Companies using voice products made by Nortel Networks Corp. should be scared of Avaya Inc.’s bid to acquire the enterprise asserts of Nortel.

“They’re going to junk the Nortel stuff on the IP telephony side,” said Mark Tauschek, lead analyst at London, Ont.-based Info-Tech research group, which uses Nortel’s Communications Server 1000 IP PBX. “It scared the hell out of us and we’re starting to look for rip and replace options.”

Basking Ridge, N.J.-based Avaya, which was spun off from Lucent in 2000, agreed to pay US$915 million for the Nortel business that makes switches, routers, phones, private branch exchanges and other products for corporations. That deal is subject to approval from Industry Canada.

Nortel put its enterprise business up for sale after going into bankruptcy protection.

Though it announced its initial bid two months ago, Avaya has said it’s “too early” to say how it will support both product lines.

Roberta Fox, president and senior partner of Mount Albert, Ont.-based Fox Group, does not think Nortel customers should be scared of the Avaya acquisition.

“You may not be able to buy a new part from Nortel-Avaya but there would be a grey market or resale sources,” she said, adding more companies are reselling old products and it’s unlikely Avaya will risk alienating Nortel users.

“Nortel channel partners are not going to let Avaya, in the short term, make things redundant because they are going to want that customer support,” Fox said. “Nortel has thousands and thousands of (small to mid-sized business) customers. I think Avaya will take care of them.”

Tauschek said one reason Avaya wanted to buy the Nortel unit was because Avaya officials decided they needed their own network infrastructure products, now that companies are starting to replace time division multiplexing (TDM) equipment with IP telephony.

Avaya has not made switches since it dropped the Cajun switch line it inherited from Lucent.

Fox said IP telephony products need more frequent upgrades than TDM equipment because they are server-based. She added Avaya may end up using software from Nortel’s unified communications servers on Avaya hardware.

“If it’s running on a server, who cares what server it is?”

Fox speculated if any products are consolidated, it will be those targeted at mid-sized to large corporations.

“It will be interesting to see what portfolio they will keep because it could be either,” she said. “Nortel has thousands and thousands of (small to mid-sized business) customers. I think Avaya will take care of them.”

The deal still requires approval from the federal government.

Industry Minister Tony Clement announced earlier this week he will only allow the deal to go through if Avaya can demonstrate there is a “net benefit” to Canada.

The Investment Canada Act requires Industry Canada to review all acquisitions by companies based outside of Canada in countries belonging to the World Trade Organization if the value is greater than $312 million.

LM Ericsson of Sweden has agreed to buy Nortel’s carrier wireless assets for US$1.13 billion, but the government is not reviewing that deal because Nortel appraised the “book value” of those assets at US$149 million.

When Avaya was spun off by Lucent Technologies in 2000, it kept Lucent’s Cajun line of Ethernet and Asynchronous Transfer Mode switches. Lucent, which has since merged with Alcatel SA, held on to the virtual private networking equipment.

But Avaya later dropped the Cajun switch line and in early 2008 advised users to instead purchase BlackDiamond or Summit switches from Extreme Networks Inc of Santa Clara, Calif.

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