Peterson, 56, will also step down as chairman on Sept. 30. A company spokeswoman said that decision was made by the board, but declined to comment further.

Basking Ridge, N.J.-based Avaya Tuesday reported third-quarter net income of US$44 million, or 10 cents per share, compared with $194 million, or 40 cents per share, in the third quarter of 2005. Meanwhile, revenue grew 4.9 percent for the quarter to $1.297 billion, up from $1.236 billion a year earlier.

Avaya's financial problems came mainly from the continued costs of restructuring following the acquisition of Tenovis GmbH in November 2004, said Allan Sulkin, an analyst at TEQConsult Group in Hackensack, N.J. The company reported a $22 million restructuring charge in the quarter.

In addition, "it seemed like every quarter, things had not been going well for Avaya, with portions of the business not growing," Sulkin said.

Services and applications, while a growing segment of the market generally, had not grown as well as they should have at Avaya, he said. Peterson was Avaya's first CEO following its spinoff from Lucent Technologies Inc. in 2000. D'Ambrosio, 42, joined Avaya in 2002 after serving 16 years at IBM in various posts in software, sales and marketing, and IBM Global Services. He began his career at AT&T, in the same division that later became Avaya. He holds an MBA from Harvard Business School.