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Avaya says bankruptcy is a step toward software and services

Avaya says bankruptcy is a step toward software and services

Avaya needs to shed debt as its focus shifts away from hardware, the company says

Networking and collaboration vendor Avaya declared bankruptcy on Thursday, calling the move part of its transition from a hardware to a software and services company.

Avaya emerged from Lucent Technologies in 2000 with a focus on phone switches, enterprise networking gear, and call-center systems. But with the shift toward mobile phones and cloud-based tools for communication, and a tight market for enterprise network equipment, the company has been changing its focus.

It plans to keep operating during the bankruptcy thanks to its cash from operations and US$725 million in financing that still needs approval by the U.S. Bankruptcy Court. Avaya said its foreign affiliates aren’t included in the filing and won’t be affected.

The company plans to keep its contact center business, which had been rumored for a possible sale, but it’s in talks to sell other unnamed assets.

The Chapter 11 bankruptcy filing is intended to cut Avaya’s debt and interest expenses from a capital structure that dates back more than 10 years to when the company was primarily a hardware vendor, CEO Kevin Kennedy said in a press release. "Our business is performing well," he said.

On Thursday, the company reported $3.7 billion in in revenue for the year ended Sept. 30, 2016, down 9 percent from the previous year. It posted an operating loss of $262 million. Not counting some one-time charges, the company said it made $756 million.

Like much of the networking and collaboration industry, Avaya is looking toward software-defined networking, IoT, and cloud-based platforms that work on many different devices and the web.

In October, it announced an all-in-one collaboration platform called Avaya Equinox that can carry voice and video calls, text messaging, web collaboration and streaming of events. Equinox can run on mobile clients, PCs, and Avaya’s Vantage, a desktop device that’s like a phone but with a large touchscreen for running applications. The company also announced a single SDK (software development kit) for integrating Equinox into productivity applications.

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