Avaya Explains Why They've Declared Bankruptcy (networkworld.com)

Friday Avaya's Corporate Treasurer explained why they're filing for a chapter 11 "restructuring." After examining their debt, "we decided it was a critical next step in our transformation from a hardware company to a software and services company and the best path forward for our customers, partners and employees." skidv writes: ZDNet breaks down the deal... "Avaya noted that its foreign affiliates aren't included in the filing and will operate as normal. Avaya said the $725 million in debtor-in-possession financing, via Citibank, is enough to minimize disruption and continue business operations." Not surprising, Avaya has canceled the planned IPO.
PC World reports that Avaya "emerged from Lucent Technologies in 2000 with a focus on phone switches, enterprise networking gear, and call-center systems. But with the shift toward mobile phones and cloud-based tools for communication, and a tight market for enterprise network equipment, the company has been changing its focus... Like much of the networking and collaboration industry, Avaya is looking toward software-defined networking, IoT, and cloud-based platforms that work on many different devices and the web."

Comments

Carly Fiorina bashing

[Anonymous Coward]

Coming 3.. 2.. 1..

But really, telecom equipment is no longer a great industry to be in.

Re:Carly Fiorina bashing

[ColdWetDog]

The ONLY industry that's great to be in is social media. If there ain't an app involved, and you don't have a billion users, you're going to be super poor extra soon.

"OK, everybody who thinks this has a lifespan more than 5 years or so raise their hands."

"Yes, Mr. Zuckerborg, we understand your take on this, anybody else?"

Re:Carly Fiorina bashing

[Anonymous Coward]

Oh look it's another Facebook denier. Don't bother telling me you don't use Facebook. Here's the thing you're you're forgetting. Women are spawning more children every day. You're just getting older every day. All of those children will be on Facebook. And you will be dead.

Re:Carly Fiorina bashing

[50000BTU_barbecue]

Hardware in general, in the West, is career suicide, personal hara-kiri. I feel super bad for the kids that are going to university in EE here in Montreal. What are they expecting to achieve by this?

Re:Carly Fiorina bashing

[nnull]

It sure is for China.

Avaya has been making horrible equipment, especially for IP phones. If you want to make equipment that's closed source, closed to literally everything, require purchasing licenses just to add an extra phone and is incompatible with everything (Left overs from the Nortel era), what do you expect? They are still popular in the used phone system market, since they work good enough, but you no longer have support for it, other than your phone guy. Want to add a phone? What a big headache... Their much touted scalability is quite a sham when it requires a team of people just to add phones.

Meanwhile, I bought my office Yealink IP phones and they work great and literally compatible with everything, SIP (of course), including adding address books, supports VPN connections and very easy to manage. They also look great, sound great and the color touch screen is a big plus. They're not exactly cheap either. Yealink also doesn't handcuff me with licensing, restrictions and fees. Works great with Asterisk and I can add as many damn phones as I please.

People still need these phones, they're not going away any time soon, unless cellphones start linking your business phone extension, but a lot of people don't like doing that either. Much of the telecomms business moved onto VOIP providers, IP phones that work and your local IT support.

Re:Carly Fiorina bashing

[David_Hart]

It sure is for China.

Avaya has been making horrible equipment, especially for IP phones. If you want to make equipment that's closed source, closed to literally everything, require purchasing licenses just to add an extra phone and is incompatible with everything (Left overs from the Nortel era), what do you expect? They are still popular in the used phone system market, since they work good enough, but you no longer have support for it, other than your phone guy. Want to add a phone? What a big headache... Their much touted scalability is quite a sham when it requires a team of people just to add phones.

Meanwhile, I bought my office Yealink IP phones and they work great and literally compatible with everything, SIP (of course), including adding address books, supports VPN connections and very easy to manage. They also look great, sound great and the color touch screen is a big plus. They're not exactly cheap either. Yealink also doesn't handcuff me with licensing, restrictions and fees. Works great with Asterisk and I can add as many damn phones as I please.

People still need these phones, they're not going away any time soon, unless cellphones start linking your business phone extension, but a lot of people don't like doing that either. Much of the telecomms business moved onto VOIP providers, IP phones that work and your local IT support.

Many companies are moving towards software phones that support chat, voice, and video conferencing (i.e. Skype for Business) for office workers. That way you can work from another desk, at home, etc. while having the same phone number. Physical phones and phone systems are no longer being invested in.

Re:Carly Fiorina bashing

[mspohr]

Telecom industry is doing just fine (there is this thing called the internet and mobile phone/data telecoms) but if you are a legacy telecom supplier selling voice switches and landline phones then you should have seen the writing on the wall many years ago.

