Report claims Avaya on path to implosion

by Eugene Liu on December 12, 2011 · 3 comments

in News

A few days ago I stumbled upon a report on Jeff Hawkes’ (of Sonic Management Group) blog about a near-taboo topic in telecom: the health of Avaya, and whether the business is spiraling toward implosion.

Surprisingly, I haven’t seen or heard much discussion in the telecom blogosphere and tweetverse about this report, which is a bit baffling considering the gigantic market share Avaya holds in the industry and the numerous analysts that cover every move about this company. At least there were several readers who chimed in with their own comments on Hawkes’ blog…

But in (bleak) summary:

  • The company failed to earn a profit since 2007, the year of its leveraged buyout (LBO) by TPG and Silver Lake; losses were $1.3 billion in 2008, $845 million in 2009, $871 million in 2010, and $863 million in 2011 (from latest 10-K filing)
  • $4 billion worth of equity destroyed from 2007 to 2010
  • Long-term debt now at $6.1 billion
  • Filed to IPO in June 2011 but yet to complete the transaction; hopes to raise $1 billion from 20% of the company
  • Avaya may end up being the Eastman Kodak of the telecom industry

You simply cannot read the financial numbers about Avaya and not get a chill down your spine. Obviously many companies are struggling in this depressed economy, but in Avaya’s case the losses and debts are staggering, especially when the company counts TPG and Silver Lake as backers.

Dear Avaya, your brand may look mesmerizing in red but not your financials.

What do you think the future holds for Avaya? Definitely something to watch out for in the new year…

    Tagged as: avaya, jeff hawkes

    Additional Reading...

    • Effort1584

      The grain of salt for this blog:
      Not the blog of the company, but of an individual who blogs on SMG blogs.
      No credentials to understand the industry.
      Ignores EBITDA which is positive.
      Avaya’s debt rating was improved this year.
      Avaya has spent heavily on Nortel integration and product enhancements.
      MANY IPO;s have been delay in the last year.
      Bottom line, this blogger didn’t look at the whole picture or direction.  To be fair, I am not a financial analyst, but I understand financials better than the blogger does.

      • Tata

        You can’t live on EBITDA alone. What’s going to happen when the book value is over? Where are you going to get the money to reinvest and renew asset?

        Anyway, Avaya EDITDA has turn red, it is losing cash from operations. The debt has continue to increase. It’s equity position has gotten worse. It’s Cash is diminishing. It has refinance some debts with added interest – which means more interest payment now. The time for debt repayment is drawing near and they are nowhere capable in paying off the capital.

        You need credentials to understand these?

    • http://twitter.com/johndavidstutts johndavidstutts

      Sweet mother of Moses, turn out the lights 

    Previous post:

    Next post: