Telecom equipment vendor continues to explore the idea of selling to interested parties
In reporting its latest quarterly financial results, Avaya included an update on its ongoing exploration of “strategic alternatives,” which is code for selling to another company or private equity. CEO Jim Chirico says a decision could come within the next 30 days whether Avaya will sell to one of several interested parties.
The Lowdown: Avaya reported progress in its strategic growth initiatives, particularly in public and private cloud ReadyNow offerings. However, the company took a charge of $633 million related to changes in its accounting practices and adjustments in stock valuations.
The Details: The speculation that Avaya could sell to a private equity firm started earlier this year as the company continued to transition more of its revenue to cloud-based services. Avaya continues to struggle in sales of legacy hardware and software products. According to published reports, interested parties include Apollo Global Management LLC, Permira Holdings, and Searchlight Capital Partners. While private equity is the most likely exit avenue, a potential acquisition by an equal or larger technology vendor remains a possibility.
The Impact: Avaya exiting to private equity could provide it more latitude to transition more of its products and revenue to cloud-based services without the prying scrutiny of Wall Street investors.
Background: Since the beginning of 2019, Avaya has revamped its channel program and incorporated more cloud products into its portfolio. Through the recast Avaya Edge program, Avaya partners had more incentive to sell cloud-based products such as unified communications. In its third-quarter earnings report, Avaya said 59% of non-GAAP revenue is recurring.
The Buzz: “As an update on the strategic alternatives process we’re conducting with J.P. Morgan, at this time we’re in advanced discussions with multiple parties on a range of strategic transactions to maximize shareholder value,” said Chirico in the earnings report. “We expect to bring this process to a conclusion within the next 30 days.”