10 ms·

Telecommunications company Avaya files for bankruptcy

99 points by doppp 10y ago

dqv 10y ago
They really went too hard with the whole proprietary software thing (but who am I kidding, telecom loves proprietary). Even though I know very little about Avaya, my assumption every time I have tried to look them up is that they are locked down and difficult to integrate with. If I'm wrong, they sure as hell spent a lot of time leading me to believe I'm right.
- ismail 10y ago
  Not at all surprised. "my assumption every time I have tried to look them up is that they are locked down and difficult to integrate with." Yep exactly this. We are working on a project where we have to integrate with Avaya. It is a nightmare and ancient technology. Why would a company spend tons of $ when you have just as good software in open source world (free switch)
  - digi_owl 10y ago
    Ass coverage for the execs...
- deleted 10y ago
  [deleted]
- Steeeve 10y ago
  Can confirm that integrations (and a lot of system interactions) are needlessly painful. Telephone systems are generally rough around the edges to begin with, but Avaya is a prize winner.
- builtinbuffalo 10y ago
  You are correct. It's been a closed system in a space that was opened by OSS like Asterisk in the early 2000s. Their solutions cost 5-10x's similar ones available from competitors. Add in their late embrace of cloud and it's not hard to see why they went bankrupt.
sheraz 10y ago
A friend of mine closed his company in 2013 and had a full avaya system with 40 phones and latest software that he could not even give away. Eventually some kids from a local hackerspace came and hauled away the whole lot. They were after the headsets and lcds.
- tsomctl 10y ago
  I think this is pretty standard in the pbx business. The manufacturers don't give out the complete documentation for the system, so it is useless without paying money to your local dealer. Your local dealer doesn't want to help you with a used system, he'd prefer to sell you a brand new one. Source: I work for a dealer.
  - closeparen 10y ago
    I worked for a dealer. The configuration utility for Cisco PBXes (piece of crap, by the way) can only be downloaded by certified Cisco partners. Or BitTorrent.
    - voltagex_ 10y ago
      Hell, even the firmware + config can only be downloaded that way. This means if you got used phones that were configured for the proprietary SCCP, you wouldn't be able to reconfigure them as SIP phones without paying the big bucks. Yes, I know about Asterisk's chan_sccp.
fenesiistvan 10y ago
I can't understand till today how they (and others) are capably to sell PBX hardware when there are free and low cost software alternatives which runs on common x86 hardware. FreePBX for Linux (https://www.freepbx.org/ https://www.freepbx.org/) or MizuSwitch for Windows (https://www.mizu-voip.com/Software/VoIPServer/FreeSoftswitch.aspx https://www.mizu-voip.com/Software/VoIPServer/FreeSoftswitch...) are very good free alternatives which can be managed also by non-technical people with zero telecom experience. And there are a good support and a lot of modules for both which can be purchased on low cost, not comparable to Avaya pricing.
- cstrat 10y ago
  They have a pretty good name in contact centre technology. I think the bigger shift is that people don't need desk phones anymore. The move to mobile is killing the need for fancy PBX gear in business.
  - rpd9803 10y ago
    I don't think many businesses are quite ready for this, but a CTO can dream...
    - kimi 10y ago
      Some are. The problem is that what is WebRTC depends on Google's whims of the day - so your browsers update and all of a sudden your agents can't work anymore.
  - msh 10y ago
    Well the contact centers I know are not going mobile but going to soft phones on the pc.
  - slau 10y ago
    I used to be the lead developer on an IVR/PBX SaaS solution. It hasn't been necessary to have dedicated hardware for years (ever since out-of-band DTMF has been a thing). The only reason that companies buy it is because they're getting conned into it. We had a server through which the conversation (SIP, converted from landlines) went, and enabled the agent to interact with the call through either a web page, or hitting keys on their phone. Transfers, blind or not, holds, recordings, assistance, we could handle all of it. To dumb phones. Literally things that weren't able to display the time of day. Mobile is doing diddly squat, frankly. Same as softphones. The voice quality over wi-fi is terrible, and what's the point of using a mobile device if it needs to be plugged in anyway. Softphones never took off because call centres couldn't reuse their headphone equipment, and having a headphone's "pick up" button work on a softphone was impossible, at scale. It also meant that actually interacting with the call was tricky (change focus of the window to find the numpad, then either click on digits, or type on the keyboard). One major game changer, however, seems to be WebRTC. A lot of companies are investing big on it (see Dixa and COLT for example). I really think this is a generational problem. Callcentres of old want the highly integrated hardware. Train your people once, and then they can become robots. New, modern places want the ability to switch providers. They want their agents to be close to the customer, and even closer to the tracking/reporting software stack, without going through 10 layers of proprietary integration. WebRTC also means that you can simply talk to the person on your website, while you see what they see, and can walk them through whatever they need.