Re:Carly Fiorina bashing

[nwf]

I haven't looked at the Yealink IP phone, but I do see advertisements for them from my telecom vendors. We settled on Polycom phones a while back. We upgraded to SoundPoint IP 650s and have been very happy. They are sufficiently open, although their config stuff is a bit obtuse. But at least it's all open enough to do what I want relatively easily. They just work and sound great. We looked at Avaya a while back, and everyone with prior experience we talked to said "run away!"

Let me guess: They can't pay their bills

[OldMugwump]

I won't miss them.

What is your opinion on call center software?

[Master5000]

I am curious. What do you think is the best call center software? Should companies use open source solutions? Are they on par? Is call center software losing relevancy? Is the market dying? To me it seems that it's a dead end to sell enterprise software that records calls since this is something that has been solved for a while now, so how the hell do these companies still make money in this market? Of course, I may have a completely wrong world-view in this regard. Enterprise sure loves paying yearly licenses just to have somebody to blame.

Re:What is your opinion on call center software?

[torqer]

Everyone still needs someone to bitch at when equipment or services don't work. Call centers are still actually surprisingly profitable. There are great margins in a call center, and the CC business probably the only reason why Avaya is still afloat (And thus the reason they are not selling of the Call Center portion of their business to pay off the debtors).

Avaya provides and creates a lot more than just Call Recording Software. The real money is quickly turning in to multi channel delivery. Phone calls are still king, but being able to answer text, email and social is becoming increasingly important. Integration and reporting on the different delivery methods is definitely a growth market.

In terms of the different platforms: I've used many. Here's my general opinion

Avaya -- Good, has been expensive. Supports a lot of legacy equipment -- that's a blessing and a curse.
Cisco -- Not good for a call center, great for office environments
Open Source -- Freeswitch / Asterisk. You can certainly do a lot with them. But interoperability between systems, and support can be a problem.
Cloud based stuff -- Interactive Intelligence / Amazon ACD / etc. I would only use them for small deployments (less than 50 seats).

Re:What is your opinion on call center software?

[arth1]

I am curious. What do you think is the best call center software?

The software sitting between two ears, when being allowed to operate.

Who?

[JustAnotherOldGuy]

It's not like I follow telecom news, but I never heard of them.

Re:Who?

[Anonymous Coward]

A lot of companies like Avaya have fallen as comm tech is changing. AT&T spun off Lucent which spun off Avaya.

Adapt and survive, or fail. Capitalism working properly is creative destruction.

Re:Who?

[wbr1]

I remember them. In 99-2001 I was working for a DSL startup that was trying to horn in on the local LECs. We had a unique business plan though. While we would server residential, we were mostly looking for small to mid-sized business with more than one location. Networking multiple offices was very expensive then. we had on the edge of our network, a box called a springtide. This company/HW was bought by Lucent and allowed for virtual routers inside this router. It was a layer 2 ATm endpoint and we could then privately connect different offices on a private network and NAT the internet traffic out. Aside from some edgecase NAT issues it worked okay, but there were questions if the Springtide router could scale enough for a large customer base.

Aside from a few small Cisco routers on the management network, and a box Ciscos at the edge (our edge providers were Frame relay, and the Springtide only supported ATM), we were Lucent shop. I was working toward my LCTE and a core engineer for this network when the bubble burst. I saw the writing on the wall and fled for a more local IT position. This shop did not get a 2nd round of venture capital, even though I thought the business plan was solid, and they did not have enough customers to be solvent.

That said I remember the Lucent split, and I also remember that even before then much of the Lucent equipment we used was fragmented. Lucent had absorbed lots of different companies so our main ATM switches had one interface, our endpoint ATM switches another, the Springtide yet another. the DSLAMS used HPUX to manage them and had yet a different OS. Most of the other ATM devices used various management applications on Solaris with a sybase backend.

This made for a lot to learn with so many different management and config systems from ONE manufacturer. At least at the time Cisco IOS was fairly consistent across devices. Bay/Nortel from my previous shop seemed pretty consistent by comparison too.

The new "I got nothin'"

[BarbaraHudson]

Like much of the networking and collaboration industry, Avaya is looking toward software-defined networking, IoT, and cloud-based platforms that work on many different devices and the web."

So, you failed as a business at what you specialized at, and now you're going to "pivot" to a field that's already over-crowded with others who've failed and are making the same pivot.

A couple of years ago it was Apps Apps Apps. Now it's IoT IoT IoT. Sturgeon was an optimist.

Re:The new "I got nothin'"

[ColdWetDog]

Sturgeon was an optimist.

No, it's a fish.

Re:The new "I got nothin'"

[BarbaraHudson]

Sturgeon's law. "Ninety percent of everything is crap". Derived from a quote by science fiction author Theodore Sturgeon, who once said, "Sure, 90% of science fiction is crud. That's because 90% of everything is crud."

My corollary: 90%? You're an optimist. 99.99% of everything on the internet is crud. And most of the rest is worse.

