The Board of Directors has authorized, and recommends for your approval, each of the three alternative reverse/forward stock split transactions described below:

•     a  reverse 1-for-30 stock split followed immediately by a forward 30-for-i stock split of the Common Stock;

•     a  reverse 1 -for-40 stock split followed immediately by a forward 40-for-i stock split of the Common Stock; and

•     a  reverse 1 -for-SO stock split followed immediately by a forward 50-for-i stock split of the Common Stock.

In the discussion below, the term “Minimum Number” means: 30, if the 1-for-30 Reverse/30-for1i Forward Split is implemented, 40, if the 1-for-40 Reverse/40-for-1 Forward Split is implemented; and 50, if the 1-for-50 Reverse/50-for-i Forward Split is implemented.

Each of these three alternative transactions is comprised of a reverse stock split (the “Reverse Split”) pursuant to which each Minimum Number of shares of Common Stock registered in the name of a shareholder at the effective time of the Reverse Split will be converted into one share of Common Stock, followed immediately by a forward stock split (the “Forward Split”) pursuant to which each share of Common Stock outstanding upon consummation of the Reverse Split will be converted into the Minimum Number of shares of Common Stock. As permitted under Delaware law, shares of Common Stock that would be converted into less than one share in the Reverse Split will instead be converted into the right to receive a cash payment as described below (we refer to the Reverse Split, the Forward Split and these cash payments, collectively, as the “Reverse/Forward Split”). However, if a registered shareholder holds the Minimum Number or more shares of Common Stock in his or her account at the effective time of the Reverse Split, any fractional share in such account resulting from the Reverse Split will not be cashed out and the total number of shares held by such holder will not change as a result of the Reverse/Forward Split.

Avaya is submitting separate proposals to approve (and the Board recommends that shareholders approve) each of the three alternative Reverse/Forward Split transactions described above, and the Board in its discretion may elect to effect any one (but not more than one) of these three transactions that are approved by the requisite vote of the shareholders of Avaya. The Board will also have the discretion to determine if and when to effect any of these transactions that are approved by the shareholders and reserves the right to abandon any or all such transactions even if approved by the shareholders (see “—Reservation of Rights”). We expect that, if shareholders approve and the Board elects to implement the Reverse/Forward S lit the Reverse/Forward Split would be consummated within one year of the date of the Annual Meeting. If the Board determines to implement any of the alternative Reverse/Forward Split transactions approved by the shareholders, Avaya will publicly announce in a press release and post on its website at http://www.avaya.com, prior to the effective date of the Reverse/Forward Split, which of the approved alternative Reverse/Forward Split transactions the Board has elected to effect.

Avaya believes that the Reverse/Forward Split will result in significantly reduced shareholder record keeping and mailing expenses for Avaya and provide holders of fewer than the Minimum Number of shares with an efficient, cost-effective way to cash-out their investments.

The Board is soliciting shareholder approval for each of three alternative Reverse/Forward Split transactions. The availability of three alternatives will provide the Board with the flexibility to implement the

Reverse/Forward Split transaction that will maximize the expected cost savings and other anticipated benefits for Avaya. In determining which of the three alternative Reverse/Forward Split transactions to implement, if any, following shareholder approval, the Board will consider factors such as (1) the then prevailing trading price and trading volume for the Common Stock and the anticipated impact of the Reverse/Forward Split on the trading market for the Common Stock; (2) the availability and cost of funds required to make the cash payments to shareholders with small holdings whose shares are to be converted into the right to receive cash pursuant to the Reverse/Forward Split, and the terms of any arrangements that Avaya may enter into to raise those funds; (3) the Board’s determination as to which of the alternative transactions would result in the greatest overall reduction in Avaya’s administrative costs; (4) considerations related to preserving the tax-free status of Avaya’s spin-off from Lucent in September 2000; (5) other transactions that Avaya might be considering; and (6) prevailing general market and economic conditions.

If approved by shareholders and implemented by the Board, the Reverse/Forward Split will become effective on such date as may be determined by the Board upon the filing of the necessary amendments to Avaya’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Effective Date”). The forms of proposed amendments to Avaya’s Restated Certificate of Incorporation necessary to affect the Reverse/Forward Split are attached to this Proxy Statement as Appendix A.

Re-Submittal to Shareholders

In connection with Avaya’s 2002 Annual Meeting, the Board of Directors proposed to shareholders for approval each of the Reverse/Forward Splits discussed above. In seeking that approval, Avaya stated that, if shareholders approved and the Board decided to conduct a Reverse/Forward Split, we expected that it would be completed within one year of the 2002 Annual Meeting (i.e., not later than February 26, 2003). Each of the three proposals was approved by shareholders at the 2002 Annual Meeting, but Avaya has not conducted any Reverse/ Forward Split as of the date that this Proxy Statement went to press. In part, this was because of a complaint that was filed in January 2002 in the Court of Chancery of the State of Delaware against the Company seeking to enjoin it from conducting any of the Reverse/Forward Splits. The complaint alleged, among other things, that the manner in which Avaya planned to implement the transactions violated certain aspects of Delaware law with regard to the treatment of fractional shares and the proposed method of valuing the fractional interests, and, further, that the description of the proposed transactions in the proxy statement distributed for the 2002 Annual Meeting was misleading to the extent it reflected those violations. The action purported to be a class action on behalf of all holders of less than 50 shares of Common Stock. The plaintiff sought, among other things, damages as well as injunctive relief enjoining us from conducting the transactions and requiring Avaya to make corrective, supplemental disclosure. In June 2002, the Court denied the plaintiff’s motion for summary judgment and granted the Company’s cross-motion for summary judgment. The plaintiff appealed the Court’s decision to the Delaware Supreme Court and, in November 2002, the Delaware Supreme Court affirmed the lower Court’s ruling in favor of Avaya. Subsequently, the plaintiff filed a motion for re-hearing by the Delaware Supreme Court, arguing that the court misapplied the law concerning fractional “shares” versus fractional “interests” to the facts of the case. The Company has filed its response to the plaintiff’s motion with the Delaware Supreme Court and awaits its ruling.

For all of the reasons discussed in the paragraphs below, the Board of Directors continues to believe that the Company may benefit from conducting a Reverse/Forward Split. As a result, the Board has proposed each of the Reverse/Forward Splits for re-approval by shareholders at the Annual Meeting.

We cannot assure you that the Delaware Supreme Court will rule in favor of Avaya with respect to this matter. As a result, in the event that, after the date that this Proxy Statement goes to press and before the date of the Annual Meeting, the Delaware Supreme Court decides this matter in favor of the plaintiff, then the Board will not re-submit the Reverse/Forward Split proposals discussed above for a vote of the shareholders at the 2003 Annual Meeting. In the event that the Delaware Supreme Court renders a decision favorable to Avaya after the date that this Proxy Statement goes to press and before the date of the Annual Meeting, at any time prior to February 26, 2003 the Board may decide to proceed with a Reverse/Forward Split in accordance with the authority obtained from shareholders at the 2002 Annual Meeting. In the event that the Reverse/ Forward Split is affected prior to February 26, 2003, the Board will not re-submit the Reverse/Forward Split proposals discussed above for a vote of the shareholders at the 2003 Annual Meeting.