qwrusz 10y ago
Not to take away from challenges of the legacy telecommunications industry right now, but this article slides in the private equity LBO part of Avaya's story at the very end - and then only hints at what happened here. I hope the pensioners and benefits obligations get paid the money they are owed ASAP, because this is a classic story of private equity (Silver and TPG) financially engineering a cash-siphon from a dying dinosaur and then "phoning it in" when it came to the manage out/re-price of new risk. I don't have a problem with mega private equity and I can see some kool-aid drinkers saying "any acquisition made in October 2007 (the technical peak of the pre-crisis market) was going to have a tough time working out as played". But this was a deal designed to fail from the start. Basically the private equity stunt here was: find a company that has $100, take $99 of it, use the company's last $1 to buy a lottery ticket, try to convince other investors that $1 ticket is a winner. They failed huge here.
- keytapper 10y ago
  "But this was a deal designed to fail from the start." Can you elaborate on this further? I just made a comment earlier about how Avaya ended up in this situation and I have had a feeling, based on how the last few years have played out, that you might be right: I just dont understand how the owners could have run the company the way they did and make out with a profit.
  - dade_ 10y ago
    They thought they were going to be able to do the quick cost cut and then buy another company, in this case Nortel, and then flip it is an IPO. They actually made a mess of the company, then 2008 happened and then made a bigger mess with the Nortel acquisition (strategically made no sense, paid way too much and then botched the integration). The part of the Nortel business that Avaya bought was actually profitable at the time. Epic cluster.
  - qwrusz 10y ago
    What would you like to know? I read your comment and I think you pretty much get the gist of it, but if you have q's about how private equity (PE) works in this situation I'm happy to try to answer. As for this deal. First it was 10+ years so feel free to call bullshit on my memory but it felt like amateur hours as if SL/TPG let their new MBA hires run it or people just screwed up when structuring the deal and unsurprisingly it's been a disaster ever since. Some examples of what I mean: TL;DR buying a knowingly bad business, buying it at auction for a 28% premium, overloading it with clearly too much debt (even by risk-lovers standards), showing little commitment as owners to planning/doing the hands on operations work needed to fix/change/revive a mature obsolescing tech company, nor put in a management team that seemed serious about it either. It appears SL/TPG saw the prospects for Avaya were weak and did the deal anyway[1]. In case you don't have access to WSJ, article talks about TPG viewing Avaya as a "buggy-whip business" at risk of being outmoded. That's not so bad on its own. Obsolescing/dying "buggy-whip businesses" are just a reality of the business world. Such companies can still have value and potential. But what's odd is SL/TPG not only stayed in the deal but they bought in at a premium on auction. Meaning they had to fight against other buyers to win the deal and then they paid a premium of ~28% for it. OK guys...Auctions are a joke of a way to buy any business to begin with and such auction deals deserve the little to no respect they get in the PE industry. (side note: This inevitable obsolescence in a business model is especially true in the tech space lately where the moment you launch a startup or introduce a new product the process of it becoming outdated has already started. All tech companies, big or bedroom, worry about keeping up with the next tech wave and there is no formula to avoid being a one-hit wonder. Of course some companies are able to hang on longer and stay big longer than others (ie "the by luck or by fuck clause" also known as the SV/DC two-step), but anyone who thinks the big FANGs of today will for sure be around in 10 years should read more tech industry history. Every tech business is dying just some faster than others). As for the Avaya debt. LBO's need debt and debt is not necessarily bad when it comes to buying companies. The analogy for LBO debt is often that it's like buying a house. I guess in the Avaya case it's maybe like a house in Detroit. But if you have a $1MM and want to buy a house it may be better not to use the whole $1Million on the house. Put down $100k and take a $900k mortgage from a bank. Put your other $900k into other investments. At the end of it one should hopefully be better off vs. putting all your eggs in one basket. So while debt to