Re:The new "I got nothin'"

[nwf]

So, you failed as a business at what you specialized at, and now you're going to "pivot" to a field that's already over-crowded with others who've failed and are making the same pivot.

No, no. They have no idea what to do because people don't want super-expensive lock in to overly complex products, so they are throwing out the latest buzz-phrases in order to seem relevant to investors. What are they going to make an IoT smoke detector that costs $500 and requires an annual service contract?

Not Suprising to an extent.

[Anonymous Coward]

We recently replaced a 30 phone system, which took an entire 3ft x 10ft x 10ft closet of traditional copper PBX and replaced everything with POE Phones running on switch-gear. The new phone system is the size of a SOHO router. We even got it financed as part of a deal from our ISP and installed at multiple locations for ~100 phones total. New phone system requires some PBX experience to understand, and object oriented programming to understand, but the GUI is easy and it gives me all kinds of features I'd want. At my last job they replaced 25k phones with avaya, and I happened to get to see all the cabinet's of old harris telco gear they got rid of during the migration. Huge cost decrease going with IP phones over TDM phones off a pbx.

Lots of companies are asking why they even really need to have wire line phones when everyone's got a cell#. I'm sure head hunting companies give you an app and it has their cell# so as to control your business contacts list, for example. It's better to get a communications app that installs on the PC's and on the phones and use that like Skype. Obviously the edge there is the regulatory environment and the companies appetite for monitoring communications and conversations. There's probably more than one company that watches social media and internal discussions to determine the effectivity of internal communications e.g. they lace e-mails and see how many people pay attention.

Translation

[Alain Williams]

Although we have lots of money and good prospects in our new products we don't want to pay our bills to our old suppliers. So we will shaft our old suppliers by getting out of paying them by using Chapter 11 financial magic. The following was not said: and management will be able to award itself bumper bonuses next year as a result.

Re:Translation

[anegg]

That's exactly what I was thinking... Avaya tried denying the writing on the wall for a long time, and is now asking others to pay for their stubbornness/lack of foresight. Its a shame.

Re:Translation

[Richard_at_work]

Chapter 11 really is an abusive mechanism responsible for shafting many many third parties while allowing the company that filed for Chapter 11 to essentially continue unharmed. In recent years it has been used in the US airline industry to get out of union contracts, dump unwanted long term aircraft leases (in several cases the lessor had to destroy the aircraft because it had been parked up by the airline for multiple years without inspection or maintenance, and thus was unable to be flown without significant investment), dump shareholders and yet the airlines were allowed to continue to operate without interruption, in many cases with the same management which took the company into Chapter 11.

Quite a few lessors won't do business with American airlines these days without a significant guarantee provided by a financial institute outside of US control.

Avaya Phones

[DaMattster]

Avaya is becoming increasingly irrelevant in today's world. Their phones are reasonably good but the PBX and backend systems are clunky and terrible. I've personally helped get a few small businesses Avaya phones working with Asterisk and SipXCom. They work pretty well.

Re:Avaya Phones

[Khyber]

Avaya systems are a breeze to set up if you have a proper MPLS setup. Clunky, yes they are physically clunky units and poorly-balanced on weight distribution.

Something's not right here

[rsilvergun]

Avaya is probably 40-50% of the business phones out there and probably 90% of the phones used in call centers. There's no way they shouldn't be profitable. Were they the victim of yet another leveraged buyout (think Bain Capital) scam?

Re:Something's not right here

[thebes]

This is the same as (or similar to) that happened to Nortel...they had a lot of debt, were hemorrhaging money, but will had decent revenue and profits from some of the centers. January 14, 2009 they filed for chapter 11 under the guise that it would help them focus on restructuring...a few months later they sold the profitable elements to other companies (including a chunk to Avaya I believe) leaving the unpolished turds behind to die (which in all honesty, wasn't that much). They were unable to see how to stop the extensive spending, especially in areas like manager and executive salaries and the like.

My opinion is they are not going to make it out...Telecom is consolidating, and the profitable stuff will just be absorbed by other companies while the shit circles the drain.

Re:Something's not right here

[SlaveToTheGrind]

Avaya is probably 40-50% of the business phones out there and probably 90% of the phones used in call centers. There's no way they shouldn't be profitable.

And Vlasic had a huge percentage of the pickle market before it filed for bankruptcy. Market share by itself tells you nothing.

Avaya was sitting on $6 billion in debt and most recently reported $58 million in quarterly profits. Do the math.

Moody's downgraded them twice last year, from nearly the junkiest of junky junk to something a bit junkier.

The only surprising thing is that they held off the inevitable as long as they did.

Re:Something's not right here

[Tough Love]

Avaya is probably 40-50% of the business phones out there and probably 90% of the phones used in call centers. There's no way they shouldn't be profitable.

