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Avaya CEO talks competition, debt, innovation

Tim Greene | April 1, 2013
Avaya is pushing a new range of unified communications products, but is finding that managed services are becoming more popular among its customers who would rather turn over complex UC transitions to someone else for a predictable monthly fee, says the company's CEO Kevin Kennedy.

The 20% is revenues?

Yes.

For customers concerned about Avaya's financials, what can you point to given that's reassuring?

The most significant thing is that if your gross margins and EBITDA are strong enough to be able to pay off your debt. We have always had that be the case and it continues to be. The second most important - I think I mentioned this morning that we just hit a record gross margin in the earnings call so that's a very good thing. The second piece is we just went through a major restructuring of our debt which means that maturities have been moved out to someplace between 2017 and 2022. That is a very important thing because you don't have a liquidity crunch at any point in time. And third I would simply - I think it's obvious that at the root of that question is a concern over the efficacy of product continuity. That's a very interesting question. If you think about the Nortel products we're still developing Nortel products. We have a release on our CS 1000 [communications server] coming up I think next month so despite Nortel's challenges you can still buy the product. Chrysler and General Motors both went through debt restructurings. Interestingly enough companies that go through restructuring of debt actually hold very close and dear product continuity and support because that is the face of commerce the face of value. Large companies that have larger portfolios can exit one product, exit another sometimes a third or exit a fourth and they will just do that because it's convenient for them. I would argue that through public information it is very clear that debt restructuring does not translate to an issue in product continuity in fact it's quite the opposite because that's the only value to be protected. That being said, gross margin, the ability to service debt has improved over the last five years and the liquidity timing is moved out to 2017 and beyond.

Is IPO in the future?

It was always the anticipation that 2013 would be the year that we would try to go out. We filed earlier in an effort to - the market had gotten frothy and the owners had asked for us to file so we did. By the time that had happened the markets began to close on us. At the end of the day that's the call of the owners. My job is to make sure that we're continuing to improve the company so that [IPO] becomes a possibility, and I'm here every day to try to make that a possibility. To be successful your numbers have to work and the market has to be receptive to an IPO. In that particular period we filed in June and by August it had become a very dubious market and it was not optimum for us to go out. Again, owners will make those decisions. They're very clear for me to stay focused on improving the products, and that's what I do.

 

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