buy companies can be a good idea in theory it doesn't always work out due to just chance and also because the investment industry has a small but news-worthy population of criminals and fucking idiots. In the case of Avaya it was clear as day they used too much debt. Everyone could see it and there were journalists/articles where the high debt issue was brought up with Avaya management. I don't know if it was negligence or malice or what. If things don't go well in an LBO and the company has to file for bankruptcy the bondholders lose. But that's not so bad, the bondholders should have known the risks of the investment going in and they were paid for that risk. Don't cry for them. This reply has gotten long. I will add Kevin Kennedy has not done a good job as CEO...Avaya is spending money on soccer stadium names and has fake filed for IPO how many times then changed its mind? Also what really happened with Louis D'Ambrosio? He leaves suddenly due to medical reasons then went to be CEO of Sears a few years later. SL/TPG put Charles Giancarlo in as a replacement who lasted a year with them? Lastly, Private Equity and LBOs have the potential to be good for companies and investors and employees. Businesses die and if someone sees a chance to make some money trying to revive it or wants to get paid to dismantle it, that's ok. But this should be done primum non nocere from day 1. This includes accurately telling employees and future investors of the risks of doing the turnaround and it should not be done with outstanding liabilities owned to employee pension plans. Frankly, in my personal opinion Avaya has been run so poorly over the last few years, with risks that did not make sense, that a crime with lapse of fiduciary duty may have occurred. [1] http://www.wsj.com/articles/avaya-how-an-8-billion-tech-buyout-went-wrong-1482321602 http://www.wsj.com/articles/avaya-how-an-8-billion-tech-buyo...
keytapper 10y ago
I have been working at avaya for the last couple years and I have been scratching my head trying to understand how this company works and how it got into this situation. On one hand its a company thats hasn't made a profit in 10 years but on the other it takes in a billion every quarter. When you look at the numbers it turns out it is paying tens of millions to service the interest on its massive debt... it would be quite profitable if it was not for this. So where did the debt come from? Most of it seems to have come from the leveraged buyout it underwent 10 years back. So now they file for chapter 11 bankruptcy but who is getting burned here? Anyone who bought an avaya bond will lose out but what about the private equity company that owns the place? The way the company was allowed to grow its debt seems like they just didnt care as if it wasnt going to hurt them when bankruptcy finally beckons.
- arbuge 10y ago
  By definition, the more leveraged the company, the more of it is owned by creditors. So if the company later does go belly-up, it is the creditors (banks, bondholders, etc.) who lose most on a percentage basis. This simplistic analysis however ignores that before the buyout the company might have been a prosperous self-sustaining entity fully capitalized by common stock with little debt. That common stock, made into a small percentage of the capital structure by the buyout, is often wiped out too in the event of bankruptcy - indeed it is usually at the bottom of the totem pole in that capital structure. So although they may no longer be majority owners, bankruptcy is typically an unhappy event for long-time stockholders of the company such as founders, employees holding company stock in their 401ks, etc. Perversely this is the kind of company PE outfits typically go after - in their worldview it is a waste of leveraging potential not to apply debt to such a company. I recommend reading "Barbarians at the Gate" if you are interested in this topic.
  - keytapper 10y ago
    Thanks for your insight, I will check out your recommendation. As is the case with most things in finance, I'm sure if I scratch the surface there is a fairly straight forward explanation as to why things worked out the way they did. It is amazing how you can work at a place where the owners interests and the leadership goals might not be aligned to what you thought they were. There was a strange situation some months back where by the board filed a notice that if the company was bought they would each get juicy bonuses and even bigger ones if they were fired by the new owners. That was an interesting one.
revelation 10y ago
They took a huge loan, bought the company and funneled its "profits" to the loan and now it's bankrupt? How is that legal?
- mbag 10y ago
  All animals are equal but some animals are more equal than others...
- jessaustin 10y ago
  That is the basis of the private equity industry. Sometimes there's more cashflow than they expected so the firm doesn't go belly-up before they can peddle it, but that's not because PE dudes are any good at running a business. It's just as common to get less cashflow than they expected, and have the whole thing collapse without paying them. In a previous life I got a close-up view of Carlyle attempting this with a former Verizon business, only to discover that Verizon can put short pants on crooked business execs. That office tower was stacked to the ceilings with deadwood. Equal parts fascinating and horrifying.
