Does Avaya Really Want Data?


Ever since Nortel went on the chopping block this past spring, one of the central questions has been what will happen to its enterprise products division.

But even though it looks like Avaya will be the one to come away with the prize (although that is not a certainty at this point), there are still some key questions surrounding the ultimate fate of the company's data networking systems.

As our own Susan Hall reported earlier this week, Avaya is ready to pony up $475 million for Nortel's enterprise solutions business, which includes everything from IP telephony and unified communications (UC) equipment to Ethernet routers and other data gear. But since many analysts have couched this as a "stalking horse" deal, meaning it may well be intended to spur even higher bids from other players, there's a chance that another suitor could emerge when the official bidding for the unit gets under way later this year.

Assuming for the moment that Avaya is the eventual winner, though, the deal would create quite a powerhouse in the enterprise communications space, one that would exceed even Cisco in marketshare, according to Gartner analyst Jay Lassman. It would also bring in a hefty revenue stream from a fairly reliable user base. The 4,000-member International Nortel Networks Users Association has already placed its seal of approval on the Avaya offer.

But since Avaya's stock and trade is in the telephone business, how committed would it be to the data products? The company has been mum on the point, saying only that it won't unveil specific plans until the sale is final. Then again, as IDC's Abner Germanow points out, the vast majority of Avaya management, including CEO Kevin Kennedy, are former Cisco guys, so it certainly could run a data unit if it wanted to.

In the end, the decision will likely come down to the company's position against Cisco, according to InformationWeek's Eric Krapf. A head-to-head confrontation across the full range of enterprise products might not be as desirable as a quick sale of the division in order to recoup some of the purchase price and fund a nest egg for further voice-related development. Besides, the company already has close ties with HP, provider of the lower-cost ProCurve networking line.

All of this uncertainty leaves current Nortel partners and customers in a bind. No one expected the bankruptcy process to be easy, but the fact is the longer it takes to spin off the unwanted units, the more tempted people will be to seek more stable alternatives.

And once a change in platforms is made, it will be awfully hard to change it back.