In its most recent quarterly filing, revenues for the first six months of its fiscal year (started September 1) were up nearly 16% to $2.8 billion when compared to the same period one year ago. However net losses ballooned by 50% (from $419 million to $612 million) during the same time; but that included a one-time charge of $246 million attributed to the “extinguishment” of some expensive debt. If the one-time charge were not included in the results, the company would have witnessed a 50% improvement in its net loss. Indeed its Operating Loss for the first six months of this fiscal year had been trimmed to a mere $86 million from $209 million in the prior year.

With long-term debt exceeding $6 billion and interest expense on track to reach $480 million (though it might be slightly reduced with the refinancing), the $1 billion IPO would be timely. But investors should get a better grip on what Avaya does for a living. Characterizing it as a company that “sells phones and other telecommunications gear to corporations,” as the WSJ reporters do, Is like damning with very faint praise. Almost as an afterthought, they add, “It also sells hardware and software used in the call centers that companies use to communicate with retail clients.” And then compound their criticism by saying that Avaya “is unlikely to drum up the same level of investor interest as today’s Internet darlings, and indeed a better proxy for the company might be Freescale Semiconductor Holdings, the private-equity-owned chip maker that had a lackluster market debut late last month.”

But Avaya is most definitely not a semiconductor maker. As enterprises retool their communications and computing infrastructures to take advantage of IP-based telephony and communications-enabled applications – not just in the contact center – but throughout the enterprise (including mobile devices), the company is one of a handful of companies with a broad portfolio of software to support communications, collaboration and electronic commerce. The 16% growth rate in Avaya’s revenues reflects the refresh that is going on in the marketplace; that said, as we all know, it is a domain where hardware has been transformed into a commodity and software is the battleground where Avaya is confronted by direct competition from Cisco Systems, Alcatel-Lucent, Microsoft and IBM.

Dealogic data reports that the lead underwriters are Goldman Sachs Group Inc., Morgan Stanley and J.P. Morgan Chase & Co. In addition Citigroup Inc., Barclays Capital and Credit Suisse Group are among the banks bringing the new securities to market. With these blue chip firms involved, the IPO deserves close attention.

Initially, our plan was to move existing service into our new building, and we made plans accordingly talking with Comcast frequently to make sure everything was moving along as our moving day approached. But, one week before our move, when we called to see when the phone service would be installed, Comcast told us that it was not going to run a new line into 350 Brannan. As we figured it, our only alternative (which may or may not be the case) is AT&T, so we started the process with Ma Bell.

This is where we entered the theater of the absurd. From our perspective, we were establishing service in our new building. Something that the AT&T Web site says should take 5-7 business days. The problem is, to AT&T we, apparently are a “win-back.” Which, for reasons that only Comcast and AT&T can justify, adds another 20 days to the process (while AT&T waits for Comcast to “release the number”). I’d like to say “it’s not my problem,” but, because in the mean time we have no phone service, it is. The alternative that the folks at AT&T are proposing is to establish new service in our new building (which means getting a new phone number) and using a feature called “Remote Call Forwarding” to have calls to old number arrive at our new place. The actual resolution is pending (thus the recommendation above to call my Google Voice number).

I used to work for the part of Pacific Telesis (now part of AT&T) that sold and helped provisionsmall business phone systems, so I thought I knew what we were getting into. I was amused at first that, after three phone calls to learn about our order status, I still had not talked to the right person. Sales didn’t know because it wasn’t a “new sale.” Service provisioning had no record of it because an order had not yet been placed. It got down to locating the single sales rep at an affiliated company who took our order. That amazed me. If I were to do all of this over again, and were gonna change numbers anyway, I’d look more seriously at Web-based provisioning through Bandwidth.com Inc.’s Phonebooth.com. It delivers the features of a small business phone system over the Internet.

In the mean time. I plan to enjoy the features of Google Voice, which makes incoming calls ring in multiple places, transcribes voicemail, let’s me send and receive SMS text messages from my computer and originate phone calls when Gmail is running on my browser. Our neighbors in the new building are letting us “share” their WiFi, while we wait to learn more about the progress of our installation.

Life’s good.