  - smcl 10y ago
    "... only to discover that Verizon can put short pants on crooked business execs" This phrase interests me - what does it mean? Like they can dress them down, or make them look foolish?
    - jessaustin 10y ago
      It means that compared to Verizon crooked execs, Carlyle crooked execs were like children, who were new to the game of being crooked executives. (Traditionally it was children who wore short pants.)
      - smcl 10y ago
        Wow ok, thanks :) I hadn't considered that
- 10y ago
dv35z 10y ago
A bit off-topic, but a call-out to those tech consultants who often work remotely (using VOIP to interface with POTS): At the previous tech company I worked at, we used Avaya VOIP phones (5000+ employees). The phones could be used at home (with a remote access point - RAP - plugged into your router). One thing that always impressed me was just how clear, crisp, and low-latency the audio was for VOIP. I'd pick up the handset and the dial-tone was immediately there; while on conference calls, I could easily interject comments (whereas with Skype, there is always an annoying delay). While working at this company, I would literally bring this big ol' corporate deskphone with my while traveling (e.g. south america, London, etc), and it was great having a perfect call connection anywhere there is decent internet. My question is - for those folks who work remotely 100% (or often): Have you found a VOIP phone solution that really works well for you? I bough an Ooma handset, and I'm sorry to say that the audio is still clouded, muffled, and has latency. Plus, the handset (the home/residential one) just feels... flaky. Without having much experience with other VOIP phone systems, I'm really looking for a solid corporate desk phone (handset, but also very clear remote headset) - it's got to be as good as an in-office phone, interface with POTS, and also be portable for travel. I do a lot of consulting, and am on phone calls sometimes 4-5+ hours a day, so it'd be great to have a comfortable powerful solution that can handle this. Would love to hear anyone's thoughts and experience on this. My Ooma purchase was an bit of a costly experiment...
- Periodic 10y ago
  I'm surprised how much, as consumers, people will put up with in terms of bad audio. I think cell phones really helped lower the bar when the connections were bad but the mobility was unrivaled. I used to hate calling someone's cell phone because the land-line was generally crystal clear and responsive. Granted, things have improved a lot over the last 10 years, both in cell phones and internet calling. However, video conferencing still seems pretty obsessed with figuring out a way to get high definition video and both audio quality (from the connection and the equipment) and latency haven't improved significantly for major video conferencing solutions.
  - yardie 10y ago
    Mobile audio is awful because we are oversubscribed. My first mobile was a CDMA PCS phone. My first call on it was for a date. My date assumed I was calling from home on a land line. I was at her front door. The audio was so clean it was indistinguishable from a landline. Later on, as CDMA phones grew in popularity, the multiplexing grew and the bandwidth shrank. Also codecs got more efficient by flattening the audio. All the atmosphere is stripped from the audio and voice calls got very sterile.
funkdobiest 10y ago
So does this mean our company will stop forcing this Avaya plugin into all the browsers? Just hopeful thinking. It has caused many hours of troubleshooting as it injects it's code into every page.
ogig 10y ago
Off-topic tale: This brings back the memory of my first serious security job, 14 years ago or so. I had to pen test a big corporate-like network from the inside so I was left with my laptop in a cubicle and the mission to own something. I was young, inexperienced and a bit scared by the size of the network. After some minutes I had a general map of the network, there were some separated LANs and in the middle of them all it was this Avaya Cajun managed thing. I ran some google queries and the second or third result showed up a CVE, the Avaya firmware had a hidden admin account. Total time used, 10-15 mins. I did not have to go any further, owning the Avaya was game over and got some pats on the back from my employer and the clients. I had prepared a quite extensive plan of action, been my first gig I had to show. The laptop was loaded of tools, even some "cool" exploits but at the end it all came down to a few nmap scans and a google query. I felt dissapointed. Also, after the pen test I spent some (very) boring weeks documenting, inventorying, and documenting again. It made me reconsider how deep I wanted to dive into security audits.
joncp 10y ago
This has been coming for a long time. First, AT&T spun off their less profitable stuff into Lucent, and then Lucent spun off their dog investments into Avaya. It's all part of the plan.

