According to a report by Wall Street Journal reporters Dana Cimillluca and Anupreta Das, The $1 billion filing could be as early as next week. It would value the company at roughly $5 billion, according to unnamed individuals. As a reminder, Silverlake and TPG took the company private in 2007 for an estimated $8.3 billion consideration and has since spent another $475 million for the enterprise communications assets of Nortel.

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.

Categories: Articles

Tags: Avaya, IP telephony, Contact Center, IPOs