The acquisition signals a branching out for the search giant. Its telephony platform is already an amalgam of previously purchased IP-telephony specialists GrandCentral and Gizmo5 mashed-up with home-grown features and functions that include speech-recognition, dictation, message transcription, machine translation along with novel ways to originate phone calls (from IM clients or Gmail).

SayNow brings to Ma Google a number of important links. It is a traffic magnet for phone calls, a communications link to the popular “social platforms” (already providing visitors to Facebook fan pages or Twitter “tweets” with a way to originate telephone calls and it is a link for recognized entertainment personalities and “brands” to communicate with customers and fans. It is consistent with Google’s advertiser supported model and, best of all, it is acknowledgment of something I’ve been saying for a long time: The phone is the very first conversational medium and, as such is the foundation of social and conversational commerce.

Here’s the blog post regarding the offer, which also includes this video:

The impact on the IP-telephony landscape will be negligible and subtle. The “portability” service is being offered on a limited basis. It applies only to wireless numbers (not, for instance, a business’s landline). What’s more It carries a charge of $20 for each ported number and requires the wireless subscriber to “cancel” his or her existing contract (which often involves an “Early Termination Fee” in the $150 range).

I’ve been urging folks to petition for number portability since June 2009. My thought was that it would create a new use case for mobile business people to consolidate their communications needs around a single phone number. But I didn’t think this would be the response. It is not destined to attract a lot of new users because it makes it too complicated and expensive to switch.

Meanwhile, Google is taking an approach to telephony that should marginalize telephone numbers, especially for owners of smart phones. Its developers have done a great job of embedding Google Voice-based talk paths into a number of its popular online properties – especially GMail and the Google app for mobile (including Rim, iOS and Android). Thus they make it possible for mobile subscribers to personalize their Google Voice experience and make it a preferred way to communicate from desktops and smartphones.

As I described back in 2009, Google took pains to claim an inventory of phone numbers, but it makes them largely transparent to the user. These days, users commonly originate calls by clicking on a entry in their contact lists or simply returning a missed or “recent” call. Likewise, the “Call Phone” feature of Gmail leverages the contact list embedded in its popular email service, but it’s introduction did not siphon traffic from alternative IP-telephony services, like Skype.

The impact of BYON (Bring Your Own Number) will be minimal to begin with and will have a “time release” quality to it as people hold off until their wireless contracts have expired. It will appeal to a small subset of individuals who have grown attached to their existing wireless numbers and want to make it their single-number-for-life while availing themselves of Google Voice’s many cool features, which include voicemail transcription in a single “in-box” (with text messages), PC-based text origination, inexpensive long distance and international calling from PCs and mobile phones. In the long run, it will be the list of features, not the ability to port an existing number, that will attract new users.

Meanwhile, at the posh Arizona Biltmore in Phoenix, Cisco held its second Collaboration Summit featuring major updates and extensions of the resources that support both intra- and inter-company collaboration, as well as collaborative customer care. The Twittersphere was also alive with comments from the Defrag Conference in Denver, and tweets surrounding a variety of talks about generation, control and filtering of streams of BIG DATA provided a counterpoint to presentations of enterprise infrastructure, architecture, software and services that encourage collaboration, communications and conferencing.

In Cisco’s case, the day-and-a-half of briefings on architectural pillars, product descriptions, strategy discussions, customer testimonials and demonstrations, provided vivid pictures of usecases for the rapidly maturing line of core technologies – including social platform and IU associated with Quad, the inter-company communications support of IME, the Android-based Cius tablet, and the virtual desktop. Collectively they provide Cisco customers and partners solutions that leverage the core functional elements: Interoperable Open Architecture, Flexible Deployment Models, Enterprise Social Software, Pervasive Video and Secure Intercompany Communications.

I’ll be issuing an advisory next week with more details on the contrasting approaches being taken by Microsoft and Cisco. My top-line thoughts follow:

For customers and technology partners looking for Microsoft to fulfill on its promises surrounding Lync to facilitate PBX replacement, the company does not disappoint. For those looking for a UI (user interface) that supports multimedia messaging and conferencing, Microsoft Lync delivers those goods as well. Indeed, if you are a customer that is steeped in the server-side architecture where Active Directory houses the company directory, Exchange is the core of email and messaging and Office applications are the foundation of productivity, Lync is your glue.

