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Avaya

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About Avaya

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, – more... 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. Parent company Avaya Holdings filed for an IPO in 2011.

IPO

Proceeds from Avaya Holdings Corp.'s IPO are slated to pay off long-term debt -- no small feat since the company is heavily leveraged and more than $6 billion in debt, with $415 million in cash for fiscal 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.

Financial Analysis

Avaya's revenue increased in 2010 by nearly half a billion dollars over 2009, and it rose again in 2011, by 10% or $487 million. Despite robust sales, the company did not achieve positive net income in either 2010 or 2011. The boost in revenue the past two years has come largely from sales of business communications products and services that Avaya acquired from bankrupt Nortel Networks in 2009. Its gains have been tempered, however, by restructuring and integration costs related to the Nortel purchase as Avaya integrated the acquired Nortel product lines with its own.

Mergers & Acquisitions

Avaya bought Nortel's Enterprise Solutions business (phones systems for businesses) for about $900 million. The deal expanded Avaya's North American market share for enterprise phone equipment (where it competes heavily with Cisco Systems) and opened up Nortel's network of resellers and corporate clients for the sale of other Avaya products. The purchase greatly expanded Avaya's revenue stream and overall size (adding about 6,000 employees).

Besides the Nortel acquisition, Avaya has since made smaller 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 conferenece 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.

Additionally, Avaya acquired UK-based Aurix, a developer of speech analytics software used to search and collect large volumes of audio data. Aurix's technology was applied to Avaya's interactive voice response and other contact center and customer service-related telephony products.

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.

Avaya 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.

Sales & Marketing

Only 24% of Avaya's sales were made directly in 2011, 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. – less

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