This is the second time that the company is going through “financial restructuring”
Avaya, the legacy unified comms provider, has filed for Chapter 11 bankruptcy protection in a Texas court this week. This is the second time that the company has filed bankruptcy. The current proposal will cut $2.6 billion from Avaya’s balance sheet, according to the company.
The news is not unexpected. In January, rumours were already floating around about a bankruptcy filing. And in December, Avaya revealed it had received multiple restructuring proposals from creditor groups. In fact, the company had been on the financial ropes since its share price dropped 45% on bad news last summer. That bitter pill was swallowed by its brand new CEO, Alan Masarek who took the helm last July. Masarek had previously pulled Vonage America from the brink of bankruptcy, and the hope was that he could turn Avaya around as well. Alas, it was not to be.
Mastering an evolving business model
Avaya, which was founded back in 2000, develops unified communications software that enterprises utilize to manage their contact centers and corporate communication. The company’s roots were solidly in providing communications and networking hardware. But recently it has been pushing its cloud contact center and collaboration software.
Avaya has established a strategic partnership with RingCentral, which is helping to develop and sell Avaya’s cloud-based offerings. RingCentral is also a major financial backer of Avaya and invested $500 million in the company in 2019.
The company’s bankruptcy filing highlights the problems faced by traditional hardware providers as they try to migrate to cloud-based software-as-a-service (SaaS) business models. Such a migration can be difficult and costly, as the company needs to redesign not just its offering but also its entire business model. Not every business can manage such a transition.
Still, Masarek is upbeat. “We appreciate the strong support from our investors, who recognize the incredible value in Avaya’s business, brand and opportunities ahead”, he said. “With this additional financial strength, we will be ideally positioned to accelerate innovation and advance our cutting-edge, long-range product roadmaps for the benefit of our customers”, he added.
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