Avaya’s acquisition of Radvision will not only add video to its UC offerings, but will give a boost to its data networking business as well.
Avaya, after months of speculation, is buying Radvision, a
move that will give it video collaboration capabilities to add to its unified
communications lineup and be a boon to its data networking business.
Executives from Avaya and Radvision announced the $230
million deal March 15, several months after news first broke that the two
companies were in negotiations, and a day
after reports circulated saying the deal was imminent.
Avaya, whose Session Initiation Protocol- (SIP-) based Aura
platform is the technological foundation of its unified communications (UC)
portfolio, has in the past relied on partnerships with the likes of Polycom to
offer high-end video collaboration capabilities to its customers. With
Radvision and its telepresence and video conferencing products in hand, Avaya
will now be able to offer an integrated and open UC offering that features
video collaboration capabilities for everything from the conference room to
mobile devices like smartphones and tablets, according to officials. It also
will put Avaya into even more direct competition with the likes of Cisco
Systems, both in unified communications and networking.
With the deal, the company can now provide customers with a
single, total solution from Avaya, Nick Francis, vice president of sales for
Avayas Video Collaboration group, said in a conference call with journalists
and analysts.
That will be important going forward, given the rising demand
from customers for greater integration of voice, video and the Web in their UC
solutions and the growing number of computing devices being used in business
today, said Gary Barnett, senior vice president and general manager of
collaboration infrastructure for Avaya.
Radvision offers a host of video collaboration products,
including its Scopia portfolio, as well as management capabilities. Radvision CEO
Boaz Raviv spoke about the companys 20 years in the video conference and UC
markets. However, the vendor took a serious hit in 2010, when partner Cisco
Systems bought rival Tandberg for $3.3 billion. Radvision has struggled to
regain its financial edge since, and while rivals such as Polycom and Cisco
have flourished in a booming video collaboration space, Radvision has seen its
financial fortunes stall.
In the fourth quarter of 2011, Radvision lost $4.4 million,
with revenues dropping to $21.8 million, almost $5 million less than the same
period in 2010. During the same quarter, Polycoms revenues jumped to a record
$407 million, more than $100 million more than in the fourth quarter in 2010.
IDC analysts are expecting the video conferencing market to
hit $3.2 billion in 2012, a jump from the $2.7 billion in revenues in 2011.
Analysts applauded the Avaya-Radvision deal, saying it will
give Avaya an even more complete UC portfolio at a time when customers are
looking for more integrated solutions.
These two technological powerhouses have
the combined brainpower to put together some of the most advanced unified
communications solutions in the world, Forrester
analyst Henry Dewing said in a post on the market research firms blog.
Combining Radvisions's experience with building complex
modular communication components with Avaya's strength at delivering
complete, reliable communications solutions is an appealing combination.
For Avaya, it means a more complete solution
that also gives it greater capabilities in the cloud, Dewing said. However,
there are challenges, from merging two difference company cultures to finding
ways to increase revenues to justify the $230 million price, which he said was
about three times Radvisions annual revenues.
Zeus Kerravala, principal analyst at ZK
Research, said the combination of the two companies makes sense.
[Avaya] appears ready to IPO sometime in the
near future, and having video be part of its growth story will likely be more
appealing to potential investors than VOIP [voice over IP] and other things,
like CEBP [communication enabled business process], which is harder to
understand, Kerravala said in a post on the NoJitter
blog site. Video is hot, and unlike in the past, this momentum appears to be
sustainable. Right now, Avaya's video strategy is the Desktop Video Device and
partnerships, but that doesn't really allow Avaya to directly benefit from the
growth of the video market.
For Avaya, having greater video capabilities
would help its data networking business, as vendors like Cisco have already
experienced, he said.
Having video would enable Avaya to better
their end-to-end story, Kerravala said. Without video, Avaya can still attach
network infrastructure to its voice base but then, if the customer is looking
at video, they may look at Polycomwhich isnt the end of the world for
Avayabut if the customer chooses to look at Cisco video, now Avaya stands to
lose the whole kit and caboodle. Anyone that's ever competed with Cisco sales
knows that once Cisco is in an account, they'll never leave.
Avayas Francis and Barnett both said they expect Radvisions
products to fit well with Avayas UC portfolio.
This is a rapid embrace, not a rip-and-replace, Francis
said, adding that merging the two companies will mean a more dynamic video
collaboration environment, which is important as customers increasingly look to
leverage video from multiple devices. Avaya hopes to move from scheduled video
to ad hoc video for anyone.
Avaya officials expect the deal to close in the next 90 days.
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