Office phones are going the way of the buggy whip.

Re:Something's not right here

[TJ_Phazerhacki]

I've done telephony integration work for the better part of a decade, so I spend a LOT of time in different call centers. Avaya is losing a ton of desk-share to Cisco, mostly because the Oracle-esque hijack-you-with-licensing scheme is finally starting to cost places more than it's worth. Adding new features costs as much as just ripping the crap out and putting something else in. It was funny the first time I saw them write an RFP to a specific price point, and then lose the business anyway because they had just pissed off to many people.

I don't use Facebook.

[mmell]

Anybody I want to talk to, I'll talk to. Facebook is for self-important morons in a desperate search for approval. Sorta like Twitter.

Re:I don't use Facebook.

[barrywalker]

Those stupid gossipy idiots are the people who pay for your salary, assuming you even have a job, if not, they pay tax that pays your welfare checks.

Wrap your brain around the network effect. Everybody is on Facebook because everybody is on Facebook.

If you want to be nobody, that's fine, just don't tell everybody you hate their stupid guts, because they might vote to eliminate your livelihood or, depending on how much of a fucking asshole you are, just come to kill you.

Jesus. Are you a fucking FB shareholder?

If so, just say so.

To me, Avaya seems badly managed.

[Futurepower(R)]

"... so many different management and config systems from ONE manufacturer."

To me, Avaya seems badly managed. The Avaya web site home page is topped with useless pictures. The Avaya Product page was apparently written by someone with no technical knowledge. There are useless photos at the bottom.

I suppose

[rsilvergun]

but it still doesn't really add up. That much debt doesn't happen overnight. Did they get their market share by giving away their stuff? Did they spend too much on R&D (doubtful)?

Vlasic got Walmarted for lack of a better term. They entered into distribution deals with Walmart, expanded to meet the demand and then when Walmart saw their high debt to income ratio made them vulnerable they threatened to renege on the deal. I remember the CEO being furious because Walmart had them selling gallon jars of pickles for a few bucks when their customers couldn't eat that many pickles before throwing them out.

Either way, something shady's going on and somebody walked off with the money. I wish we'd regulate these companies more. Lot of folks are gonna lose their jobs when the shit hits the fan and prices'll go up when they get bought out by competitors. Bad for everyone but whoever swiped the money.

Re:I suppose

[hairyfeet]

Yeah smells like they got Bain'd to me. A corp raider snatches a profitable company, tacks on as much debt as they possibly can, spin off any assets like real estate they can quickly flip, leave the dying husk while they walk off with a pile of money.

Although it could have been a former CEO, we've certainly seen that enough times where a CEO has stock they can flip at any time who then fucks the company for a short term stock jump and then cashes and bails, see the CEO of Circuit City who fired all their best salespeople who then cashed out after the market gave the stock a bounce because of their "lower operating costs" as just one example.

Re:I suppose

[guruevi]

Those sorts of companies tend to be top-heavy which gets them involved in a lot of large government contracts, large enterprises etc but also makes them very, very expensive. This is great in economic bubbles because companies will tend to throw lots of money at them, smaller companies and during economic downturns (which has pretty much defined the last decade) even bigger companies tend to go with alternatives in these situations and over the past two decades VoIP and Asterisk has been eating Avaya for breakfast, lunch and dinner.

I remember interacting with Avaya about 20 years ago, I did an RFQ for a small VoIP solution for a web startup, they had their own VoIP protocols and refused to integrate with others. For the size of the company (about 20 people), they still recommended installing separate digital lines and using ISDN for remote work even though we had a 'brand new' switch installation with VLAN and QoS capability (these days, even home switches have it). That is ultimately what killed them in the long run, insistence on a closed, expensive platform when smaller, much more nimble technologies were already in place.

Re:I suppose

[guruevi]

How do pickles go bad, they should last for like a decade at least before they start disintegrating. Pickling is one of the most ancient methods of preserving foods and was done for really long boat voyages. I have sauerkraut that has been there for 2 years (covered with brine) that remains edible.

I highly doubt a bad deal with WalMart was the only problem, business deals go two ways and you are not required to make a deal and if you are reliant on one of your buyers not to pull the rug from under you, then you have way overextended.

Re:I suppose

[whoever57]

I have sauerkraut that has been there for 2 years (covered with brine) that remains edible.

Some people might think that it was never edible.

Re:I suppose

[adolf]

Traditional pickles are fermented. Fermented pickles (fermented anything, really) is the stuff that keeps forever due to the lactic acid produced during fermentation.

The stuff Vlasic sells is "fresh pack," not fermented (as your sauerkraut was), using vinegar as a preservative. Totally different stuff...

That said: I've never thrown out pickles for "being old," even when I buy them in enormous containers.