Avaya survives a long, strange trip

Avaya, one of the major players in the enterprise IP and unified communications markets, appears headed for an IPO that could happen within days, according to a report in The Wall Street Journal. If it happens, it could raise $1 billion, and it would be the latest step in a long, strange trip for a company that began its life as part of AT&T Network Systems, the long-ago manufacturing arm of the long-distance giant.

AT&T Network Systems spun off much of itself into a new firm, Lucent Technologies, and not long after, in 2000, Lucent spun off much of its enterprise gear business, including some fledgling unified messaging assets, as Avaya. As I remember--and some of you crispy critters who are even crispier than me can feel free to correct me--that spin-off landed with a bit of a thud. It was aimed at giving Lucent more of an opportunity to focus on service provider markets, but there was some debate over how well Avaya would do in a realm dominated by the likes of Cisco Systems and Nortel.

Of course, narrowing its focus to service providers did not exactly work out the way Lucent might have hoped. It remained independent for only six years, merging with Alcatel in 2006 in a marriage that wreaked havoc through both companies, which the remaining firm is probably lucky to have survived.

After being a public company itself for seven years, Avaya became one of the premier examples of the private equity sector's rising interest in telecom when it was acquired and turned private by Silver Lake Partners and TPG in 2007 for about $8 billion. (The IPO reportedly would see the company valued at about $5 billion, so do the math to figure out how that investment turned out.)

Still, Avaya has seen some bets pay off. That unified messaging stuff it dabbled in around the turn of the millennium evolved, much aided by the Internet's explosive potential, into a much broader technology trend--unified communications.

As the unified communications trend has marched through the enterprise market, Avaya has bolstered its position by acquiring Nortel's Enterprise Solutions division after the storied Canadian manufacturer was forced to break itself up during bankruptcy. Ironically, it was once Nortel that was rumored to be in the running to acquire Avaya in 2007, just days before the private equity deal was reached.

It is only natural to wonder what would have happened if things had been a bit different. If Lucent had held onto Avaya, would it have found greater success to buoy it during tough times in the service provider sector (not that enterprise was anymore of a safe haven)? If Nortel had been able to acquire Avaya, would it have been better off? That might be pinning a lot on Avaya being more of a technology treasure trove than it actually is, but it is Avaya and not Lucent or Nortel, that will once again be a standalone public company.--Dan