Channel Keeping Eye On Avaya-Nortel Deal

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It's not yet a done deal, but Avaya's $475 million bid for Nortel Networks' enterprise solutions division has some partners seeing the light at the end of the dark tunnel, hopeful that once all is said and done, the traction Nortel once had will bloom again.

Avaya and Nortel on Monday confirmed that Nortel has accepted Avaya's $475 million offer for Nortel's enterprise division, which comprises Nortel's data, voice and government solutions arms. Avaya, however, could still be outbid as the auction to unload Nortel's assets proceeds.

The agreement is a "stalking horse" deal, meaning that while Nortel has agreed to sell its enterprise solutions unit to Avaya, other companies can bid. The process is the same for Nortel's CDMA and LTE access units, for which Nokia Siemens offered $650 million last month and Nortel accepted. The deal is still subject to the approval of the U.S. Bankruptcy Court for the District of Delaware and the Ontario Superior Court of Justice.

In a statement, Nortel CEO Mike Zafirovski said the Avaya deal underscores the value of the Enterprise Solutions business and the investments Nortel has made in telephony, unified communications and data networking. Nortel's enterprise division is the largest piece of Nortel still available as the Toronto-based company conducts a fire sale of sorts to unload its assets after it filed for Chapter 11 bankruptcy protection in January.

"If successfully completed, this transaction will provide clarity on the path forward for our Enterprise customers, partners and employees, and enable the industry to continue to benefit from Nortel-created technology, know-how and leading-edge innovation," Zafirovski said in the statement.

"This is still not a done deal," said Stuart Chandler, CEO of Optivor Technologies, an Ellicott City, Md.-based solution provider and Nortel partner. "The best path for them would be the two join forces and move forward."

Chandler said Nortel's intellectual property is still extremely valuable, Nortel still has a massive installed base and Nortel's partner community is still visible. For Avaya to succeed with the proposed acquisition, the Basking Ridge, N.J.-based company will have to leverage those three strengths and build on them.

"The best thing Avaya can do is embrace the Nortel partner model," he said. "Bring Nortel to the table and see what they can do to make things stronger."

Todd Abbott, Avaya senior vice president and president of field operations, said that's exactly what Avaya hopes to do: Form a cohesive channel program combining both Avaya's and Nortel's cadre of partners. Each company has roughly 4,000 partners globally that will be melded into one large program over time if the deal is approved.

"The good news with this consolidation is they don't need to change; they can continue to buy and deploy. It allows them to determine their course of direction without the fear of their vendor going under," Abbott said of Nortel partners. The merging of the two programs will come as Avaya continues to shift the majority of its business to indirect, with the ultimate goal of doing only 5 percent of business direct in the next few years, compared to the 45 percent direct and 55 percent indirect split the company currently has. Nortel's channel-centric approach will help that vision.

"They can continue to do business and solidify supply and support," he said. "We need a collective ecosystem embraced by the partners."

Abbott said Avaya will remain focused on unified communications and contact center, its two core strengths. He wouldn't offer a road map of what Avaya plans to do with Nortel's data networking portfolio.

Optivor's Chandler was quick to point out that in most acquisitions the name on the box changes but the box itself stays the same, something he hopes for regardless of who ultimately acquires Nortel.

Next: Avaya is buying the competition.

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