Avaya Continues Profit Streak

"A transition by enterprises to IP telephony is beginning to take hold," said Don Peterson, chairman and CEO of Avaya, Basking Ridge, N.J., during a conference call. "Our position allows us to capitalize on this transition and generate profitable growth."

Avaya saw increases in both IP revenue and line shipments during the quarter, Peterson said. He added that the company's business model is performing well.

"Our balance sheet is the strongest it has ever been in our three-year history," he said.

For its second fiscal quarter, ended March 31, Avaya reported earnings of $125 million, or 27 cents per share, up dramatically from a $41 million loss, or 11 cents per share, in the same quarter a year ago.

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Revenue for the quarter rose to $1.01 billion, up from $950 million in the same period last year.

Channel sales accounted for 34 percent of revenue.

Excluding discontinued operations, a gain from a tax settlement and other items, the company earned $103 million, or 22 cents per share, compared with a loss of $55 million or 15 cents per share the same quarter a year ago.

Financial analysts expected the company to report earnings of 7 cents per share, excluding items, according to Thomson Financial/First Call.

Peterson said the company sees positive momentum in terms of overall economic growth and IT spending. "We need to continue to balance this optimism against the ongoing uncertainties we and our customers face regarding the economy, the overall business environment and IT spending in particular," he said.

Avaya expects revenue for the third quarter to increase over the second quarter.

Shares of Avaya Tuesday rose 40 cents to $15.92 in after hours trading, after dropping 82 cents before the announcement.