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New CEO Alan Masarek: ‘Avaya’s Opportunity For Future Success Is Stronger Than Its Past Performance’

Gina Narcisi

The former Vonage CEO and Avaya’s new leader opened up his playbook for the unified communications powerhouse with CRN that includes a focus on cloud, cultivating transparent relationships with partners and customers and an internal ‘cultural revitalization.’

Why did Avaya’s revenue decline so sharply in the last fiscal quarter?

The biggest part of the mess—about two-thirds of it—was the subscription. The reasons were tied to contact duration—length of contract and contract size—for purposes of [revenue recognition]. What happens is customers sign a shorter-term contract, or let’s say there’s a cancellation clause in the contract [for] future performance obligation. While the contract value may be, let’s say, $1 million a year for three years but it’s cancellable after one year, you can’t treat it as a $3 million TCV. So, there’s all sorts of nuance from a [revenue recognition] perspective that gets depressed when you have, from a TCV perspective, smaller [contract] size and smaller duration together. The other side is, we had customers who renewed maintenance instead of flipping into a multiyear subscription contract.

We’re diagnosing these issues as quickly as we can. It seems like maybe the implication is that we were in market with this financing very publicly with a lot of swirl. [It] took a long time to premarket it, launch it, close it, and that, I think, created a lot of worries about these upcoming debt maturities, which is what our refinancing took care of. And I think what you saw was customers sort of taking a more cautious approach with us, as reflected in a short-term contract or a cancellation clause, or, ‘Hey, I’m just going to renew my maintenance thing and see how you guys are doing. Maybe next year I’ll do the longer subscription.’ That was about two-thirds of the mess. The other side was the old Capex licensing model. Some of it downsized, some of it was lost, and it happened proportionately across all theaters in the world. There’s no particular culprit, which makes me think it’s the same thing, a sort of caution because of financial instability or worries of financial stability that were out there rampantly in our Q3. 

 
Gina Narcisi

Gina Narcisi is a senior editor covering the networking and telecom markets for CRN.com. Prior to joining CRN, she covered the networking, unified communications and cloud space for TechTarget. She can be reached at gnarcisi@thechannelcompany.com.

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