Avaya Bankruptcy News, Product Innovations, Partner Reactions, More: A Year In Review
“The dynamic of business is changing, and partners need to change. We want to change with them,” said one exec.
June 19, 2023
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“Innovation without disruption,” a motto Avaya CEO Alan Masarek coined for the company, could be perceived with irony considering how events unfolded last summer.
In August, Avaya execs expressed “substantial doubt” that it could continue as a viable business. At that time, revenue was down 20% year over year in the third quarter to $577 million, according to an earnings report. This was compounded by the fact that Avaya borrowed $600 million in June of 2022. As Bloomberg reported, the company had a “large chunk of convertible debt maturing in less than a year.”
Also last summer, Avaya named Masarek its new CEO, replacing Jim Chirico, who had been with the company for 15 years. Masarek was CEO at Vonage where he led the company from a VoIP-based residential phone provider into a global enterprise cloud communications provider.
At the time of his appointment, Masarek said: “I look forward to leveraging my background and years of cloud communications experience to propel Avaya to renewed growth and profitability as we build on the company’s strong fundamentals. At the same time, I intend to undertake a comprehensive strategic and operating review of all facets of the business with the goal of delivering industry-leading solutions to our global customers and enhancing value for all stakeholders.”
Despite optimism surrounding new leadership at Avaya, analysts outlined in August a less than rosy picture of what would come in the year ahead. At that time, it was nearly five years since Avaya had emerged from its first Chapter 11 and it was projected that those circumstances were indeed a possibility again.
As analyst Dave Michels outlined, “The company has not clearly communicated a detailed vision or technical road map for some time. The few significant updates that did occur were poorly communicated. Avaya possibly renamed all its products OneCloud to obfuscate the direction and health of individual product lines within its portfolio.”
As news continued to break surrounding financial difficulties, including layoffs at Avaya, partners weighed in.
Eric Asquino is president of Los Angeles-based ACS Cloud Partners. In August he said he didn’t have much confidence in Avaya going forward, adding that the company’s financial troubles were “another sign they don’t have the product set or ability to compete with the increasingly crowded field of larger well-funded cloud-based UCaaS providers.”
At the time, Asquino was concerned that Avaya gear had limited compatibility with other UCaaS providers.
“If a customer were to make a change away from Avaya, they would need to purchase all new equipment. This could lead to some customers taking a wait-and-see approach to avoid the potential additional cost,” he said.
Ryan Rowland, co-owner of Adaptiv Advisors, spelled out broader criticisms of the firm.
“Why do I want to entrust my customers to a company clinging to the past when the market is saturated with innovators and forward-thinking competition who started in the cloud and aren’t encumbered with decades of legacy hardware, code and business practices? There is precedence for enterprises reinventing themselves and coming out stronger than ever, but the actions of Avaya speak louder than their words and I’m not wholly optimistic on their future.”
To address these concerns, two Avaya executives sat down for an interview with Channel Futures to discuss plans to begin 2023 on a new financial footing. CEO Masarek and vice president of channels John Lindsley talked of financial cuts and the vision for the company.
“On Sept. 6, we began initiating significant efforts toward cost-cutting measures of $225 million-$250 million this quarter,” Masarek said. “The actions announced are expected to provide net savings at the top-end of the $250 million that we disclosed to the U.S. Securities and Exchange Commission (SEC) in the Form 8-K. I am confident that this is a step in the right direction to correct our financial standing and lead the company into the future, and plan to begin 2023 with a clean slate as we get on the other side of the short-term financial noise.”
Lindsley assured partners there would be continuity with channel programming.
“Partners want us to win. Partners want us to succeed. Clearly, they’re hungry for information, for strategy, for product road map,” he said. “All of that stuff is in progress. But there’s a really encouraging vibe of certainly with the executive presence, the content here and the vision, and where we’re taking the company. So it’s exciting to be a part of it, certainly. There’s a lot of work to do. I don’t want to undermine that. We’ve got a lot … to do, but partners want us to win. They’re rooting for us. And our role here is to make sure that they know how important they are in the strategy as we move forward.”
Lindsley added: “Our partner program does an annual refresh, and that’s always a work in progress. I don’t expect dramatic changes to the program itself. But as we put things in place with regard to product strategy, road map and journeys to the cloud, certainly there are enhancements that always come along with that.”
Masarek’s attempts to revamp Avaya amid financial questions were often overshadowed by news of further improprieties by the company. Avaya bondholders sued the company, claiming “massive fraud.” The plaintiffs say they lost more than $125 million because the company’s board misled investors.
Feb.14, 2023, Avaya filed for bankruptcy, making it its second Chapter 11 in six years. For the filing, Avaya had the support of more than 90% of the company’s secured lenders.
“Strengthening Avaya’s capital structure is a critical step to fully realize our transformation,” said Masarek. “We are excited to move ahead as a well-capitalized company with one of the strongest balance sheets in our industry that includes substantial cash to invest in our own success.”
The company received commitments from Apollo Global Management, Brigade Capital Management and Citi. The company secured $780 million in committed financing and reduced its debt by more than 75%.
Avaya came out of Chapter 11 bankruptcy with approximately $650 million in liquidity.
It took Avaya one year to emerge from bankruptcy when it filed the first time for Chapter 11 in 2017. This time around, the process was much quicker, noted Jon Arnold, principal at J Arnold & Associates.
“Compared to last time, this emergence from Chapter 11 was much faster and on more favorable terms, which is great to see given how capital markets are tighter now,” Arnold said.
Now Avaya has little debt but also less equity. This makes Avaya less risky, and customers and partners will now be more confident in doing business with them, analysts said.
Arnold added that Avaya is in a more advantageous position when it comes to growth than they were several years ago.