99 points by doppp 10y ago

dqv 10y ago

They really went too hard with the whole proprietary software thing (but who am I kidding, telecom loves proprietary). Even though I know very little about Avaya, my assumption every time I have tried to look them up is that they are locked down and difficult to integrate with. If I'm wrong, they sure as hell spent a lot of time leading me to believe I'm right.

ismail 10y ago
Not at all surprised. "my assumption every time I have tried to look them up is that they are locked down and difficult to integrate with." Yep exactly this. We are working on a project where we have to integrate with Avaya. It is a nightmare and ancient technology. Why would a company spend tons of $ when you have just as good software in open source world (free switch)
- digi_owl 10y ago
  Ass coverage for the execs...
deleted 10y ago
[deleted]
Steeeve 10y ago
Can confirm that integrations (and a lot of system interactions) are needlessly painful. Telephone systems are generally rough around the edges to begin with, but Avaya is a prize winner.
builtinbuffalo 10y ago
You are correct. It's been a closed system in a space that was opened by OSS like Asterisk in the early 2000s. Their solutions cost 5-10x's similar ones available from competitors. Add in their late embrace of cloud and it's not hard to see why they went bankrupt.

sheraz 10y ago

A friend of mine closed his company in 2013 and had a full avaya system with 40 phones and latest software that he could not even give away. Eventually some kids from a local hackerspace came and hauled away the whole lot. They were after the headsets and lcds.

tsomctl 10y ago
I think this is pretty standard in the pbx business. The manufacturers don't give out the complete documentation for the system, so it is useless without paying money to your local dealer. Your local dealer doesn't want to help you with a used system, he'd prefer to sell you a brand new one. Source: I work for a dealer.
- closeparen 10y ago
  I worked for a dealer. The configuration utility for Cisco PBXes (piece of crap, by the way) can only be downloaded by certified Cisco partners. Or BitTorrent.
  - voltagex_ 10y ago
    Hell, even the firmware + config can only be downloaded that way. This means if you got used phones that were configured for the proprietary SCCP, you wouldn't be able to reconfigure them as SIP phones without paying the big bucks. Yes, I know about Asterisk's chan_sccp.

fenesiistvan 10y ago

I can't understand till today how they (and others) are capably to sell PBX hardware when there are free and low cost software alternatives which runs on common x86 hardware. FreePBX for Linux (https://www.freepbx.org/ https://www.freepbx.org/) or MizuSwitch for Windows (https://www.mizu-voip.com/Software/VoIPServer/FreeSoftswitch.aspx https://www.mizu-voip.com/Software/VoIPServer/FreeSoftswitch...) are very good free alternatives which can be managed also by non-technical people with zero telecom experience. And there are a good support and a lot of modules for both which can be purchased on low cost, not comparable to Avaya pricing.

cstrat 10y ago
They have a pretty good name in contact centre technology. I think the bigger shift is that people don't need desk phones anymore. The move to mobile is killing the need for fancy PBX gear in business.
- rpd9803 10y ago
  I don't think many businesses are quite ready for this, but a CTO can dream...
  - kimi 10y ago
    Some are. The problem is that what is WebRTC depends on Google's whims of the day - so your browsers update and all of a sudden your agents can't work anymore.
- msh 10y ago
  Well the contact centers I know are not going mobile but going to soft phones on the pc.
- slau 10y ago
  I used to be the lead developer on an IVR/PBX SaaS solution. It hasn't been necessary to have dedicated hardware for years (ever since out-of-band DTMF has been a thing). The only reason that companies buy it is because they're getting conned into it. We had a server through which the conversation (SIP, converted from landlines) went, and enabled the agent to interact with the call through either a web page, or hitting keys on their phone. Transfers, blind or not, holds, recordings, assistance, we could handle all of it. To dumb phones. Literally things that weren't able to display the time of day. Mobile is doing diddly squat, frankly. Same as softphones. The voice quality over wi-fi is terrible, and what's the point of using a mobile device if it needs to be plugged in anyway. Softphones never took off because call centres couldn't reuse their headphone equipment, and having a headphone's "pick up" button work on a softphone was impossible, at scale. It also meant that actually interacting with the call was tricky (change focus of the window to find the numpad, then either click on digits, or type on the keyboard). One major game changer, however, seems to be WebRTC. A lot of companies are investing big on it (see Dixa and COLT for example). I really think this is a generational problem. Callcentres of old want the highly integrated hardware. Train your people once, and then they can become robots. New, modern places want the ability to switch providers. They want their agents to be close to the customer, and even closer to the tracking/reporting software stack, without going through 10 layers of proprietary integration. WebRTC also means that you can simply talk to the person on your website, while you see what they see, and can walk them through whatever they need.

