Mixed reaction from local market on Avaya buy-out

Avaya ended a week of speculation when it unveiled plans to go private via an US$8.2 billion (A$9.7 billion) merger agreement with investment firms Silver Lake and TPG Capital.

The cash deal, announced 5 June, was foreshadowed by reports that Avaya was entertaining several interested suitors, including the two private equity firms as well as networking competitors Nortel Networks and Cisco Systems. The sale is expected to close this autumn.

David Cannon, senior analyst, telecommunications at IDC, said it was too early to tell how the deal will affect Avaya players in the local market. However, interestingly the equity firms decided to buy the telco at a time when the IP/PBX market was becoming more market software centric.

“Given that Microsoft is about to also enter the same market environment it will be interesting to see what will happen to Avaya. Equity firms aren’t renowned for long term holdings,” said Cannon.

However with market changes and Avaya’s strategy into becoming a software company instead of staying a pure box seller, Cannon was impressed both equity firms paid premium dollars for Avaya.

“Avaya is becoming a software-centric organisation and this is at a time when both Microsoft and Google have announced plans to head into the same arena,” he said.

Managing director of Avaya reseller NSC, Craig Neil, said he wasn’t surprised the Avaya business was being sold.

“Its business as usual for us, but things could have been a lot different if it had been Nortel that bought the company,” said Neil.

He wasn’t worried about Avaya being bought out by private equity firms, as it would mean more money for the company.

“I certainly haven’t heard any customers stop any Avaya business after hearing about the sale,” he said.

Neil said NSC would keep its head down and continue with its current and future projects.

“With Avaya becoming a more software-centric company we can get the business more into application-type products,” he said.

Scott Smith, director at Comlinx, a Queensland-based Avaya reseller, said this buy indicated to him a positive growth for the telco.

“It’s too early to tell but I think it’s a positive step forward for all,” he said.

However, Cannon said some end-users might be put-off by private equity firms buying the company.

“They might see this as an indication of things becoming more unstable for the company. The new owners need to put out a message to reassure customers and partners of Avaya’s longevity,” he said.