Cisco’s approach puts much more emphasis on the rapid arrival of “pervasive video” as the model for interpersonal and intercompany communications. It will require some retooling of the way that broadband media streams are managed from endpoint-to-endpoint, but Cisco and partners are working on many of the answers there. Another point of major departure revolves around the contact center, where Cisco has a vision that embraces social networks (with Socialminer), Capture and analytics and a new desktop (Finesse) that serves as a “container” for all sorts of agent and supervisor apps and instances. By contrast, Microsoft will depend partners, led by Aspect, InteractiveIntelligence and PrairieFyre to deliver on contact center functionality.

The implications and promises of the two approaches are the core subject of my forthcoming advisory.

Since its inception in 2008, Twilio has launched a number of highly visible initiatives to recruit Web developers – both inside and outside enterprise IT groups – into the telecommunications fold. It has succeeded in providing cloud-based telecom infrastructure to support phone apps at eBay, SurveyMonkey (which itself just secured $100 million in debt financing) and Sony Records, among others. It has kept its API simple and prices its services according to an “on demand” model. As a result, it has built a community of over 20,000 registered developers who, in turn, have discovered that they can reliably generate “communications enabled business processes” quickly and relatively inexpensively (when compared to alternative professional services shops and systems integrators).

Twilio is, by no means, alone in the “phone API” business. The mix-and-match world of VoIP, coupled with Web-based phone apps includes search and cloud computing giant Google, Skype (with over 500 million registered users), BT-owned Ribbit and Voxeo, whose cloud-based telephony subsidiary Tropo is the closest thing to a direct competitor. Collectively they are doing an excellent job of recruiting fresh talent into the telephony developer space while scaling up both capacity and features to fill burgeoning demand. Twilio will use the money to scale up and has posted job descriptions for a variety of new positions.

Lync’s progress through the Microsoft code mill has been accelerating. We noted the name change in this blog post on September 13. At that time, 120 enterprise customers were already using the software as part of Microsoft’s Technology Adoption Program (TAP). In that previous post, we said that getting details on partnerships was a bit difficult, however that was remedied in this September 14th posting on Microsoft’s TechNet blog. It shows the specifics on 30 hardware, software and service vendors with products to showcase using beta versions of Lync. In addition it claims “more than 400 partners are involved in readiness activities to help customers plan, deploy, manage, and support Lync 2010 when it is generally available later in the fall.”

In the mean time, Microsoft has polished much of its marketing rhetoric to suit the times. OCS 2007 R2 was unquestionably designed for on-premises deployment preferably in an all Microsoft environment. By contrast, Lync is intimately (ahem) linked to a cloud-based strategy that Microsoft calls “extensible and open” while at the same time designed to “minimize legacy infrastructure costs,” which could mean a mass migration to softphones or, as I mentioned earlier, a higher reliance on cloud-based applications and infrastructure.
Apropos moving to the cloud, as Gregersen frames it:

If you caught our Office 365 disclosure last week, you saw that the next version of cloud productivity from Microsoft will also deliver the 2010 suite of products, including Office, Sharepoint, Exchange and Lync, to customers of all sizes. Additionally, Lync Online will federate with consumer communication applications like Windows Live Messenger (now supporting high definition audio and video), and with IM and presence with AOL, Yahoo!, Google and Jabber. Getting connected with others is a beautiful thing!

Agreed! “Getting connected with others” would be a beautiful thing. Whether Lync becomes foundational to the sort of multi-vendor, developer-friendly opportunities that characterize the age of RC (Recombinant Communications) will be determined as Lync goes to GA, Office 365 evolves and developers/partners learn just how open and extensible Lync really is.

It was founded in early 2006 to provide an application development environment (of “platform”) that made it easy to add telecom and messaging features to Web pages and Web services. They used a RESTful programming environment (with tools like Flex, Flash, Java, PHP, along with Microsoft’s .Net and Silverlight) to build “recombinant apps” that leverage APIs, including Skype Connect and XMPP (now embedded into GoogleTalk).

