Reliant FORM 10-K manual Segment research and development expense

•services edge capability to realize simplification of customer network operations and broadband access technologies, including wireless and wireline; and

•enhanced network security to ensure the level of reliability and performance that has traditionally existed in carrier networks.

We expect that our R&D expense as a percentage of revenue in 2004 will be similar to 2003 and 2005 will be lower than 2004 as we seek to achieve ongoing cost reductions in R&D as part of our strategic plan first announced in August 2004. See “Business overview — Our strategic plan and outlook”.

Segment research and development expense

Wireless Networks

Wireless Networks R&D expense increased slightly in 2003 compared to 2002 primarily due to:

•significant unfavorable foreign exchange impacts associated with the Canadian dollar and euro; partially offset by

•the continued impact of our workforce reductions;

•transitioning R&D activities into lower cost markets; and

•focused cost-savings initiatives.

Wireless Networks R&D expense decreased in 2002 compared to 2001 primarily due to:

•reductions in our UMTS R&D programs as a result of delays in commercial launches by wireless carriers in EMEA;

•focused cost-savings initiatives; partially offset by

•continued investment in the development of new products.

Enterprise Networks

Enterprise Networks R&D expense was up slightly in 2003 compared to 2002 primarily due to:

•unfavorable foreign exchange impacts associated with the Canadian dollar; partially offset by

•the continued impact of our workforce reductions that targeted a level of R&D that was more representative of the volume of our business.

Enterprise Networks R&D expense decreased substantially in 2002 compared to 2001 primarily due to:

•the continued impact of our workforce reductions that targeted a level of R&D expense that was more representative of the volume of our business; and

•effectively prioritizing investment in data products and increased outsourcing activity.

Wireline Networks

Wireline Networks R&D expense decreased significantly in 2003 compared to 2002 and decreased substantially in 2002 compared to 2001 primarily due to:

•the continued impact of our workforce reductions that targeted a level of R&D expense that was more representative of the volume of our business; and

•effectively prioritizing investment in data products and increased outsourcing activity.

Optical Networks

Optical Networks R&D expense decreased substantially in 2003 compared to 2002 and in 2002 compared to 2001 primarily due to:

•the continued impact of our workforce reductions that targeted a level of R&D expense that was more representative

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