Avaya’s Struggles Slip Under Industry Radar

As public companies, Nokia and Research In Motion have drawn considerable press coverage relating to their ongoing struggles. Nary a day passes without a barrage of articles on the latest setbacks and travails affecting both companies.  Some of the coverage is decidedly morbid, even ghoulish, with death-watch speculation on how soon one company or the other might be sold off or otherwise expire. 

Perhaps because it is private, Avaya has escaped such macabre notice from the mainstream business media and the industry trade press.  Nonetheless, speculation has arisen as to whether the company, richly backed by private-equity sponsors Silver Lake Partners and TPG Capital, has a future any brighter than the dim prospects attributed to RIM and Nokia. 

Abandoned IPO Hope  

At this particular juncture, the prospect of an IPO, which once seemed tantalizingly close for Avaya, seems a remote and forlorn hope.  As I’ve noted on a couple occasions before now, Avaya’s IPO was scuppered not only by its wan growth profile, but also by industry and macroeconomic headwinds that show no sign of abating. 

If no IPO is in the cards, what happens to the company? While at least one blogger has speculated that bankruptcy could be an option, I suspect the deep-pocketed private-equity sponsors might have no choice but to prop up Avaya until a buyer can be found. Given Avaya’s tepid growth prospects, its daunting long-term debt overhang, a recent weakening of channel sales, and stiffening competition across its product portfolio, the company is unlikely to find itself in the driver’s seat in any negotiations with a prospective buyer, presuming one can be found.  

Stranded in Purgatory 

Meanwhile, Avaya stakeholders, including the company’s employees, are mired in a purgatory. Sources have suggested the company will consolidate facilities and further reduce headcount, but no major announcements have been made on either front.

With an IPO seemingly off the table as an exit alternative, all eyes turn to the company’s private-equity sponsors. One potential delaying tactic, which we could see before the end of this calendar year, is the potential departure of president and CEO Kevin Kennedy, who has served in that dual capacity since January 2009. We’ve already seen revolving doors in the executive suites along Avaya’s mahogany row, and “new blood” in the CEO office would buy time for the company’s financial backers to devise and articulate a compelling narrative for customers, channel employees, employees, and potential strategic acquirers. 

We’ll have more insight into Avaya’s circumstances soon. The company is due to report its latest quarterly results within the next month or so.   

4 responses to “Avaya’s Struggles Slip Under Industry Radar

  1. Kevin Kennedy has said he expects to shed 3K employees, globally, before FQ14.

  2. Corporate Facts

    The Avaya workplace is described as a ‘toxic’ environment solely created and facilitated by Kevin Kennedy – and his execs have been voting with their feet, the bulk of the talent left the building 2 or 3 quarters ago. The Channel Partner community are viewed as parasitic whilst Kevin doles out the ‘my way or highway’ mantra to them, so they are taking the highway to greener pastures. The result was a disastrous Q3 and suspect no different in Q4 (which should historically be their strongest quarter). Its sophomoric leadership to simply blame the macroeconomic climate … we will see if the Owners buy that argument again…

    Question is – When will Silverlake and TPG step in for the assist? Rome, after all, is burning…

  3. Ernie: Avaya had a toxic environment long before Kevin Kennedy ever showed up. This failure was created back in 2001 or so when Don Petersen, Pam Craven, Mike Thurke and the rest of the so-called “leadership team” decided to use Avaya to line their pockets, while letting the product-line and employees suffer. Other “leaders” have merely followed their lead.

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