qwrusz 10y ago

Not to take away from challenges of the legacy telecommunications industry right now, but this article slides in the private equity LBO part of Avaya's story at the very end - and then only hints at what happened here. I hope the pensioners and benefits obligations get paid the money they are owed ASAP, because this is a classic story of private equity (Silver and TPG) financially engineering a cash-siphon from a dying dinosaur and then "phoning it in" when it came to the manage out/re-price of new risk. I don't have a problem with mega private equity and I can see some kool-aid drinkers saying "any acquisition made in October 2007 (the technical peak of the pre-crisis market) was going to have a tough time working out as played". But this was a deal designed to fail from the start. Basically the private equity stunt here was: find a company that has $100, take $99 of it, use the company's last $1 to buy a lottery ticket, try to convince other investors that $1 ticket is a winner. They failed huge here.

keytapper 10y ago
"But this was a deal designed to fail from the start." Can you elaborate on this further? I just made a comment earlier about how Avaya ended up in this situation and I have had a feeling, based on how the last few years have played out, that you might be right: I just dont understand how the owners could have run the company the way they did and make out with a profit.
- dade_ 10y ago
  They thought they were going to be able to do the quick cost cut and then buy another company, in this case Nortel, and then flip it is an IPO. They actually made a mess of the company, then 2008 happened and then made a bigger mess with the Nortel acquisition (strategically made no sense, paid way too much and then botched the integration). The part of the Nortel business that Avaya bought was actually profitable at the time. Epic cluster.
- qwrusz 10y ago
  What would you like to know? I read your comment and I think you pretty much get the gist of it, but if you have q's about how private equity (PE) works in this situation I'm happy to try to answer. As for this deal. First it was 10+ years so feel free to call bullshit on my memory but it felt like amateur hours as if SL/TPG let their new MBA hires run it or people just screwed up when structuring the deal and unsurprisingly it's been a disaster ever since. Some examples of what I mean: TL;DR buying a knowingly bad business, buying it at auction for a 28% premium, overloading it with clearly too much debt (even by risk-lovers standards), showing little commitment as owners to planning/doing the hands on operations work needed to fix/change/revive a mature obsolescing tech company, nor put in a management team that seemed serious about it either. It appears SL/TPG saw the prospects for Avaya were weak and did the deal anyway[1]. In case you don't have access to WSJ, article talks about TPG viewing Avaya as a "buggy-whip business" at risk of being outmoded. That's not so bad on its own. Obsolescing/dying "buggy-whip businesses" are just a reality of the business world. Such companies can still have value and potential. But what's odd is SL/TPG not only stayed in the deal but they bought in at a premium on auction. Meaning they had to fight against other buyers to win the deal and then they paid a premium of ~28% for it. OK guys...Auctions are a joke of a way to buy any business to begin with and such auction deals deserve the little to no respect they get in the PE industry. (side note: This inevitable obsolescence in a business model is especially true in the tech space lately where the moment you launch a startup or introduce a new product the process of it becoming outdated has already started. All tech companies, big or bedroom, worry about keeping up with the next tech wave and there is no formula to avoid being a one-hit wonder. Of course some companies are able to hang on longer and stay big longer than others (ie "the by luck or by fuck clause" also known as the SV/DC two-step), but anyone who thinks the big FANGs of today will for sure be around in 10 years should read more tech industry history. Every tech business is dying just some faster than others). As for the Avaya debt. LBO's need debt and debt is not necessarily bad when it comes to buying companies. The analogy for LBO debt is often that it's like buying a house. I guess in the Avaya case it's maybe like a house in Detroit. But if you have a $1MM and want to buy a house it may be better not to use the whole $1Million on the house. Put down $100k and take a $900k mortgage from a bank. Put your other $900k into other investments. At the end of it one should hopefully be better off vs. putting all your eggs in one basket. So while debt to buy companies can be a good idea in theory it doesn't always work out due to just chance and also because the investment industry has a small but news-worthy population of criminals and fucking idiots. In the case of Avaya it was clear as day they used too much debt. Everyone could see it and there were journalists/articles where the high debt issue was brought up with Avaya management. I don't know if it was negligence or malice or what. If things don't go well in an LBO and the company has to file for bankruptcy the bondholders lose. But that's not so bad, the bondholders should have known the risks of the investment going in and they were paid for that risk. Don't cry for them. This reply has gotten long. I will add Kevin Kennedy has not done a good job as CEO...Avaya is spending money on soccer stadium names and has fake filed for IPO how many times then changed its mind? Also what really happened with Louis D'Ambrosio? He leaves suddenly due to medical reasons then went to be CEO of Sears a few years later. SL/TPG put Charles Giancarlo in as a replacement who lasted a year with them? Lastly, Private Equity and LBOs have the potential to be good for companies and investors and employees. Businesses die and if someone sees a chance to make some money trying to revive it or wants to get paid to dismantle it, that's ok. But this should be done primum non nocere from day 1. This includes accurately telling employees and future investors of the risks of doing the turnaround and it should not be done with outstanding liabilities owned to employee pension plans. Frankly, in my personal opinion Avaya has been run so poorly over the last few years, with risks that did not make sense, that a crime with lapse of fiduciary duty may have occurred. [1] http://www.wsj.com/articles/avaya-how-an-8-billion-tech-buyout-went-wrong-1482321602 http://www.wsj.com/articles/avaya-how-an-8-billion-tech-buyo...

