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Sticking with the competitive piece, I asked you last year about Microsoft as a key competitor in the UC space. We've had a year now since they launched Lync, and we're seeing some growth there for them. How do you now view Microsoft as a competitor?
I think there are architectural choices for customers, including Microsoft, Cisco, cloud, and that all of us need to be paranoid. We have accounts that use us as middleware for Google Docs -- they're saving money, for example, by not using Microsoft anymore. And then iPads come in, and guess what, Lync doesn't help you so much with that.
The reality is there is a lot of fragmentation. I think people are conscious that they have all these choices. Cisco is an intense competitor, and Microsoft has done a great job placing Lync in lab trials in so forth, and cannot be underestimated. At some level, that was my message to our team: the people who win will be the ones who execute and tend to details. So with that humility, no one can discount the other guy right now.
I think this is also the first year that we've seen Avaya very explicitly mention ShoreTel from the stage. Are they making inroads against you?
First, you have to let results be one indicator, and I think they have grown. I think they've done a good job. They've worked at places where ourselves and others may have taken their eye off the ball. We did the integration with Nortel and we left a hole, and I think ShoreTel sees that. The other side of it, however, is realizing that for us, one good quarter is more than what they would grow in a year. So we're pleased with what we're doing. But to your point they have done a great job, and I think they have executed well.
Another thing you and your team have brought up is upping Avaya's consideration rate among customers. But given your market share, isn't it fair to say Avaya is already considered frequently? "Consideration rate" is usually something we hear from smaller competitors trying to break in because they don't have the brand equity.
I think you're right in that, but let me go back to…well, one of the challenges the company had is we felt we needed more coverage, and that's why we did the acquisition of Nortel. At some level, the reason we did that was coverage, and therefore, consideration rate. It wasn't lack of brand awareness, you just needed people to show up and say, this is what's in our portfolio.
The second piece of that is both Avaya and Nortel had a lot of legacy product and a lot of legacy maintenance. Having that, you tend to be less virtuous about talking up the new products because you're afraid that a customer might ask you to discount your past. So part of the emphasis on getting a lot of the new product out there is to say we're a product company now, and hey, product growth is very important to us. The percentage of product revenue is a significant number I threw out [Avaya derives 55 percent of its revenue from products versus 48 percent two years ago]. A seven-point move in a couple of years is a big deal. We are having success moving up our consideration rate, but we're going to do it more. Is there growth for us? There is, absolutely.
Your presentation didn't mention Avaya's IPO at all. Is there any update you can provide?
At the end of the day, the event of an IPO is really the decision of the owners. As you know, since probably August, it's been closed to us. Going forward, the owners will decide if and when. My whole job is to make the numbers so that they have that alternative.
So that decision is entirely in their hands?
Pretty much, yes.
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