Who is most likely to buy Avaya’s networking business?

It’s almost 10 years since Silver Lake acquired Avaya, and speculation is starting about what company will buy Avaya’s networking business

Who is most likely to buy Avaya’s networking business?

Earlier this year Forbes posted an article speculating that Avaya’s private equity firm, Silver Lake was exploring a sale of the company or at least parts of it. Private equity companies typically hold its portfolio companies for three to five years and then divest themselves of it through an IPO or a sale to another organization. The Avaya situation is somewhat of a rarity because it’s coming up on 10 years since Silver Lake took ownership of it.

Avaya is a strong company with good products that has been trying to transform itself into more of a software and services company, but it is saddled with debt. A sale of its contact center and/or networking business could help offset that debt and put the rest of Avaya in a much better position.

The networking business should be attractive to many companies. Avaya has a unique software-defined networking (SDN) solution based on the shortest path bridging (SPB) protocol. Network configuration is done at the edge, with provisioning of the core being fully automated. The company recently introduced a highly flexible cloud management solution that unifies wired and wireless management. Also, under the leadership of Nidal Abou-Itaif, Avaya has seen tremendous growth in the Middle East and India, highly coveted markets, as these are some of the regions leading the digital revolution. Lastly, the senior management team at Avaya—made up of Marc Randall, Jake Power and JT Turgeon—is as good a trio as there is in the industry.

Potential Avaya buyers

What company is most likely to buy Avaya’s networking business? Here are my ideas:

Alcatel-Lucent Enterprise (ALE)
In 2014, Chinese investment firm China Huaxin acquired the enterprise division of Alcatel-Lucent. When the acquisition happened, China Huaxin had a stated goal of doubling the revenue through organic growth and acquisitions. ALE has a strong networking portfolio built on SPB, so bringing the two product lines together should be straightforward. More important, Avaya would give ALE a strong customer and channel base in the U.S., something it has tried and struggled to build on its own. Lastly, Avaya’s Wi-Fi products would give ALE its own solution instead of having to use OEMs for Aruba’s products.

Extreme Networks
Extreme acquired Enterasys in 2013 with the purpose of creating a bigger company that was better equipped to compete with Cisco and HP. Since then, the company continued its mission of rolling up some of the smaller players when it acquired the Wi-Fi business from Zebra technologies. An Avaya purchase would roll another small networking vendor under the Extreme umbrella, moving the company closer to the billion-dollar revenue mark. Some product rationalization would need to happen, but the company just went through that with Enterasys, so it should be able to apply what it learned in that process to this acquisition. More important, there should be very little overlap in customers or channel partners, giving Extreme a much bigger base to monetize.

Most know Fortinet as a security vendor, but it has a portfolio of products that is as broad as any vendors that includes VoIP phones, Wi-Fi, routers and other products. It also has a small line of Ethernet switches that are used to complement the security business. Avaya Networking would give Fortinet a robust portfolio of modular and stackable products that would make Fortinet a legitimate network player. Fortinet customers tend to love the company’s products, so it could look to displace the incumbents in its current install base.

One of the best-kept secrets in this market is that NEC has networking products. If one has heard of NEC in networking, it’s probably as one of the early evangelizers of SDN. NEC is a much bigger company than most realize, but most of its revenue comes from the Asian markets, where the company is headquartered. Similar to the value proposition Avaya would play with ALE, Avaya would give NEC an instant customer base in the U.S.

Dell Technologies
Avaya owner Silver Lake also owns Dell Technologies. Dell has a networking business that includes the low-end PowerConnect portfolio and high-end, data center class of switches the company got when it acquired Force10. There would obviously be some overlap at the high end, but Dell would get a great campus and Wi-Fi portfolio from Avaya. Currently, Dell has a mix of OEM Wi-Fi vendors, including Aerohive. Avaya would give it its own product set to build a unified networking strategy. This acquisition makes sense, but Dell currently has its hands full with the integration of EMC.

This is a bit of a dark horse, but Mitel CEO Rich McBee has discussed the importance of rolling up a number of smaller vendors to help the company better compete with the likes of Cisco and Microsoft. Since he has taken the reigns of the company, he has acquired fellow UC companies Aastra and InterTel, as well as mobile infrastructure provider Mavenir. Mitel has also tried to buy ShoreTel and Polycom. The deals did not close, but the message from McBee is clear: Mitel is actively looking for companies to buy and roll up into its portfolio. To date, McBee hasn’t shown much interest in the enterprise. But it did buy Mavenir, so purchasing Avaya is possible.

Copyright © 2016 IDG Communications, Inc.

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