Avaya bids $US475m for Nortel's IP telephony & UC arm

Stuart Corner
Tuesday, 21 July 2009 06:36

IT Industry - Strategy

He added; "This type of consolidation is good for the industry and has been happening over the past few years with NEC acquiring Sphere, Mitel purchasing InterTel, Ericsson selling its enterprise assets to Aastra, Avaya buying Ubiquty, etc. There are simply too many vendors for this market to support...The combined organisation will be the undisputed number one voice vendor. Based on my quick calculations, I believe Avaya and Nortel will be conservatively 25 percent of the overall voice market (not just VoIP but all voice) with Cisco being number two  with 16 percent... Avaya has done an excellent job in converting its own base to VoIP but hasn't been able to attract many new customers.

"This gives Avaya many new enterprise customers as well as government institutions to sell into. Additionally, Nortel helps Avaya expand its channel by adding some systems integrators and service providers that Avaya does not have right now. So more customers and broader channel, definitely something Avaya would have been challenged to grow organically."

He predicted that the deal would benefit customers of both companies. "For the Nortel customer base there's finally closure to the long period of uncertainty. The product strategy from 'Norvaya' won't be substantially different than Nortel alone in that real time communications is core to mission. For the Avaya customer base, the benefits will come down the road when a bigger Avaya is better able to compete and then further re-invest R&D dollars.

"The long term determination of whether this was a good deal or not will be based on how many of the channel partners Avaya can retain and how many customers it's able to flip before Cisco, Microsoft and the other companies come knocking with great deals on Nortel replacement products."

In the US and Canada the transaction is subject to a competitive bidding process and requires the approval of the United States Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice. Avaya expects that hearings before those courts to approve bidding procedures will be held within the next couple of weeks, followed by an auction, with hearings for approval of the ultimate sale to be held thereafter.
 
In EMEA, Avaya has entered into an agreement with the Joint Administrators, on behalf of the EMEA entities for which they have been appointed and the transaction is subject to information and consultation with employee representatives and approval of the courts in France and Israel.