REPORT: Avaya Planning to Go Public

by Matt Klassen on June 8, 2011

A global leader in business communications, Avaya has always been known for the innovation and advanced technology in its much sought after phone systems. Now the company is hoping the strength of its name will bring success on the open market, because while the details aren’t yet public, it looks like Avaya soon will be.

The Wall Street Journal has reported that the phone systems maker could file for an Initial Public Offering as early as this week, seeking an initial valuation of approximately 1 billion dollars. The decision to go public comes amidst a flurry of such technology sector IPOs in recent months, with many of those seeing mixed results and with lots more still to come.

But will Avaya be able to turn its IPO into a gold mine, or will it follow the likes of Mitel and others, struggling with slumping share prices and disgruntled investors as it tries to right its suddenly sinking ship?

There’s no question that taking Avaya public again is a gamble, as recent filings have had mixed results for technology companies. Chip maker Freescale Semiconductor Holdings filed last month, and faced a weaker than expected debut, while Linkedln watched its shares more than double on its first day of trading later in May.

Furthermore, the move comes at a time when the public market is infatuated with Internet companies, evidenced by the fact that e-commerce company Groupon filed for an IPO that could see the company valued as high as $20 billion. What this means is that despite Avaya’s strong history of market dominance, it may not see the initial success that more technologically cutting edge companies are seeing.

The difference in Avaya’s case, however, may be twofold: It has already been a publicly traded company in the past, and it’s a recognized and established global brand that has seen no hint of decline in its profits or popularity.

It was back in 2000 when Avaya first hit the public market, a spinoff from technology company Lucent—now of Alcatel-Lucent. It was publicly traded until 2007 when it was acquired by private equity firms Silver Lake and TPG Capital for $8.2 billion, who have owned the company ever since.

Further, the Journal has reported that the company may be valued as high as $5 billion, and likely plans to file for an IPO of $1 billion, underwritten by such banks as Goldman Sachs Group Inc., Morgan Stanley and J.P. Morgan Chase & Co. CitigroupInc., Barclays Capital and Credit Suisse Group.

One is clear, though, this is a turning point in Avaya’s long and storied career as a globally recognized telecommunications brand, and for those like Digitcom who are closely linked to Avaya, the hope is that the company executives will be able to navigate the public market with the same confidence with which they have led the company in recent years.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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Stuart Armstrong June 23, 2011 at 10:00 am

Imho, from a sales perspective, easier to sell the “new Avaya story” to SMB buyers (and their VARs) when Avaya was a “hidden” private company and a perceived hero and industry heavy weight after buying Nortel and re-defining its strategy re UC, IP, channel, etc.

I wonder if Kevin O’Leary will be investing his Fund client’s money into the Avaya IPO after these results are now public. Its clear that the “telephony” business model has changed for ever and Avaya must find a lower cost base starting at the top and throughout the company. Perhaps a voluntary 25% salary cut in exchange for shares vested for 3 years will focus the troops on the realities of an IP world that is “flat , hot and crowded” (as per Tom Freidman) with competitors full of profits, cash and UC plans of their own.

Deep Dive on AVAYA IPO:
http://www.zdnet.com/blog/btl/avaya-ipo-deep-dive-competition-debt-are-big-worries/50344

Still, AVAYA’s collective knowledge base in Call Center CRM, UC, IP telephony,++ and huge client base combined with a much more defined channel strategy makes them a target for merger, takeover etc. IBM > Rolm in the 80’s. HP > Avaya in 2012?

regards,
SA

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