The first apps, which were made available right about the time of the acquisition, were Ribbit Mobile (which competed directly with Google Voice, but worked with existing numbers) and Ribbit for Salesforce (which provided a tight integration between Ribbit’s voicemail, text, and call handling capabilities and Salesforce’s cloud-based management of contacts and opportunities).

Word has it (this is where I may be overstating what’s really going on) that BT is taking Ribbit “internal”. That means it is less of an “exposure layer” to enable 3rd party developers or enterprise IT folks to build their own solutions and more of an application manufacturing resource for BT’s personnel to develop and deliver ready-made solutions. Ribbit Mobile, Ribbit for Salesforce and a more recently added “Bring Your Own Network” offering are the pre-fabricated service offerings that shorten the lead-time for BT and carrier partners to deliver features and services that employ Ribbit or BT’s IP-based network. After an encouraging start (purchasing Ribbit two years ago), BT remains pretty much a monolith.

Meanwhile, the move toward higher flexibility and open sourcing of application components and cloud-based resources appears to be accelerating. As I noted in previous posts on this site, Orange is very committed to its “Open Source Mobile Widget Program”, which is arguably more granular and more developer-friendly than the BT/Ribbit “bring-your-own-network” approach.

More reently, IBM, with its “Cloud Service Provider Platform”, is doing its best to help incumbent carriers transform themselves into reliable IP- or cloud-based, service delivery platforms. This represents an opportunity to move ever-closer to role of offering a highly-reliable, capacious and feature-rich “services grid”, which is a construct we strongly urge carriers, system integrators, application developers and enterprise customers to take a long, hard look at.

Ultimately, everyone is getting poised for competition “on the glass.” In the enterprise setting it’s a “battle for the desktop”, where applications and features are presented in portals that include feeds, softphones and most-favored applications. Because “the glass” extends to mobile devices, BT and Ribbit were being far-sighted when they made Ribbit Mobile one of their first commercial offerings.

The latest cohort of RC app developers is dealing with a riddle that has plagued the IVR (interactive voice response) and ASR (automated speech recognition) community dating back to the late 1990s. Enterprise customers say that they want flexible tools and application development environments (ADEs) in order to generate custom solutions that bring competitive advantage. Yet, what they often want is a trusted vendor (or resource) that provides an inventory of pre-fabricated solutions that help them bring new products or services to their customers quickly and reliably.

In the world of speech applications, it’s a lesson that the likes of Apptera, TuVox or Voxify have learned as they morphed into providers of specific applications rather than mere tools providers. I think the enterprise demand for reliable solutions to specific problems is driving demand for custom applications, built from well-understood components and running on rock-solid lower layer network resources. That means BT’s approach (bringing Ribbit in-house) may accomplish both near-term and long-term goals.

Lest you think this will only add more confusion to the already amorphous market for UC products, consider that it truly plays to HP’s strength. As illustrated in the chart below, the IT giant’s revenues from software and professional services are eclipsing those from printing, imaging, storage, servers and personal systems combined, making it a system integration powerhouse. As we approach the two-year anniversary of the acquisition of EDS, it is bold acknowledgment that HP is ready to apply its considerable expertise and experience with Avaya infrastructure to help smooth over many of the bumps and fill in the gaps as they apply the principles of UC in inherently multi-vendor, non-homogeneous environments.

The deal brings Avaya a partner that can provide a number of service delivery options for its core call processing and contact center technologies. HP has the potential to ease the potentially painful transition from those rock-solid, fully-depreciated, PSTN-friendsly Definity ACDs over to the more future-proof SIP-friendly world of Aura. The move looks so seamless on a project plan, but there are only a handful of system integrators that can work with customers to orchestrate the transition as a managed service encompassing resources around the globe, both on premises and “in the cloud.”

This press release provides more color on the agreement between the two firms. It clearly emphasizes such capabilities as life-cycle management and support that HP brings to multi-vendor environments that are ripe for Avaya Aura. It is clearly a professional and managed services play that also serves the purpose of helping Avaya maintain its presence in enterprise IT environments where the move to IP-telephony is an open invitation for competition from Cisco, Huawei, Alcatel-Lucent and others.