Avaya Planning $1 Billion IPO: Report


Avaya is close to filing for a $1 billion initial public offering (IPO), paving the way for Avaya to become a public company again after four years of private equity ownership.

Avaya's alleged plans were reported by The Wall Street Journal Tuesday, citing sources said to be familiar with the matter. Those sources told the Journal the offering would value Avaya at about $5 billion -- a number that would be about 40 percent less than the $8.2 billion TPG Capital and Silver Lake Partners paid to take Avaya private in 2007.

Responding to a request by CRN for further comment, an Avaya spokesperson said Avaya doesn't comment on rumors and speculation.

The seminal event for Avaya since it went private was the company's 2009 acquisition of Nortel's former enterprise unit -- a move that helped propel Avaya ahead of Cisco to the No. 1 worldwide market share for enterprise telephony, and also gave Avaya an expanding data networking footprint. It's also pursued close ties with several major IT vendors, particularly HP.

From an IT channel perspective, Avaya in recent years mounted a significant overhaul of the Avaya channel program. It largely eliminated the channel conflict that dogged the Avaya channel in years past, even if Avaya and former Nortel partners continue to express frustration with squeezing margins, program changes, and an ongoing executive shuffle in Avaya's senior management and channel ranks.

Avaya has also expanded the breadth of its technology portfolio, well beyond its voice and PBX heritage. In addition to the data networking expansion -- including with VENA, Avaya's virtualization architecture -- Avaya has become aggressive behind Session Initiation Protocol (SIP) technology, particularly with Aura, its virtualized UC platform. Last fall, the company released the Avaya Flare Experience -- a collaboration dashboard -- and a companion tablet device for use with Flare as an endpoint.

Avaya, based in Basking Ridge, N.J., was originally part of AT&T, and then part of Lucent Technologies, which was spun off from AT&T. Avaya itself was a spin-off from Lucent in 2000.

Avaya's leaders have made no secret of its future IPO plans, but no firm target date has been offered previously.

"It's ultimately up to the owners," said Avaya CEO Kevin Kennedy in an interview with CRN last fall. "My job is to make sure we can create an environment for it, and that means getting the gross margins and the business models in the right place, and getting our net debt divided by EBTIDA in the right zone. We're headed in the right direction."

An Avaya IPO would come at a time of increasing expectations for IPO activity in the technology space. Recent IPOs have ranged from blockbuster debuts by LinkedIn to whimpering arrivals for companies like Freescale Semiconductor Holdings.

Other UC-centric companies that compete with Avaya, such as Alcatel-Lucent and Siemens Enterprise Communications, are also said to be interested in either IPOs or sales of their channel-facing enterprise networking units.

Avaya's IPO, according to the Journal, is being underwritten by Goldman Sachs Group Inc, Morgan Stanley, JP Morgan Chase & Co., Citigroup Inc., Barclays Capital and Credit Suisse.