Avaya does better but still in red

Unified communications solutions maker Avaya Inc. finished another year in the red at the end of its recently concluded fiscal year, although the company did manage to cut the loss significantly from 2011.

The company said Tuesday it lost $344 million in the fiscal year that ended Sept. 30 on revenue of $5.17 billion (all figures U.S.), compared to a loss of $863 million the year before.

That revenue was a drop of seven per cent – or $376 million — compared to the same period a year ago.

Overall, product revenue dropped 10 per cent compared to fiscal 2011 and services revenue was down three per cent.

Executives blamed slowing buying from organizations due to the global economy and a drop in demand for older products which Avaya picked up when it bought assets from bankrupt Nortel Networks .

However, operating income (earnings before interest and taxes) in fiscal 2012 hit $115 million, compared to operating losses for the past four years.

That came in part from a restructuring that trimmed 1,600 employees overall, after taking into account the addition of 400 staffers from the June purchase of videoconferencing specialist Radvision Ltd. Avaya also saved in consolidating offices and outsourcing non-critical functions.

Overall it slashed about $105 million during the fiscal year. It hopes to save a total of $400 million by 2015.

Helping things were gross margins of products and services of 54 per cent, the highest in the company’s history, and $20 million in revenue from Radvision.

“While 2012 saw its challenges it was a productive and positive year for Avaya,” CEO Kevin Kennedy told financial analysts on a conference call. “The company has launched a new product cycle and we believe we are entering 2013 stronger than we were in 2012.”


But Kennedy also said that at the beginning of this calendar year Avaya was caught (or, in his words, “left ourselves exposed”) without telephony solutions for some small and medium-sized customers on older Nortel SMB platforms. As a result, he acknowledged, Avaya lost some market share. But starting last spring new products to address that began being introduced, he said.

Now, he said, “the worst is behind us” and sales to mid-market companies are picking up.

Asked for his latest impression of the global economy, Kennedy noted he has just returned from visiting nine countries. “Clearly people are cautious,” he said, but it depends on the industry and country.

“There are pieces of Europe where there’s spending,” he said.

Avaya has several hundred resellers and solution provider partners in Canada that sell its Aura unified communications suite for enterprises, IP Office UC suite for small and medium businesses, Ethernet switches and branch routers.

Around the world, sales from Avaya partners account for three-quarters of the company’s revenues. The rest comes from direct sales to large organizations and governments.

The company also gave its fourth quarter results at the same time. Overall it pulled in $1.28 billion during the three month period ending Sept. 30, up two per cent from the third quarter. However, that was 10 per cent lower than the same period a year ago.

Revenue from the U.S. represented 54 per cent of the total revenue at year end, EMEA represented 26 per cent, Asia-Pacific represented 10 per cent and Americas International — which includes Canada and Latin and South America — represented 10 per cent of revenue for the fourth quarter.

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@] soloreporter.com

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