Avaya's Nortel Buy: Can You Top This? (2 Updates)Avaya's Nortel Buy: Can You Top This? (2 Updates)
It's a deal, but it's not quite a done deal.
July 20, 2009
It's a deal, but it's not quite a done deal.
It's a deal, but it's not quite a done deal. Avaya announced today that it's agreed to acquire Nortel Enterprise Solutions out of bankruptcy for $475 million, but this is a "stalking horse" bid, meaning that there will be an auction to see if anyone wants to outbid Avaya for Nortel Enterprise.Could it happen? Doesn't seem likely. Siemens Enterprise, the main competitor in the Nortel bidding, would have to decide Nortel was worth more than $475 million--or, more likely, that the opportunity to become a major player in North America at the stroke of a pen--and deny Avaya the dominance it's now poised to gain--would be worth a half-billion or more. New Siemens Enterprise CEO and Gores Group exec Mark Stone hasn't tipped his hand on this score; maybe they were waiting for Avaya to make the first move.
I'd been thinking over the past few days that Avaya, and anyone else buying Nortel assets out of bankruptcy, might have been wise to employ experts in game theory, the way wireless carriers do when they bid in FCC auctions. The trick would be to bid as little as possible in the "stalking horse" phase, without bidding so low that it entices other players into a bidding war in a subsequent auction. My guess is that Avaya may have hit pretty close to the target with its $475 million figure.
UPDATE 1: Here's the statement from INNUA, the Nortel users' group:
CHICAGO, IL - The International Nortel Networks Users Association (INNUA) today voiced its support for Nortel's selection of Avaya as the "stalking horse" Enterprise Solutions business. The group of more than 4,000 Nortel customers worldwide believes the acquisition will allow the company to refocus its energy and resources on its solutions, and quiet concerns about the corporate structure that has beleaguered the company.
"The events and actions leading to Nortel's bankruptcy have taken the focus of the market, the media and even customers away from the strength of their solutions," commented INNUA's Executive Director Victor Bohnert. "The strength of the enterprise solutions portfolio has never been in question, and the Avaya acquisition could enable a more effective go-to-market strategy for these solutions and strengthen the market position of the company."
The majority of INNUA members have been Nortel customers for more than ten years and they depend on the reliable Nortel solutions they have in place. In a recent poll conducted after Nortel's bankruptcy filing in January, 80% of INNUA members said they intend to move forward with Nortel purchases or deployments. INNUA leadership recognizes the value its members place on their Nortel investments and therefore, INNUA will continue a deep strategic relationship with Nortel leadership and develop a relationship with Avaya throughout this transition to ensure the customer community's voice is heard.
"On average INNUA members spend 5 times more on Nortel solutions than non-INNUA members," said INNUA's President Steve Ford. "Their loyalty to the Nortel product line makes the customer base one of Nortel's most valued assets."
The organization says it will now turn its focus to the future. Bohnert went on to say, "This chapter in Nortel's history is closed. We understand that there is still much that can change during the auction process. However, we will begin working with Avaya as soon as it's appropriate to determine how we can best represent the collective voice of their new customers."
"The events and actions leading to Nortel's bankruptcy have taken the focus of the market, the media and even customers away from the strength of their solutions," commented INNUA's Executive Director Victor Bohnert. "The strength of the enterprise solutions portfolio has never been in question, and the Avaya acquisition could enable a more effective go-to-market strategy for these solutions and strengthen the market position of the company."
The majority of INNUA members have been Nortel customers for more than ten years and they depend on the reliable Nortel solutions they have in place. In a recent poll conducted after Nortel's bankruptcy filing in January, 80% of INNUA members said they intend to move forward with Nortel purchases or deployments. INNUA leadership recognizes the value its members place on their Nortel investments and therefore, INNUA will continue a deep strategic relationship with Nortel leadership and develop a relationship with Avaya throughout this transition to ensure the customer community's voice is heard.
"On average INNUA members spend 5 times more on Nortel solutions than non-INNUA members," said INNUA's President Steve Ford. "Their loyalty to the Nortel product line makes the customer base one of Nortel's most valued assets."
The organization says it will now turn its focus to the future. Bohnert went on to say, "This chapter in Nortel's history is closed. We understand that there is still much that can change during the auction process. However, we will begin working with Avaya as soon as it's appropriate to determine how we can best represent the collective voice of their new customers."
UPDATE 2: Here's CEO Kevin Kennedy's letter welcoming Nortel employees to Avaya.It's a deal, but it's not quite a done deal.
