Avaya Moves Forward

By Irwin Lazar
On Nov 15, 2013
Friday, November 15, 2013

"Play Offense" was the theme of this week's Avaya Executive Partner Forum in Cancun.  Highlighting its role in providing network and telecom infrastructure to next year's Sochi Olympics in Russia, Avaya attempted to use this event to demonstrate a renewed focus on taking on, and beating Cisco, Genesys, Interactive Intelligence, Microsoft and ShoreTel, especially in the mid-market and contact center arenas.  With numerous sports-related analogies, Avaya tried to demonstrate that it was providing its partners with the tools they need to more effectively compete and win business, not just with technology, but with customer service, training, and go-to-market support, and the ability to support the rapid transition to cloud.  The later coming as welcome news to the partners I spoke with who universally praised the Avaya product portfolio  ("it's the best its ever been" said one mid-size-focused partner), but who said their biggest challenge has been Avaya's support and go-to-market assistance, especially in competing with cloud-based offerings such as ShoreTel Sky and 8x8.

For the second year in a row Avaya addressed concerns about its financial situation, especially its heavy debt load, head-on.  VP of Finance Matthew Booher highlighted how Avaya has improved margins, increased operating profit and EBITDA earnings, and investment in R&D.  Even though it is a private company, Avaya reports earnings as if it were a publicly traded company, and will report FY4Q earnings next week.  While Avaya didn't yet release specifics, it was bullish on 4Q performance though it remains to be seen if their future guidance will be lower like we saw this week from Cisco.  Booher noted how Avaya restructured its debt, with the majority of its notes coming due in 2017-2019, though Avaya is paying high interest rates to push that debt out (7.5-8.5%).  While the debt is still a concern in the mid-term, Avaya's restructuring is paying dividends and its cash-flow position remains solid.

Still challenges remain, Avaya still faces stiff competition from Cisco, Genesys, and Microsoft in the large enterprise, and Interactive Intelligence and ShoreTel in the mid-market as well as renewed pushes from Mitel/Aastra and Unify.  It's cloud offerings are still a work in progress and will require uptake by their partners ("the second mouse gets the cheese" is the way one Avaya exec described their approach to cloud).  In our Enterprise Trusted Advisor report, Avaya received a large number of ratings, indicating that many of their customers view them as strategic; but they received a low number of Trusted Advisor scores, meaning that customers aren't necessarily relying on them to help define a vision and roadmap.  As we noted in the report, enterprises like to buy from Trusted Advisors, meaning that for Avaya to more effectively compete it must by itself and through its partners succeed in enabling customers to see it as a thought leader that can help companies define and execute a vision for collaboration and customer service moving forward.