Avaya, Reportedly Bankruptcy-Bound, 'Hasn't Capitalized'

Avaya reportedly is nearing a deal to sell its call-center business and could be heading toward chapter 11 bankruptcy.

The company has been transitioning from a legacy hardware business to a software and services company, and is looking for ways to decrease its debt load.

Avaya could file for chapter 11 protection as soon as next month, noted the Wall Street Journal, citing “people familiar with the matter.” The filing likely would occur after a deal is in place to sell the call-center business, it said.

Buyout firm Clayton Dubilier & Rice is among the potential buyers of the call-center business, the Journal said. The sale could yield about $4 billion for Avaya.

If the sale happens, Avaya could use the proceeds to pay back some of its senior debt, while other creditors could swap debt for ownership in a reorganized company upon its emergence from bankruptcy, it said.

When contacted, Avaya wouldn’t comment on either the potential sale or the chapter 11 filing.{ad}

Brendan Read, senior industry analyst of digital transformation at Frost & Sullivan, said Avaya is making the right moves in considering the sale.

“Avaya has a strong brand that is founded on one of the most comprehensive portfolios of contact-center solutions and development tools in the market today,” he said. “Avaya continues to enhance its solutions and build customer loyalty. But Avaya’s position, and its future opportunities in the contact-center market, is imperiled by the shift of applications to the cloud.”

Avaya has been “playing catch-up to competitors” that have growing presences in the cloud market, Read said. Avaya has an “impressively large” installed base that has helped it maintain market leadership in inbound contact-center routing and IVR for many years, he said.

“However, much of the installed base consists of older Avaya platforms and those gained through acquisition (such as Octel, VMX, and Nortel),” he said. “This has represented an opportunity for Avaya that they haven’t capitalized on as much as competitor’s targeted replacement campaigns. Avaya has had to integrate the various product lines, channels, support, positioning and marketing from its acquisitions.”

At the same time is a growing encroachment on the traditional voice market long dominated by Avaya by “innovative, automated and self-service chat, text, web, mobile, social and video customer contact technologies, which include voice and video-enabled WebRTC,” Read said.

“Finally the North American contact center market is mature,” he said. “Frost & Sullivan research forecasts a slight decline in the number of agent positions. The growing North American economy, and with this the rise in demand for contact center-serviced products, and the incremental return of contact center services from offshore, have not fully offset the competition from automated and live agent non-traditional customer contact applications.”