Channel Questions Abound For Avaya As Nortel Acquisition Heads Toward Approval Stage

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Avaya may be the winning bidder for Nortel Networks' enterprise solutions unit, but once the dust has settled -- and provided the deal survives regulatory scrutiny -- how will Avaya integrate Nortel products into its portfolio without disrupting the channel businesses of either company?

That question and others were top of mind as news of the planned acquisition raced around the channel Monday.

Avaya and Nortel confirmed in separate statements that Avaya would pay $900 million in cash and $15 million for an employee retention program to acquire all assets of Nortel's Enterprise Solutions business and shares of Nortel Government Solutions Inc. and Diamondware Ltd.

The deal -- subject to court approval -- comes after a formal bidding process for Nortel's enterprise business and before that, the $475 million "stalking horse" bid Avaya made for the business in July.

Nortel entered bankruptcy protection in January after its restructuring plans failed and it lost $5.8 billion last year, and has spent much of 2009 auctioning off pieces of its business.

In an interview with Channelweb.com, Nortel Enterprise Solutions President Joel Hackney said he had two messages for Nortel's channel following the confirmation that Avaya had won the enterprise business.

"The first message is that this is an extremely positive day where we're able to demonstrate to our current and future partners that we now have a clear path forward that allows us to not only continue our partnerships but grow our relationships," Hackney said. "The second message is, the partner base is as important to us or more important to us than it's ever been. One of the major drivers of this transaction was Avaya's interest in learning and leveraging from Nortel's channel relationships and bringing forward the benefits of working with both Nortel and Avaya."

Avaya, which declined comment to Channelweb.com beyond its Monday morning statement, has spent much of the past few years refocusing its efforts on the channel and is expected to launch its global channel program at its partner conference in Nashville, Tenn., in mid-October.

The company has been offering incentives to Nortel partners to migrate to Avaya since late last year, and, Hackney argued, having Nortel's partner base in its purview helps Avaya accelerate its own channel goals.

"Avaya for several years had been pursuing more direct strategy but then expressed interest in growing a more channel-friendly model," Hackney said. "It would have taken them years to do that and whether they would have been able to do that effectively is a question. We provide a more complete product suite and one that can enable partners to compete more directly in the marketplace with other solutions, and also augment our partners' capability gaps in ways we are not able to do as two separate companies."

Hackney wouldn't comment on what his role or those of his executive team would be under Avaya management, or what steps would be taken immediately if the deal is approved.

Hackney said during a conference call for analysts that at least 75 percent of the Nortel unit's workforce would be preserved, but did not elaborate on how the $15 million in employee retention program money from Avaya would be used.

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