Can Avaya Survive a Second Time?

The problems have been piling up for Avaya  

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Unified CommunicationsNews Analysis

Published: August 11, 2022

James Stephen

Technology Journalist

Avaya has endured a number of financial and internal upsets, which could spell the beginning of the end.  

The communication and collaboration platform’s revenues have declined for the past year, dropping from $732 million to $577 million.  

The news of Avaya’s struggling financial situation came at around the same time as the company’s decision to ‘remove’ CEO Jim Chirico.  

The new CEO and President of Avaya, Alan Masarek, released a statement alongside the additional preliminary Q3 results, which said:

“Our preliminary financial results for the quarter reflect operational and execution shortcomings, amplified against the backdrop of a volatile economic environment.  

“We are taking aggressive actions to right-size Avaya’s cost structure to align with our contractual, recurring revenue business model.”  

Avaya’s share price has been following suit, dropping over 90 per cent since the start of last year.  

The company has now announced its Q3 revenues have sunk by 20 per cent year-over-year. Its share price fell by 37.5% the same day.  

As if things couldn’t get any worse at the Avaya camp, the $600 million deal that the company struck with lenders, clients of Goldman and JP Morgan, may have been done under false pretences.  

According to the Wall Street Journal, the company cut its earnings forecast by more than 60% weeks after borrowing the money, and it alleged that there were no explanations provided for the difference in earnings reports.  

It has been reported that lenders are now threatening to default on the loan if Avaya does not file its quarterly results.  

The Avaya Audit Committee has opened an internal investigation following its quarterly earnings results and a whistle-blower letter which has negatively implicated the company.  

The Future of Avaya  

There may be some hope yet for Avaya, however. UC Today sat down with Zeus Kerravala, Founder and Principal Analyst at ZK Research, shortly after the news broke of its Q3 earnings results and change of CEO.  

Kerravala was optimistic about Avaya’s chances of coming back from this financial low point. He also seemed confident in Alan Masarek’s ability to take the company forward, and he predicted that Masarek would use the Avaya OneCloud as the company’s leading product and build on it.  

Since this time, Masarek has entered the public stage and said in his own words what he hopes to achieve: “We have already begun operationalizing our recently announced savings initiatives and expect to identify additional areas as our work continues.  

“At the same time, we will focus our investments on driving innovation and advancing product development for the benefit of our customers.  

“The July 2022 financings, together with our cost-cutting initiatives, are important steps towards maintaining our financial and operating flexibility to continue to invest in our business and to sustain our business model transition.  

“Although we have a lot of work to do, we have a tremendous foundation to build on as we become a stronger, leaner, more agile, and innovative organization.”  

Masarek’s fighting spirit and belief in his ability to turn Avaya’s financial situation around certainly provides an inspiring leader to rally around, but the financial pressures could be too much for the former Vonage CEO to shoulder.

 

 

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