After months of speculation that it would take steps to restructure its $6.3 billion in debt, Avaya finally filed for Chapter 11 bankruptcy protection in January. Some industry analysts have applauded the move, and are optimistic that the company will emerge from the process stronger and more competitive. However, Avaya customers have good reason to be concerned.
In addition to the debt load, Avaya was covering $1.7 billion in unfunded pension liabilities, meaning that it had to generate about $900 million in earnings just to stay even. However, the company had seen revenue decline about 8 percent per year for the last few years, so covering the debt and pension payments through earnings was not a viable proposition long term. Avaya investigated selling its contact center business unit, but could not do so for various reasons. Bankruptcy turned out to be the best choice.
The ultimate outcome depends upon how quickly the bankruptcy proceeds. If all creditors agree to the restructuring plan, the process could be wrapped up in a few months. If they do not, it could drag on for years, crippling Avaya in the process. That’s what happened to Nortel back in 2009, and the company was ultimately liquidated. Avaya bought Nortel’s Enterprise Solutions business at auction.
Even if Avaya emerges from bankruptcy in good shape, there’s no question that its product line and technology strategy will change. The company has already sold its networking business to Extreme Networks, and other business units will undoubtedly be sold as well. Avaya must also develop new solutions that meet today’s demand for cloud-based and hybrid deployment models, which means it will likely eliminate older products that are based upon hardware-centric architectures.
Few customers will be able to wait months or years to find out what Avaya’s long-term technology strategy will be. And because many legacy Avaya PBXs are based upon proprietary hardware, customers will be facing forklift upgrades when Avaya comes out with new solutions.
Rather than taking a wait-and-see approach, those customers should begin exploring other options. ShoreTel Connect is a state-of-the-art unified communications platform that can be deployed onsite, in the cloud or in a hybrid platform. Built to support your needs today and in the future, it can easily be expanded as your business grows and upgraded as new features become available. It also enables you to extend full phone system capabilities to mobile workers, and integrate communication and collaboration tools into your business applications and workflows.
Best of all, ShoreTel is offering substantial trade-in discounts and credits to customers who upgrade from Avaya to ShoreTel Connect CLOUD by December 31, 2017. These incentives enable customers to enjoy all the benefits of a modern, cloud-based phone system with reduced installation costs and lower monthly fees.
Avaya equipment isn’t going to stop working tomorrow due to corporate restructuring, but customers are right to be concerned about the future of their technology investments. Avaya customers should take this opportunity to reevaluate their communication infrastructures and implement a more modern, forward-looking solution. Contact us for a demo of the ShoreTel Connect platform.