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Posted by Henry Dewing on September 14, 2009
After a long week-end of sleepless nights, hurried hotel arrangements, and slow court proceedings, Nortel has the court’s blessing to sell their Enterprise and Government Systems Groups as well as DiamondWare assets) to Avaya for $900 million plus a $15 million fund for retention of key employees. Nortel’s Enterprise Solutions group posted latest quarter revenue of $464 million -but even with corporate gross margins near the 40% range, Nortel overall posted a loss for the quarter. Avaya assumes negligible liabilities from debt and none from pensions. The deal is expected to be accretive to earnings well within 24 months. Business leaders (and accountants) must find a way to make the Enterprise assets profitable in the short term.
Successful vendors in the global market for Unified Communications and Collaboration need tremendous scope and scale. Scope to serve customers ranging from global MNCs to small local businesses is a market imperative – as is the scale to drive innovation, to optimize cost of goods sold, and to develop innovative services offers. Successful companies in the UC&C market over the next five years must have a well developed portfolio of services to install, configure, and maintain equipment – or to deliver UC&C as a Service. A combined Avaya- Nortel has the scope and scale I am talking about – their real time communications credentials are impeccable and have forward momentum. The key competitive issue is their ability to deliver integrated collaboration solutions. They must answer the market’s thirst for information about UC&C product and solutions roadmaps as soon as possible. The combined firm looks to innovative offers like ACE and Aura to enable horizontal integration of communications, and collaboration infrastructure – as well as embedding communications and collaboration functions into other business processes and applications. Partnerships with IBM, Microsoft and others will be key to success in this market – and while the company will not speculate on details, they will continue to cultivate these important relationships .
Existing Nortel customers have been antsy for some time. They have been worried about the future of their solutions, and this deal should help to calm their nerves – – Avaya understands and values these customers and is committed to moving the combine product portfolio forward. The combined company will support the existing data products roadmap 100% - and will continue to support voice and unified communications solutions from both heritages with no change for the foreseeable future – at least 24 months. No doubt, the combined company will consolidate solutions offers and has stated their commitment to fulfill their customers’ needs for support or transition services. Many Nortel heritage products and relationships offer Avaya an accelerator for their plans to become more channel-centric, so customers can rest assured that their needs will be considered.
What do you think about the deal? Does the combined roadmap hold the promise to make Avaya-Nortel a market leader? ... or do you believe that the combination is table stakes to develop the scope and scale to participate in the market? How will you compete with the new company? Why did it take all week-end to close the deal? I understand that the deal teams got less than 4 hours of sleep Friday, Saturday and Sunday night – what do you think dragged out the process that was scheduled to complete Friday night until 3 AM Monday morning?
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