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What impact would a Mitel-Avaya merger have on the channel?

over 4 years ago by Lucy Cinder

What impact would a Mitel-Avaya merger have on the channel?

unified communication news

Avaya's rollercoaster couple of years could be set for another twist, following reports that fellow comms giant Mitel is preparing a bid for its competitor.

Reports of an Avaya takeover first surfaced last month, with Reuters claiming that Avaya was considering a private equity-backed buyout valuing it at $5bn (£3.9bn).

The Wall Street Journal has now claimed that Mitel, the vendor's biggest competitor, has thrown its hat in the ring.

The publication said that Mitel has offered a deal valuing Avaya at between $2.2bn and $2.4bn, citing people familiar with the matter.

Avaya has endured a hectic period that has seen it go into bankruptcy, offload its networking business to Extreme Networks, exit bankruptcy, then float on the New York Stock Exchange.

At first it might seem strange that a business that floated only a year and a half ago would look to be acquired. But bearing in mind Avaya's recent history, it doesn't seem so outlandish.

The vendor went all out on publicity when it went public - draping its logo over the front of the NYSE building on Wall Street, having its CEO ring the bell to start the day of trading, and going after competitors such as Cisco and Microsoft in the press.

It also made a huge effort to make crystal clear that its financial difficulties are well and truly in the past, perhaps putting itself in the shop window.

If you couple this with rate of consolidation in the comms space, a merger between arguably the two largest players perhaps does not seem too far-fetched.

Comms partners are certainly not unfamiliar with acquisitions, the largest of recent years being Mitel's £500m deal for ShoreTel in 2017.

Rufus Grig, CTO at top Avaya and Mitel UK partner Maintel, told CRN that the acquisition track record of both vendors is a huge positive for the channel - should the rumours prove to be true - and would help mitigate any disruption typically seen when two prominent vendors merge.

"It's important to note that these are only rumours; there's no confirmation from either party," he stated.

"They are two great companies with terrific products and both have a history of successful consolidation and integration going back many years - think about Avaya's purchase of Nortel and Mitel's serial set of acquisitions. There has always been consolidation in our space and there will continue to be."

He explained that more consolidation in the comms arena was always on the cards, given the merging of communications and information technology.

"I think we have expected more consolidation, both at the vendor level and in the channel as well," he explained.

"It is the way that companies are going to scale and compete in this competitive world.

"Comms used to be a very fragmented world. PBX companies didn't sell networks, mobile or internet, or LAN - yet that world seems 100 years ago when you look at today's converged service providers.

"Now cloud is increasing the scope for convergence even further. As the technologies converge themselves, customers want to have a converged option from their suppliers."

If these merge rumours prove to be true, it is likely that the comms challenger vendors will try to spin the move to their advantage.

Avaya was heavily targeted by its competition when it entered Chapter 11 bankruptcy protection, with ShoreTel and RingCentral both vocal in their attack on the wounded vendor.

What is unclear is Mitel's rationale behind the acquisition, if the rumours are true.

For a long time, Avaya has been the used as the Blockbuster in the Blockbuster-Netflix saga, with various start-ups accusing it of failing to adapt to a cloud-centric world.

Avaya CEO Jim Chirico has openly said that the vendor has fallen behind the competition. But the signs of a transformation, after shedding its legacy baggage, are strong.

After reporting eight consecutive years of sales decline between 2008 and 2016, and losing ground on Mitel and ShoreTel, Avaya started reporting growth again.

Last year it reported consecutive months of year-on-year growth for the first time in its history.

And in Q1 this year, it claimed to have seen mid-market cloud growth of 150 per cent year on year.

Even if Avaya has fallen behind its competitors when it comes to cloud, it most likely has a sizable install base ready to make the cloud transition, which is perhaps a reason behind private equity-backed Mitel's mooted merger attempt.

When contacted by CRN, Avaya said it does not comment on speculation, while Mitel had not responded.

Source: channelweb

Industry: Unified Communication news

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