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Avaya is Still Floundering PDF Print E-mail
Friday, 17 May 2019 06:27


Avaya recently came out of Bankruptcy and had bad 1st quarter sales that “coincided” with rumors of a takeover that conveniently was never true.

The reports of a private buyout were spread prior to Avaya's disappointing fiscal quarter results, which was followed by its announcement that it was considering different financial moves to rectify the situation.

The significant drop in its revenues was apparently caused by operational issues and reports of a buyout. The company saw its numbers dip to $709 million for its fiscal quarter ending in March. This was a 3.9 percent drop when compared to the previous period. The company was initially expected to generate somewhere between $703 million to $760 million for the quarter.

Following its poor fiscal quarter performance, Avaya downgraded its fiscal 2019 revenue projection by $100 million. The company initially expected to generate revenues of around $3.01 billion to $3.12 billion for fiscal 2019. Now, it expects to make around $2.9 billion to 2.95 billion for the year.

During a conference call to investors, Avaya CEO Jim Chirico mentioned that they did not expect to start the calendar year with such low numbers. Despite this, the CEO mentioned that they are still hopeful for the next quarters.

According to the company, its poor performance was mainly due to a report published in March, a week before the quarter's close, which alleged that a private equity firm had made an offer to buy out the company. The offer was reportedly somewhere around $5 billion for a leveraged buyout. The report apparently caused uncertainty with the firm's customers and its partners.

Another report published recently speculated once again on Avaya's plans to go private. The report revealed that Avaya may be planning an auction after receiving offers from several potential buyers. One of those buyers is allegedly Avaya's longtime rival Mitel. A merger between both companies would result in one of the largest communications vendors in the world.

Just this week, Avaya seemingly confirmed rumors of a buyout after it announced that it had contacted JPMorgan Chase to help it explore possible alternatives to appease shareholders. One of the options apparently put on the table was to sell the company. The option to sell however is likely only a last resort move as Avaya can still take less drastic steps such as to overhaul its investment portfolio.

Avaya recently emerged from a Chapter 11 bankruptcy and has since been listed on the public stock market. Prior to that, it had been operating under private ownership after an $8.2 billion purchase by two equity firms. According to analysts, going private once again may be good for the company given that it does not have to endure pressure from Wall Street. However, the company may have some trouble getting buyers at the right price given its recent earnings shortfalls.

 


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