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Avaya’s New Home

Pondering Avaya's next move

Avaya’s New Home

Avaya is one of the most talked-about companies in the communications market. Not only does it offer some of the most reliable and innovative unified communications and contact centre solutions, but the rumour mill behind this business seems to be constantly churning too.

Over the last few months, I’ve had the unique opportunity to listen to countless conversations while connecting with industry leaders and visiting UC events. From what I’ve heard, it’s growing increasingly clear that Avaya may well be beyond economical repair. Despite the company’s continued growth in the cloud space and strong revenues, a new home may be necessary for the organisation to continue holding on to its position in the UC sector.

In my opinion, Avaya is the Ford of the UC industry. The demise of such an iconic brand is deeply disturbing to me. The significant debt that the company continues to carry with it means that it’s difficult for the brand to accelerate at the pace that’s necessary for the current marketplace.

As Jack Welch, former CEO and Chairman of General Electric, once said:

“If the rate of change on the outside exceeds the rate of change on the inside, the end is near”

Keeping Up with Current Demands

Avaya’s ability to recover since its Chapter 11 bankruptcy has been impressive to say the least. In January last year, the company released a huge chunk of it’s 6 billion debt, and managed to move on from Chapter 11 completely, listing on the public market soon after it acquired its own cloud contact centre business. For a while, it seemed as though Avaya were back in action, bigger and better than ever.

However, less than 18 months later new rumours began to emerge about Avaya potentially considering offers for an acquisition. With financial leaders like Bloomberg and the Wall Street Journal echoing this sentiment, it became difficult to ignore the idea that Avaya could officially be “up for sale.”

While I’m not a financial expert, I don’t think that any new home for Avaya is going to be perfect from day one. There’s a good chance that the new owner will be looking for a way to cut costs as soon as they embrace Avaya. However, the strategy that the acquiring business will consider when taking on Avaya all depends on which company is doing the buying. On one end of the scale, we have legacy powerhouses like Mitel. On the other hand, there’s RingCentral – a UCaaS Magic Quadrant leader, benefiting from astronomical growth and a fully established cloud platform.

What Happens If an Acquisition Goes Through?

In my perspective, Mitel purchasing Avaya may not be a good idea. At this time, Mitel is still working on its cloud strategy, and it’s in the process of reshaping its organisation after the acquisition of ShoreTel. When two huge companies like Avaya and Mitel come together, there’s a significant likelihood that we’ll see massive layoffs and significant integration challenges.

So, will Avaya consider an acquisition, knowing that it may cause additional problems for its communications family? Or will the company remain independent? If Avaya chooses the latter option, then will they stay on the public stock market or go private? Will they consider selling off a portion of their business to keep the lights on? At the moment, the Aura Contact Centre has the highest value for Avaya, which means it could be sold off for some significant cash. But what happens to Avaya if the business starts chopping off chunks of what makes it special?

Splitting a business is a very messy and challenging process. What’s more, as UC and CC components continue to blend in the current communication marketplace, selling Aura could eventually lead to selling Avaya’s UC solution too. It seems logical that a Contact Centre provider could come in and snatch up Avaya’s CC business. The contact centre is valuable and could pay off a lot of the company’s debt, allowing it to focus on UC. However, Avaya doesn’t have a full-fat UCaaS offering yet, which means the company would still need to transform the business if it decided to move on as a UC-only solution. Maybe the best option might be to sell the UC business and keep the CC business?

Avaya Has a Lot of Value to Offer

Despite its issues, Avaya still has a lot of factors that make it valuable. For instance, the company comes with a vast channel partner base, which would be very useful for any company considering the acquisition of Avaya. If you want to build an international channel base, buying Avaya means getting a pre-made solution as part of the deal.

Avaya’s international reach is a big factor too. The company truly spans the globe unlike no other brand. With the exception of options like Microsoft and Cisco, few vendors come close to what Avaya can offer in terms of market reach. For a company like Mitel, that wants to claim the number 3 spot behind Microsoft and Cisco, this international presence is a huge benefit.

So far, various industry experts and analysts have discussed the potential buyers that could consider throwing their bid in for the Avaya brand. We’ve seen predictions that cover everyone from 8×8 and RingCentral, to Salesforce, Microsoft, Oracle, Vonage, Cisco, Genesys, Verint, and others. Personally, my money is on a SaaS-based business taking it over.

I can see Avaya being bought by a SaaS brand that wants a robust channel, more CC customers, and more international reach. Therefore, companies like RingCentral, Vonage, and 8×8 could well be front-runners. Of course, Google and Oracle could also benefit from a helping hand in getting more traction within the enterprise communications marketplace.

What’s more, this is all only applicable if Avaya chooses to sell. The company may yet attempt to continue as a brand on their own, building a new personality and face that their customers can believe in. We will inevitably find out in days to come, watch this space.

Where do you think Avaya is headed right now? Join the discussion in the comments below.

 

Got a comment?

2 Comments
AvatarJohn Doe 22:25, 03 Sep 2019

The fate of Avaya was essentially sealed when it was spun out of Lucent Technologies in 2000. The debt assigned to Avaya was disproportionately high (IMHO) so it was simply a matter of time until it succumb.

Under the previous CEO and Executive Team there was a chance, but having a longtime operations person skilled in cost reduction (i.e. the Chief Operating Officer) takeover as CEO there is little chance of growth. You can not cut your way to growth.

Even the bankruptcy did not reduce enough debt to make it viable as an independent entity. Sure it prolonged Avaya’s life. When you look at the competition from SaaS competitors, revenue stream which continues to decreased YoY, and the amount of revenue necessary to service the debt there is little left to develop truly new and meaningful products. It is barely enough to the broad product line viable.

The best way to see the products survive long term is if, as Rob Scott puts in the second to last paragraph, Avaya is purchase by SaaS or very large tech company.

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Ian TaylorIan Taylor 11:39, 03 Sep 2019

To lose Avaya as a brand would be a great shame, but either way their tech needs to remain part of the market as well as their team around the world. I hope they remain a brand in their own right…

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