Avaya will pay more than $900 million for Nortel Networks' Enterprise Solutions business, which includes Nortel's unified communications technologies. The deal will give Avaya a 25 percent share of the enterprise telephony market, putting Cisco Systems in second place at 16 percent, according to analysts. The deal is part of bankrupt Nortel's decision to sell off its businesses piecemeal.
is propelling itself to the top of the enterprise telephony market
with its $900 million purchase of bankrupt Nortel Networks'
The combination of Avaya and Nortel's enterprise business will give Avaya
about 25 percent of the enterprise telephony market, outdistancing Cisco
Systems, which now holds a 16 percent share, according to the companies and
Avaya and Nortel announced the deal Sept. 14, saying Avaya had won the
bidding for the Nortel Enterprise Solutions business, which generated $2.4
billion in revenue in 2008. The business includes Nortel's UC (unified
The deal also includes Avaya spending another $15 million for employee
retention costs. Avaya also will get part of Nortel's Government Solutions and
Avaya, which makes phone systems for businesses, in July entered a "stalking
horse" bid of $475 million for the Nortel unit,
the floor for bidding on the business. Avaya outbid Siemens Enterprise
Communications for the Nortel unit.
Zeus Kerravala, an analyst with Yankee Group, said bringing Nortel's
Enterprise Solutions businesses into the fold will help Avaya build its
"Avaya, challenged in the past with new customer acquisition, now has a
big base to sell into," Kerravala said in an e-mail. "And Cisco,
after battling Avaya for years for enterprise telephony leadership, now finds
itself No. 2 with 16 percent in market share, and facing a significantly more
challenging competitor with the combined Avaya-Nortel."
The deal still has a few more hurdles to clear. It still needs to be
approved by bankruptcy courts in the United
States and Canada.
Another challenge could come from Verizon Communications officials, who said
before the auction began that if Avaya won the business, it could have national
security ramifications. Avaya officials have said they don't think the dispute
with Verizon will stop the deal.
Nortel filed for bankruptcy protection earlier in 2009 after officials said
the company lost almost $6 billion in 2008, thanks in large part to the state
of the economy. In the spring, Nortel decided that rather than try to
restructure the business the better course for customers and employees would be
to sell off pieces of the company.
Nokia Siemens Network is looking to buy
(Code Division Multiple Access) wireless business and LTE
(Long Term Evolution) technology for $650 million, and Nortel also has agreed
to sell wireless technology business to Telefon AB L.M. Ericsson for $1.13
Joel Hackney, president of Nortel's Enterprise Solutions business, said the
deal with Avaya will give customers confidence in the future of the products
"As we work through integration planning, it is business as usual, and
we will continue to focus on supporting our installed base," Hackney said
in a statement.