The VAR Guy

May 28, 2007

2 Min Read
Avaya Up for Sale?

Takeover rumors can spread unchecked during three-day weekends in the US. One prime example: The VAR Guy and other networking pundits are wondering if Avaya is up for sale. Here’s why.

Avaya this weekend postponed an investor conference scheduled for May 31. No additional info is available from the company, but the cancellation triggered the buyout rumors. But if a buyout occurs, it would likely involve a multi-billion deal, according to some rough estimates from The VAR Guy.

Historically, extended holiday weekends in the US have provided ample time for executives to huddle up and negotiate buyouts. Avaya’s current market cap is about $6.15 billion, with $829 million in cash and only $11 million in debt, according to Yahoo Finance. In its most recent quarter, Avaya’s income jumped 50 percent, while earnings and revenue were within analyst expectations during the period.

Translation: Avaya is healthy and the company’s large installed base of telephony equipment could be tempting bait.

Still, Avaya isn’t exactly setting the world on fire. Quarterly sales — at $1.29 billion — grew only about 8 percent. In stark contrast, Cisco System’ quarterly revenue is a far larger ($8.9 billion) and growing much faster (21 percent) than revenue at Avaya.

If Avaya is up for sale, who are the potential suitors? Great question. Here are some potential names…

  • Alcatel-Lucent: Doubtful. The company is still busy sorting out its own business. The VAR Guy doubts Alcatel-Lucent has the ability to digest another big acquisition right now. Although … Lucent and Avaya have big offices close to each other on the east coast.

  • Cisco: Doubtful. The giant typically buys fast-growing companies rather than large legacy firms.

  • Juniper: Doubtful. During a chat last week at Interop, Juniper CEO Scott Kriens downplayed potential acquisitions, suggesting that Juniper would instead focus on its core enterprise technologies.

  • Nortel: Actually, Nortel could be a pretty good fit. The company has finally cleaned up its accounting and seems to be back on track.

Still, there’s no confirmation that Avaya is actually up for sale. And Avaya won’t likely offer any comments until US employees return from a holiday weekend on May 29.

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