Network World — If Avaya buys up Nortel’s enterprise properties, the new entity will have product overlap issues but they’ll be overshadowed by something more important: customers.

Avaya Reportedly Offering $500M for Nortel Enterprise Biz
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Avaya has had trouble wooing new customers to its all IP line of communications equipment – from straight-up VoIP telephony to unified communications – but buying Nortel’s enterprise business could help alleviate all that, says Zeus Kerravala, an analyst with the Yankee group.

The deal is really all about the customers, he says, and convincing them to migrate their phone systems to Avaya gear over time.

“They’d want to upgrade the legacy and hybrid customers to IP,” he says. “That would be the question. Could they convert the customers fast enough before they go to another vendor?”

Nortel enterprise competitors such as Cisco, Juniper, ProCurve are already swarming around Nortel customers in hopes of luring them away, a job made easier if they perceive that Nortel as a dead-end vendor. That won’t give Avaya much time to act if it does buy the Nortel group, he says.

Avaya might also be attracted to the market share boost it would receive from Nortel’s enterprise business. Buying the unit would give Avaya a double digital percentage revenue lead over Cisco in enterprise telephony, according to Dell’Oro Group.Leader Avaya had 16.6% of the $16 billion market in 2008 to runner up Cisco's 14%, according to Dell'Oro. Nortel came in 4th, with 9.6%, trailing Siemens at 11.4%.

As the Dell’Oro figures indicate, there will be considerable product redundancy in TDM, hybrid and IP PBXes and handsets, and unified communications and contact center applications. Nortel and Avaya have been battling in voice technology for decades from their days long ago as Northern Telecom and AT&T Network Systems/Lucent.

With Avaya’s market share lead, it’s likely that most Avaya equipment would survive a product rationalization.For its part, Avaya won’t comment on whether it has made the bid, reported to be $500 million. That seems a bit steep, Kerravala says, but it may be worth it if Avaya can gain some accounts from it.

“They have not done a great job so far getting new customers,” he says.

So far there has been no mention of Avaya assuming any Nortel debt if it were to make the deal. Similarly there is no mention of Nokia Siemens assuming any Nortel debt if its $650 million bid for Nortel’s CDMA and LTE wireless technology is accepted.

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