Mitel-Avaya Merger To Create a UC behemoth

Avaya is considering a bid from rival Mitel Networks that could create a telecommunications equipment vendor worth more than $5 billion including debt, people with knowledge of the matter said. Avaya had filed for bankruptcy in January 2017 and sold its networking business to Extreme Networks for $100 million later that year.

As per the industry report, Mitel-Avaya merger would be good for the Industry and the combination would create a behemoth with real competitive power. Mitel submitted an offer for Avaya that it believes would value the combined business at more than $20 per share.

Mitel’s CEO Rich McBee has long stated the industry needs to consolidate and he’s done his part with acquisitions of companies like ShoreTel and Toshiba (its communications systems business). If it were to acquire Avaya, the deal would certainly be bigger than any other purchase Mitel has made so far.

Avaya completed its debt restructuring and emerged from Chapter 11 bankruptcy in December 2017. Since then, the company has been focused on shifting to a cloud-based business model and bringing on more cloud solution provider partners. Avaya does upward of 80 percent of its sales through the channel.

Post-merger of Avaya-Mitel tie-up could compete against their larger UC competitors, including Cisco Systems and Microsoft. Synergy Research Group data shows Cisco in the pole position, with about 44% market share, Avaya second at 10%, and Mitel third at 8%. With the combined Avaya and Mitel would hold the industry’s biggest installed base by far.

Two companies would complement each other, with bits of overlap. Key Highlights are:

* Mitel’s strength is in small and midsize businesses, whereas Avaya primarily serves large enterprises.

* While Avaya designed its IP Office VoIP system to crack the code on SMBs, the product has become more of a branch office option for highly distributed enterprises.

* Mitel has a strong UCaaS solution whereas Avaya’s strength lies in private cloud, which makes sense given its large enterprise focus (see my No Jitter post from earlier this week on why international bank selected Avaya OneCloud to move its contact center operations from the premises to the cloud).

* Avaya gears its contact center business upmarket whereas Mitel’s focus is down market.

* Both vendors have strong, broad desktop product portfolios, and while “MiVaya” would need to do some product rationalization, the end result would be a good selection best-of-breed phones.