Avaya Inc. is positioning itself as the buyer for Nortel Networks Corp.’s enterprise unit, but the deal is not done, nor is the outcome guaranteed. In fact, if Avaya were honest with itself, there’s a strong possibility deeper-pocketed rivals will come in with higher bids. After all, Avaya’s $475 million offer for the enterprise business is almost insultingly low, and creditors and bankruptcy courts aren’t about to let go of a prized division for almost nothing. To that point, final bids for the branch are due Sept. 4, which gives other entities plenty of time to outshine Avaya. Indeed, two companies appear to threaten Avaya’s hopes the most: Siemens AG (SI) and Cisco Systems Inc. (CSCO). There’s also a dark knight possibility in Aastra Telecom, says one source, although most observers pin their expectations on the first two.
So, what if Avaya doesn’t win Nortel’s enterprise unit? What can channel partners expect?
What if Siemens Wins?
Siemens wants Nortel’s enterprise group. The company in late July formed a joint venture – Enterprise Networks Holdings – with private-equity partner The Gores Group LLC. The sole purpose is to buy Nortel’s enterprise assets.
If Siemens achieves that goal, Nortel channel partners will be in for some changes. For one thing, Siemens is fairly new to the channel partner world, and to North American markets in general.
In May, Siemens, a unified communications vendor, announced its plans to generate 75 percent of its revenue via the channel, within three years. Presently, a mere 15 percent of sales are partner-produced. So, in addition to revamping its reputation from that direct-sales-only, Siemens would have another challenge to tackle if it wins Nortel’s enterprise unit, said Michael Jude, program manager in the consumer communications services practices at Frost & Sullivan.
“With Siemens, there is likely a lot of overlap, especially with lower-end PBXs,” Jude said. “This might make for a confused transition as Siemens attempts to clean up the overlaps.”
On the other hand, if Siemens, or even Cisco, ends up with Nortel’s enterprise business, that’s probably better for channel partners, said Jeff Wiener, president of reseller Digitcom in Canada.
“One of the downfalls of Avaya picking up Nortel’s base is they also get a lot of the dealer channel, so the market would probably be flooded with new dealers,” he explained. “Then there’s a whole batch of dealers competing for the same market share. Margins are going to suffer and the dealer base is going to suffer.”
However, if Siemens buys Nortel’s enterprise unit, the dealer overlap would be far less extensive, especially in North America.
What About Cisco?
No matter which company buys Nortel’s assets, there will be transformations. Experts say the buyer will take what it needs of Nortel’s technologies and products and morph them into its own lineup. That way, customers aren’t confused or questioning support availability, and resellers don’t have to try to push two sets of the same products. To that end, whoever buys the assets must integrate them quickly, observers say. Cisco probably is the best-equipped company to do this, said Jude.
