Avaya is reaching a chapter 11 bankruptcy filing in an effort to restructure its balance sheet and turn its businesses and financial problems around, according to the Wall Street Journal.
The report states that Avaya has said there was “substantial doubt about its ability to continue as a going concern in light of debt maturity next year”.
A chapter 11 bankruptcy would involve Avaya proposing a plan of reorganisation to keep its business alive and pay creditors over time.
If the company does enter chapter 11, it would be for the second time in five years due to a previous bankruptcy filing in January 2017.
Avaya then exited the chapter 11 measures before listing on the New York Stock Exchange in 2018.
Things did initially appear to be on the up for Avaya; however, it has been a troubled few months for the vendor, which has seen the company change CEO and announce redundancies.
Avaya has not yet published its full Q3 results that were due in August, with its Q4 numbers expected to be due around this time of year.
The company did reveal that Q3 sales were 17 per cent below the guidance it had previously given the market.
It also stated that it expects Q4 revenue to be between $460m and $480m, massively down on the $760m it made in the same quarter last year.
Looking longer term, Avaya expects annual revenue to decline in full years 22, 23 and 24 before returning to growth in 25. Sales in FY27 are forecast at $2.5bn – still lower than in 2019, 2020 and 2021.
The revenue declines, however, will be offset by a cost-cutting programme that will run over the next few years. This will eventually end up at run rate savings of $524m by Q1 2024.
Earlier this week, Avaya hinted that several product lines could be scrapped as it looks to streamline its portfolio.
The vendor has published a “business update” slide deck on its website to give investors an insight into its plans.
One slide, titled “Streamlined Product Portfolio”, details the areas in which Avaya plans to focus and those in which it will “exit”. The actual product names, however, are not visible.
Avaya has recently appointed Jill Frizzley to its Board of Directors with immediate effect, following a nomination from RingCentral.
Frizzley has more than 20 years of experience on boards counselling on financial restructuring, mergers and acquisitions.
In accordance with its strategic partnership with Avaya, the appointment followed a proposal by RingCentral. Avaya has also stated it “remains committed to a strategic partnership with RingCentral”.
Positive Outlook
Despite all the bad news surrounding the company, Avaya seems to be remaining positive, with CEO Alan Masarek stating so in an exclusive interview on UC Today on August 30.
He said: “In this last June 30 quarter, we added 92 customers with contracts with TCVs greater than a million dollars.
“It just gives you an example; no one else in the industry has added a number anywhere close to 92 million-dollar TCV deals.
“It just sort of speaks to the power of this enterprise base and what Avaya can be.
“We just need to continue to invest in our products, take care of our customers, drive forward — again, the existing base and new base — and we’re going to do just fine.”
UC Today will continue to follow this story and provide updates when we have them.