keytapper 10y ago

I have been working at avaya for the last couple years and I have been scratching my head trying to understand how this company works and how it got into this situation. On one hand its a company thats hasn't made a profit in 10 years but on the other it takes in a billion every quarter. When you look at the numbers it turns out it is paying tens of millions to service the interest on its massive debt... it would be quite profitable if it was not for this. So where did the debt come from? Most of it seems to have come from the leveraged buyout it underwent 10 years back. So now they file for chapter 11 bankruptcy but who is getting burned here? Anyone who bought an avaya bond will lose out but what about the private equity company that owns the place? The way the company was allowed to grow its debt seems like they just didnt care as if it wasnt going to hurt them when bankruptcy finally beckons.

arbuge 10y ago
By definition, the more leveraged the company, the more of it is owned by creditors. So if the company later does go belly-up, it is the creditors (banks, bondholders, etc.) who lose most on a percentage basis. This simplistic analysis however ignores that before the buyout the company might have been a prosperous self-sustaining entity fully capitalized by common stock with little debt. That common stock, made into a small percentage of the capital structure by the buyout, is often wiped out too in the event of bankruptcy - indeed it is usually at the bottom of the totem pole in that capital structure. So although they may no longer be majority owners, bankruptcy is typically an unhappy event for long-time stockholders of the company such as founders, employees holding company stock in their 401ks, etc. Perversely this is the kind of company PE outfits typically go after - in their worldview it is a waste of leveraging potential not to apply debt to such a company. I recommend reading "Barbarians at the Gate" if you are interested in this topic.
- keytapper 10y ago
  Thanks for your insight, I will check out your recommendation. As is the case with most things in finance, I'm sure if I scratch the surface there is a fairly straight forward explanation as to why things worked out the way they did. It is amazing how you can work at a place where the owners interests and the leadership goals might not be aligned to what you thought they were. There was a strange situation some months back where by the board filed a notice that if the company was bought they would each get juicy bonuses and even bigger ones if they were fired by the new owners. That was an interesting one.

revelation 10y ago

They took a huge loan, bought the company and funneled its "profits" to the loan and now it's bankrupt? How is that legal?

