1. Conduct a DuPont decomposition of Lucent's ROE by quarter. What factors contributed to the differences in Lucent's performance between those quarters?

(Calculate the changes in Sales, Accounts Receivable, Inventory and Gross Margin by (same) quarter.

EXHIBIT 1 LUCENT TECHNOLOGIES Selected Earnings Per Share Data Dec-99 For the Quarters Ended: Earnings Per Share Sep-99 Jun-99 Mar-99 Dec-98 0.31 Analyst Expected Earnings Per Share 0.36 0.26 0.17 0.43 0.29 0.23 0.52 Difference 0.15 0.50 (0.07) 0.02 % Surprise 0.03 0.02 0.02 16.28% 6.90% 13.04% 13.33% 5.00% EXHIBIT 3 LUCENT TECHNOLOGIES onsolidated Balance Sheets Dec-99 Assets Sep-99 For the Quarters Ended: Jun-99 Mar-19 Dec-98 Sep-98 Jun-98 Mar-98 Cash Dec-97 Sep-97 $ 2 219 5 covables 10.143 1.816 5 10 439 196 5 1,099 S 1,350 Less Allowance 301 8.752 5.792 Contracts in Process, not 5.380 Deferred Taxes, net 1. 164 1.103 2.973 Other Current Assets old Current Assets $21.578 7 21 931 5 17.374 Toparty & Equipment (net) Accumulated Decreciation Pro-paid Pension Costs 7.893 6.078 7.274 17:251 elerred Taxes, not 6337 6.936 6.210 Pitalized Software Development Costs 3.002 bilities and Shareholders' Equity $ 38.634 5 38,735 5 37.156 20 5 Payroll and Benefit Liabilities 2,162 5 out-retirement and Post-employment Get Maturing within One Year 2.672 tal Current List That arement and Post-employment Benefit Liabilities $ 3,659 9.917 11.778 ng Term Debt or Liabilis 22.56 Additional Paid in Capital Guaranteed ESOP Obligations (30) Accumulated Other Comprehensive Income or Loss Total Shareholders Equity Total Liabilities and Shareholders' Equity 16.079 38 834 EXHIBIT 4 LUCENT TECHNOLOGIES Consolidated Statements of Income" Total Revenues Dec-99 9.906 Sep-99 For the Quarters Endedi 10 575 5 Jun-59 Mar-99 Sep-98 Cost of Sales 5.250 9.315 4.834 8.220 un-98 Mar-98 Gross Margin 5.706 4.327 8,574 4087 3.436 Selling. General and Administrative Expenses 4.646 3,893 4137 Research and Development 2.251 1.937 1,972 1.673 2 748 1,501 Total Operating Expenses 932 Operating Income 1.760 3.022 2.433 Other Income (Expense). net Interest Expense Income Before Taxes Income Tax Expense 1,728 Net Income 553 $ 1.175 5 972 $ 829 5 457 1.523 18 838 518 "Excludes one-time events and the cumulative effect of accounting changes EXHIBIT 5 Notes to Consolidated Financial Statements Doc-99 Sep-99 Jun-99 Supplementary Balance Sheet Information Inventories Mar-99 Doc-98 Sep-98 Jun-98 Mar-98 Dec-97 Sep-97 Finished Goods 3062.00 2946.00 2917.00 Work in Process 2281.00 1777.00 2318.00 1578.00 2102.00 1594.00 1463.00 2262.00 2051.00 2001.00 1503.00 Total Inventories 1379.00 1291.00 1611.00 5380.00 5048.00 1411.00 5179.00 1313.00 1315.00 4332.00 3778.00 3081.00 2973.00 2874.00 2604.00 2926.00