Avaya Reportedly Considers Selling Contact Center Unit

Reports of a possible deal to sell the business to Genesys comes three months after Avaya began reviewing options for dealing with its mounting debt.

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Avaya executives in May said the business communications and networking vendor was evaluating its options for the future as it deals with a debt burden hovering around $6 billion. Now the company reportedly is considering selling its contact center business for as much as $4 billion.

Citing unnamed sources, Reuters reported that officials with Genesys Telecommunications Laboratory, a key player in the contact center technology field based in the United States, are talking with Avaya executives about acquiring the vendor's business. According to the sources, Genesys is one of several companies that have contacted Avaya about possibly buying the contact center business, and it is unclear whether a deal with Genesys will be reached. Officials with both companies have denied comment on the report.

The possible deal comes at a time of transition for both Avaya and the larger enterprise communications field. Avaya is undergoing a transformation toward becoming more of a communications software and services provider, reflecting a growing trend in the industry toward cloud- and software-based solutions that enterprises are increasingly demanding.

In the first three months of the year, Avaya generated $904 million in revenue, a $91 million drop from the same period last year. Company President and CEO Kevin Kennedy at the time said Avaya's ongoing shift in focus contributed to both the drop in revenue as well as the hiring of Goldman Sachs and Centerview Partners as financial advisers to help assess the vendor's current structure and options for the future, which could include selling assets or the entire company.

Reports earlier in the year indicated that Avaya owners Silver Lake Partners and TPG Capital, which bought the company for $8.2 billion in 2007, were considering selling Avaya, which they believe could be worth $6 billion to $10 billion.

"Our purpose in assessing and taking capital structure actions is to improve the balance sheet as we progress through our ongoing transition as a software and services company," Kennedy said in May. "We will focus on maintaining Avaya's strong and broad customer relationships, continuing to advance our industry leading technology and multi-year operational improvement trend, and ensuring customers continue to receive our outstanding service and support that drives exceptional customer satisfaction."

The growing demand for more software- and cloud-based solutions and the rising competition in the communications space are roiling the industry, which is seeing its share of consolidation and vendor transformations. Some examples include Nokia buying Alcatel-Lucent, Atos buying Unify, Lifesize spinning out of Logitech after shifting its portfolio to the cloud, and private equity firm Siris Capital planning to buy Polycom for about $2 billion.

More recently, ShoreTel officials announced last week that they, too, were reviewing options for the company's future, which could include selling businesses or the entire company. Meanwhile, Mitel, which over the past couple of years has bought Aastra Technologies and Mavenir Systems, is continuing to look for other acquisitions despite its failed efforts to purchase ShoreTel and Polycom.

Genesys itself last month received an infusion of cash via a $900 million investment by buyout firm Hellman and Friedman.

Avaya in March announced Zang, a subsidiary that sells a communications platform-as-a-service, part of the move toward cloud-based solutions. Analysts with Synergy Research Group reported that in the fourth-quarter 2015, revenues from hosted and cloud solutions grew 10 percent year-over-year, even as revenues from on-premises-based systems fell 3 percent. Synergy also listed Avaya as the third-largest vendor in the global collaboration space, behind Cisco Systems and Microsoft.