mbag 10y ago
All animals are equal but some animals are more equal than others...
jessaustin 10y ago
That is the basis of the private equity industry. Sometimes there's more cashflow than they expected so the firm doesn't go belly-up before they can peddle it, but that's not because PE dudes are any good at running a business. It's just as common to get less cashflow than they expected, and have the whole thing collapse without paying them. In a previous life I got a close-up view of Carlyle attempting this with a former Verizon business, only to discover that Verizon can put short pants on crooked business execs. That office tower was stacked to the ceilings with deadwood. Equal parts fascinating and horrifying.
- smcl 10y ago
  "... only to discover that Verizon can put short pants on crooked business execs" This phrase interests me - what does it mean? Like they can dress them down, or make them look foolish?
  - jessaustin 10y ago
    It means that compared to Verizon crooked execs, Carlyle crooked execs were like children, who were new to the game of being crooked executives. (Traditionally it was children who wore short pants.)
    - smcl 10y ago
      Wow ok, thanks :) I hadn't considered that
10y ago

dv35z 10y ago

A bit off-topic, but a call-out to those tech consultants who often work remotely (using VOIP to interface with POTS): At the previous tech company I worked at, we used Avaya VOIP phones (5000+ employees). The phones could be used at home (with a remote access point - RAP - plugged into your router). One thing that always impressed me was just how clear, crisp, and low-latency the audio was for VOIP. I'd pick up the handset and the dial-tone was immediately there; while on conference calls, I could easily interject comments (whereas with Skype, there is always an annoying delay). While working at this company, I would literally bring this big ol' corporate deskphone with my while traveling (e.g. south america, London, etc), and it was great having a perfect call connection anywhere there is decent internet. My question is - for those folks who work remotely 100% (or often): Have you found a VOIP phone solution that really works well for you? I bough an Ooma handset, and I'm sorry to say that the audio is still clouded, muffled, and has latency. Plus, the handset (the home/residential one) just feels... flaky. Without having much experience with other VOIP phone systems, I'm really looking for a solid corporate desk phone (handset, but also very clear remote headset) - it's got to be as good as an in-office phone, interface with POTS, and also be portable for travel. I do a lot of consulting, and am on phone calls sometimes 4-5+ hours a day, so it'd be great to have a comfortable powerful solution that can handle this. Would love to hear anyone's thoughts and experience on this. My Ooma purchase was an bit of a costly experiment...

Periodic 10y ago
I'm surprised how much, as consumers, people will put up with in terms of bad audio. I think cell phones really helped lower the bar when the connections were bad but the mobility was unrivaled. I used to hate calling someone's cell phone because the land-line was generally crystal clear and responsive. Granted, things have improved a lot over the last 10 years, both in cell phones and internet calling. However, video conferencing still seems pretty obsessed with figuring out a way to get high definition video and both audio quality (from the connection and the equipment) and latency haven't improved significantly for major video conferencing solutions.
- yardie 10y ago
  Mobile audio is awful because we are oversubscribed. My first mobile was a CDMA PCS phone. My first call on it was for a date. My date assumed I was calling from home on a land line. I was at her front door. The audio was so clean it was indistinguishable from a landline. Later on, as CDMA phones grew in popularity, the multiplexing grew and the bandwidth shrank. Also codecs got more efficient by flattening the audio. All the atmosphere is stripped from the audio and voice calls got very sterile.

funkdobiest 10y ago

So does this mean our company will stop forcing this Avaya plugin into all the browsers? Just hopeful thinking. It has caused many hours of troubleshooting as it injects it's code into every page.

ogig 10y ago

Off-topic tale: This brings back the memory of my first serious security job, 14 years ago or so. I had to pen test a big corporate-like network from the inside so I was left with my laptop in a cubicle and the mission to own something. I was young, inexperienced and a bit scared by the size of the network. After some minutes I had a general map of the network, there were some separated LANs and in the middle of them all it was this Avaya Cajun managed thing. I ran some google queries and the second or third result showed up a CVE, the Avaya firmware had a hidden admin account. Total time used, 10-15 mins. I did not have to go any further, owning the Avaya was game over and got some pats on the back from my employer and the clients. I had prepared a quite extensive plan of action, been my first gig I had to show. The laptop was loaded of tools, even some "cool" exploits but at the end it all came down to a few nmap scans and a google query. I felt dissapointed. Also, after the pen test I spent some (very) boring weeks documenting, inventorying, and documenting again. It made me reconsider how deep I wanted to dive into security audits.

joncp 10y ago

This has been coming for a long time. First, AT&T spun off their less profitable stuff into Lucent, and then Lucent spun off their dog investments into Avaya. It's all part of the plan.