Avaya and RingCentral have started a strategic partnership, with RingCentral providing cloud technology to its partner. RingCentral also makes an investment of 500 million dollars (455 million euros).

Avaya has been producing hardware systems that provide unified communication services for many years. The company also produces equipment for call centers. However, Avaya faces increasing competition from Microsoft and Amazon Web Services, as they provide communication services in the cloud. Avaya has struggled with this for some time, so this collaboration is an attempt to tackle the issue.

The new strategic partnership should provide a solution for this, Reuters writes. Avaya will rely on RingCentral to deliver cloud technology in the form of a new product. Both companies will provide financing for the sales and marketing of this product.

RingCentral will pay Avaya $375 million (€341 million) in advance for future sales commissions and licensing fees, as well as $125 million (€113 million) for an equity investment, which could result in a 6 percent stake in Avaya if this would be converted into ordinary shares.

Takeover rumours

There have been rumours about acquisition talks at Avaya for some time. The company itself initially indicated that it would only investigate strategic alternatives after it had to apply for bankruptcy protection in 2017. In 2018, the company recovered and went public. There were various offers for a takeover. In August, competitor Mitel made an offer of more than 5 billion dollars, which Avaya had taken into consideration. In September, however, there a rumour was going around that a merger with RingCentral was being considered. This turned out to be limited to a strategic partnership.

CEO Vlad Shmunis of RingCentral says the deal is beneficial for his company, as it provides access to the 100 million users of Avaya. RingCentral has about 2 million users. According to Shmunis, this is an indication of the number of companies which have yet to move to the cloud with their telephone networks.