Rumor buzz this week has intensified, and at least some it involves a mooted acquisition by Avaya of videoconferencing vendor Polycom.
Unless one is an insider — which, in this instance, I am assuredly not — one never knows whether rumors of these deals represent anything other than an optical illusion of smoke without fire. Insiders know what’s happening behind the scenes, but they’re not supposed to tell anybody, notwithstanding apparent evidence to the contrary as exemplified by the scandal involving Galleon Investments and others.
So, we’re left to play Sherlock Holmes in the technology markets, looking for clues and employing deductive reasoning to ascertain whether a given rumor possesses anything more than surface plausibility.
As it turns out, a case can be made for an Avaya acquisition of Polycom. It could happen. That doesn’t mean it will happen, and I am not advising anybody to bet the farm on such an outcome. It’s just that looking at Avaya’s strategic ambitions and how Polycom could further them, I could envision a scenario in which Avaya takes an acquisitive shine to its longstanding business partner.
The partnership, while not evidence that a closer relationship will ensue between the companies, represents coincident interests and a history of working together.
Additionally, let’s remember that Polycom might be amenable to a takeover in the wake of Cisco’s purchase of its primary videoconferencing rival, Tandberg. Polycom could continue to stand alone, but shareholders and other major stakeholders might be thinking that the timing and circumstances favor a sale.
Let’s also consider Avaya. The company bought insolvent Nortel’s enterprise business for more than $900 million at auction last fall. It’s still assimilating that purchase, dealing with product overlaps, roadmap questions, and channel issues. Still, when one considers the searing ambition that drove that acquisition and that continues to power the strategic thinking in Avaya’s executive suites, it would be folly to completely dismiss the potential for Avaya to make further M&A moves.
Avaya’s CEO is Kevin Kennedy, a former Cisco executive who subscribes to the same GE-inspired mantra as John Chambers regarding market focus, specifically the part about aiming to be first or second in every market a company enters.
Cisco and Avaya go head to head for market leadership in enterprise VoIP and unified communications. Meanwhile, video-based communication and collaboration are seen as the next major wave, with Cisco betting heavily on the space and Polycom moving into a prominent market position in videoconferencing on the back of its voice-conferencing franchise. Avaya could see ownership of Polycom as both a competitive necessity and a natural adjunct to its existing business.
Remember, too, that Avaya is a private company, richly backed by the munificence of private-equity houses Silver Lake and TPG. Being private, Avaya has more liberty than most public companies to devise and pursue a long-term strategy. Having the backing of Silver Lake and TPG potentially gives Avaya the means to swing for the fences.
There are reasons, perhaps many, why an Avaya-Polycom deal won’t transpire. This rumor, though, seems to have more plausibility than most I hear during an average week.