Avaya Readies Itself For The Recession
Economic conditions expected to speed up consolidation process, analysts told
January 1, 2009
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Avaya Inc., the former business communications unit of Lucent Corp., no longer needs to concern itself with shareholders and excessive public scrutiny now that it is a private organization.
While that is particularly beneficial during an economic downturn, according to Todd Abbott, senior vice president of sales and head of the firm’s field operations division, the organization is fortunate in that it has a sound financial structure and unlike some key competitors, namely Nortel Networks Inc., is also profitable.
Speaking at a recent media and analyst event at Avaya Canada’s head office in Markham, Ont., he predicted that recessionary pressures are going to speed up consolidation in the enterprise communications market.
“We are anxious to see how the markets play out from a capital spend standpoint,” Abbott said. “We will continue to invest in the business for the long term and will not modify our plans in any way.”
The company, which was acquired by two private equity firms, TPG Capital and Silver Lakes in 2007 for US$8.2 billion, has reduced 27 product groups down to three since the sale — unified communications (UC), contact centres and IP telephony. UC is defined by research firm Dell’Oro Group as the integration of voice with other modes of real-time communications, including instant messaging, video and multi-party collaboration.
In the third quarter of 2008, it estimated that worldwide revenues totaled US$3.1 billion and that Avaya had a 22% market share, three points ahead of its nearest competitor. Other companies tracked were Cisco, Nortel, Alcatel-Lucent, Siemens and Microsoft.
“It is reasonable to believe that unified communications will be the next disruptive technology,” said Alan Weckel, a Dell’Oro Group director. “UC is bringing functions that have historically been confined to core PBX hardware into software applications.”
In the contact centre space, a report released by Gartner last year, found that Avaya held a 38% share of worldwide revenues, which put it 25 points ahead of its nearest competitor.
“The dependency on them is going to go up, not down,” said Abbott. “As companies look to fine tune their business, they are going to be looking to drive a level of support through their call centres.”
In terms of the enterprise telephony market, Infonetics Research stated in a recent report that it grew 8% between the second and third quarter of 2008 and that Cisco overtook Avaya for the first time in the overall PBX-KTX equipment market.