Avaya to Buy Radvision, Ramping Competition With Cisco

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 €œnow provide customers with a single, total solution from Avaya,€ Nick Francis, vice president of sales for Avaya€™s 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 company€™s 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, Polycom€™s 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.

€œThese 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 firm€™s blog. €œCombining 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 Radvision€™s annual revenues.

Zeus Kerravala, principal analyst at ZK Research, said the combination of the two companies makes sense.

€œ[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. €œVideo 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.

€œHaving video would enable Avaya to better their end-to-end story,€ Kerravala said. €œWithout video, Avaya can still attach network infrastructure to its voice base but then, if the customer is looking at video, they may look at Polycom€”which isn€™t the end of the world for Avaya€”but 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.€

Avaya€™s Francis and Barnett both said they expect Radvision€™s products to fit well with Avaya€™s UC portfolio.

€œThis 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 €œmove from scheduled video to ad hoc video for anyone.€

Avaya officials expect the deal to close in the next 90 days.