Avaya helps to tie the corporate world together. The company's communication equipment and software integrate voice and data services for customers including large corporations, government agencies, and small businesses. Its office phone systems incorporate Internet protocol (IP) and Session Initiation protocol (SIP) telephony, messaging, Web access, and interactive voice response. Avaya also offers a wide array of consulting, integration, and other managed IT services. The company sells directly and through distributors, resellers, systems integrators, and telecommunications service providers; more than three-quarters of its sales are made indirectly. Its parent company is Avaya Holdings.
Parent company Avaya Holdings filed for an IPO in 2011. Proceeds from its IPO are slated to pay off long-term debt -- no small feat since the company was heavily leveraged and had more than $6 billion in debt when it filed in 2011. The company will also redeem outstanding shares of preferred stock and pay off affiliates of Silver Lake and TPG for terminating its management services agreement.
Avaya operates through about 230 leased facilities and a half dozen owned facilities spanning nearly 60 countries.
Avaya divides its operations across three segments. Two of the segments -- Global Communications Solutions (GCS; 46% of total sales) and Avaya Networking (6%) -- make up the company's Enterprise Collaboration Solutions product portfolio. The third segment is Avaya Global Services (AGS; 48%).
GCS offers business collaboration and communications software used to make IT infrastructure for communications contact centers. Avaya Networking makes Ethernet switches, routers, a virtual private network technology products, while AGS offers IT consulting and advisement services.
Sales and Marketing
Only 25% of Avaya's sales were made directly in 2012, and the company's sales strategy places increasing emphasis on building its channel partnerships. The company continues to offer traditional communications equipment with an eye toward migrating legacy voice network equipment to more modern, converged, IP-based systems.
Avaya's revenues decreased by 7% from $5.5 billion in 2011 to nearly $5.2 billion in 2012. It also suffered its fourth straight year with a net loss, although it shrank from $863 million in 2011 to $344 million in 2012.
The decrease in revenues was attributed to lower IT infrastructure spend and investment levels from its end customers, quality issues on certain product integration transitions during the second quarter of 2012, and the unfavorable impact of foreign currency.
The losses have been due to exorbitant operating costs in addition to high interest expenses and impairment charges.
Mergers and Acquisitions
Avaya has grown its revenue by making acquisitions. In 2011 it paid about $15 million in cash to acquire Sweden-based audioconferencing telephone maker Konftel in a bid to expand its line of conference room communications products. That year it also bought communications security company Sipera, which was integrated into Avaya's Aura unified communications product set. Sipera specialized in application-layer security to functions such as cloud-based communications, videoconferencing, instant messaging, and various other collaboration tools.
In 2012 Avaya paid $230 million to acquire RADVISION to expand its videoconferencing product line. The purchase enabled the company to extend the functionality of its enterprise video-conferencing products to support mobile devices based on iOS and Android, in particular. RadVision has recently begun targeting small and medium-sized businesses with scaled-down, less expensive product options to help fuel growth. RadVision's video infrastructure systems are being integrated into Avaya's unified communications platform.
After four straight years of net losses, Avaya is working to cut costs and streamline its operations. It sold assets related to its telepresence and video conferencing endpoints and network infrastructure to Glowpoint in 2011 in order to focus on its core segments. The two companies still jointly develop managed video services to address the market for cloud computing tools. The previous year Avaya sold its 59% stake in AGC Networks (a provider of communications systems in India and Australia) to Essar for $44.5 million to better focus on its own business in India. Avaya maintains partnerships with AGC and Essar.
Investment firms Silver Lake and TPG Capital own the company.