“Having [CEO Masarek] in place now, this process could be structured more as a win-win than last time. Avaya gives up some financial control, but they gain a clear runway of liquidity to build on for growth. This is reflected in the makeup of their board, where four of the nine members are on the investment side. They include the addition of experienced industry executives who Alan can build a growth plan around.”
Nidal Abou-Ltaif, Avaya SVP global sales and president, Avaya International, sat down with Channel Futures in March at Enterprise Connect for an interview to discuss product innovation.
“I don’t think the bankruptcy impacted anything to do with our innovation and our product because it was it was a financial transaction that took place. Of course, it gained a lot of attention from the press, from the partners, from us, but it did not really impact in terms of investment or in terms of where we’re going regarding innovation,” Abou-Ltaif said. “Our base wants to innovate. So we are working with them to take them to the future and innovate with them. We are enabling that development. When Alan [Masarek] joined as our CEO, he came up with ‘innovation without disruption.’ What do we mean by that? Customers are building a path to go toward the future and modernize and innovate their operation, which means they must innovate and modernize their technology.”
Avaya’s innovation is focused on one thing, he added.
“Our platform is the base of all the innovation. Our customer can sit on top of it and innovate with minimum disruption financially, operationally and technologically. And so our Avaya Experience Platform is going to be their platform toward the future, which is public cloud, and then our customer can consume from it while they’re still on-prem.”
Abou-Ltaif said change was inevitable for the Avaya’s relationship with partners.
“The dynamic of business is changing, and partners need to change,” Abou-Ltaif said. “We want to change with them. And definitely we are trying to find new partners that are API-style partners who come with the API economy that we’ve been talking about it for many years.”
Since the start of the year, Avaya has rolled out more than 150 new product features and enhancements across its portfolio. It launched Avaya Enterprise Cloud, a dedicated instance of Avaya’s core contact center, collaboration and unified communications software solutions for large enterprises. CEO Masarek said Avaya remains poised to capitalize on its product development momentum and address the current and future needs of its customers.
That includes the Avaya Experience platform, a public cloud solution that builds and scales the contact center business.
“We have set up our North Star, and it’s going to be our Avaya Experience platform, which is a platform based on public cloud, based on Azure, that it will be the platform that we will connect and interconnect everything to it. But we also continue continue to invest in our private cloud platform, on our on prem platform, because a lot of customer wants to stay on prem,” said Masarek.
Since the start of the year, Avaya has rolled out more than 150 new product features and enhancements across its portfolio. It launched Avaya Enterprise Cloud, a dedicated instance of Avaya’s core contact center, collaboration and unified communications software solutions for large enterprises. CEO Masarek said Avaya remains poised to capitalize on its product development momentum and address the current and future needs of its customers.
That includes the Avaya Experience platform, a public cloud solution that builds and scales the contact center business.
“We have set up our North Star, and it’s going to be our Avaya Experience platform, which is a platform based on public cloud, based on Azure, that it will be the platform that we will connect and interconnect everything to it. But we also continue continue to invest in our private cloud platform, on our on prem platform, because a lot of customer wants to stay on prem,” said Masarek.
AVAYA ENGAGE — The Avaya bankruptcy news was short-lived this year, and the company isn’t wasting any time moving forward. The cloud and collaboration services provider is holding its annual conference, Avaya Engage. this week in Orlando. Channel Futures is there.
Avaya will showcase product innovations, the company’s channel strategy, its road map for the future of unified communications and customer experience, as well as a primer on the organization’s outlook regarding artificial intelligence. And there’s much more.
This may be an opportunity to revel in a new era, but channel partners are certainly seeking reassurances about the business health of this international company. To grasp what’s ahead necessitates taking an examination of the past. In the slideshow above, we explore the year in that has included financial hurdles, how the company has advanced technologically, and partner and analyst reactions to the Avaya bankruptcy news cycle over the last few months.
In Spite of Avaya Bankruptcy News, It’s a New Era for Product
Avaya’s Alan Masarek
Alan Masarek, Avaya CEO, has said that from a product point of view, Avaya is moving to cloud around its own contact-center-as-a-service (CCaaS) solution.
“We have integration of that with our UC solution. [We work] with [RingCentral] on Avaya Cloud Office, which moves us on the UCaaS side. We’ve got some really attractive assets.”
This includes on-premises. Masarek told Channel Futures in September, prior to its most recent bankruptcy filing, that Avaya had a “history in selling premises-based solutions, our midmarket product, IP Office; our UC product for enterprise, Aura; and our CC product, Elite. We’re unique out there. Where most competitors are all cloud, there are big swaths of customers for which premises makes a great deal of sense.
“So think about certain geographies in the world; we cover 190 countries,” he added. “Think about verticals – health care, critical care, hospitals – and even within geographies or segments, you have governments frequently, or rural areas without great connectivity, things like that, where that premises architecture is critical to them. Then we have companies that want to go immediately to full public multitenancy cloud. The beauty is, most are somewhere in between. Most are sitting there in some sort of hybrid path, particularly when you think of these very large customers that are really the bread and butter of Avaya’s customer base. And we have effectively 90% share among large enterprises, governmental agencies and such globally. So in that world, we can provide a very unique offering, which we call innovation without disruption.
“Finally, [there are] those who want to go immediately to full cloud; we can do that as well in both our public CCaaS solution and our public UCaaS solution — Avaya Cloud Office. That’s where we’re driving. And there’s enormous power, in my view, of being able to manage that cloud transformation on behalf of the customers.”
See our slideshow above for Avaya’s ups and downs from the past year, as well as its ambitions for the future as Avaya Engage gets underway. Then stay with Channel Futures all week for coverage from Engage.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email Claudia Adrien or connect with her on LinkedIn. |
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