2	%
Services	487			498			-2.2	%
Rental and managed services	158			181			-12.7	%
	$	1,238		$	1,222		1.3	%
Gross Margin %
Sales of products	53.6		%	54.9		%	-1.3	%
Services	34.9		%	31.9		%	3.0	%
Rental and managed services	57.0		%	58.6		%	-1.6	%
	46.7		%	46.1		%	0.6	%
Operating Expenses
Selling, general and administrative	399			406			-1.7	%
Research and development	106			105			1.0	%
Restructuring charge	20			—			100.0	%
	525			511			2.7	%

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Operating and Net Income

Dollars in millions	Q2 FY06			Q2 FY05			YoY Change
Operating Income	53			52			1.9	%
Other income (expense), net	6			—
Interest expense	(2		)	(5		)
Income from Continuing Operations	57			47			21.3	%
Provision for income taxes	19			11
Income from Continuing Operations	38			36
Loss from Discontinued Operations	—			—
Net Income	$	38		$	36

•Operating income for Q2 FY06 includes $20 restructuring charge

•Net income for Q2 FY06 includes effective tax rate of 33.3%

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Gross and Operating Margins

Gross Margin ($M)

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Operating Income ($M)

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Segment Results
Global Communications Solutions

Dollars in millions	Q2 FY06		Q2 FY05		YoY Change
Large Communications Systems	$	414	$	393	5.3	%
Small Communications Systems	94		78		20.5	%
Converged Voice Applications	141		145		-2.8	%
Other	12		9		33.3	%
Total revenue - GCS	$	661	$	625	5.8	%

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Revenue ($M)

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Operating Income (Loss) ($M)

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Segment Results
Avaya Global Services

Dollars in millions	Q2 FY06		Q2 FY05		YoY Change
Maintenance	$	366	$	377	-2.9	%
Implementation and integration services	120		123		-2.4	%
Managed services	90		96		-6.3	%
Other	1		1		0.0	%
Total revenue - AGS	$	577	$	597	-3.4	%

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Revenue ($M)

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Operating Income ($M)

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Cash Flows
Operating Cash Flow of $275 million

($ in millions)	Six Months Ended 3/31/06
Net Cash Provided by Operating Activities	$	275
Net Cash Used in Investing Activities	(99		)
Net Cash Used in Financing Activities	(179		)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(2		)
Net Decrease in Cash and Cash Equivalents	(5		)
Cash and Cash Equivalents at beginning of fiscal year	750
Cash and Cash Equivalents at end of period	$	745

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Balance Sheet
Cash

Cash outlays in Q2:

•   $47M for capex & capitalized software

•   $103M share repurchases

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Balance SheetDebt

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Balance SheetNet Cash*

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* Net Cash is defined as cash and cash equivalents less total debt. At 3/31/06 this amount is calculated as cash and cash equivalents of $745M less total debt of $29M. Net cash is a non GAAP financial measure.

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Share Repurchase Program

Shares Repurchased (in millions)

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•  Share repurchase program approved by the board during Q3 FY05

•  Authorization to repurchase shares up to $500 million over a two-year time period ending in Q3 FY07

•  As of Q2 FY06, $300 million used for share repurchases

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Key Areas of Focus

•Continue to generate product sales growth

•Sales of products for the first half of the year is up 8% year over year

•Resolving product supply issue is a top priority

•Stabilize our maintenance and rental businesses

•Effectively manage and maintain the value of our traditional base

•Roll out and gain traction with new offers

•Expand managed service offerings

•Continue to improve closure rate

•Beginning to gain traction, but more room for improvement

•Continue to manage our cost and expense structure

•Planning additional actions in Europe

•Generate significant cash flow

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[GRAPHIC]

Q2 FY2006
Earnings Conference Call

April 26, 2006

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