According to the CEO for ScanSource, Mike Baur, some of the larger enterprises working with Avaya have had to delay their plans for expansions and upgrades, because of the vendor’s position with Chapter 11 bankruptcy. Recently, ScanSource saw a fall in their Avaya-related sales for larger enterprise businesses, simply because of the uncertainty plaguing the market since Avaya filed for bankruptcy.
Although Baur noted that he feels the current issue is a “pause”, rather than a change, it’s worth noting that Avaya’s activities are having pretty big impacts on the sector. For ScanSource, Avaya is one of three vendors providing a significant percentage of the company’s sales for last year.
What’s Happening with Avaya?
Avaya first filed for Chapter 11 bankruptcy protection during January, and announced its plans in March to sell its networking sector onto “Extreme” networks. ScanSource’s CEO noted that company is familiar with Extreme, and they believe that if the acquisition is successful, the distributor will be able to transition it’s networking solutions to Extreme, and continue providing the same services without much disruption.
Of course, Avaya’s main business focuses on the contact centre. Networking partners only came to Avaya later, and Baur noted that they contribute only a small piece of the overall business pie.
The Present and Future of ScanSource
According to ScanSource, the sales for the third quarter saw an increase of around 1.9% from the previous year, raising to $813.5 million. That means that they missed their prediction of $833.1 million. Additionally, earnings fell 11.4% per share, from $0.54 last year, to $0.49 this year. Additionally, on a non-GAAP basis, earnings fell to $16.4 million, or around $0.65 per share.
ScanSource saw a growth of around 30% over the past year in terms of business, around their master agent Intelisys. The distributor acquired this company during August of 2016, for around $83.6 million. Currently, ScanSource is educating VARs in Intelisys’s business model, though they don’t expect a growth of 30% every quarter.
Though things have remained shaky for Avaya, ScanSource’s stock stayed unchanged at around $40.70 per share in trading. During the next quarter, ScanSource expects diluted earnings per share of between $0.64 and $0.71 a share on sales that reach between $860 and $920 million.
UC Today Opinion
Naturally this was going to happen, some Avaya sales orders will be on hold at present and some orders may have been placed with other vendors. It’s looking like Avaya will be out of chapter 11 bankruptcy by late Summer 2017, I wonder whether ScanSource will have an extra flurry of orders as soon as everyone knows Avaya are a safe bet?
