Avaya Files S-1 with the SEC

Avaya Files S-1 with the SECNEWYORK, – These days the once public Avaya is a private company backed by the deep pockets of Private Equity, in this case TPG and Silver Lake Partners.    Thursday they filed a Securities and Exchange Commission (SEC) form S-1 to register their securities in the first step to an Initial Public Offering (IPO).

The S1 has the basic financial and business information of the company that wishes to go public. Avaya Holding Corp, the company formed by Silver Lake and TPG hopes that they can raise up to $1 billion        in the offering.

In the Telecommunications market Avaya was once a predominate player in the Private Branch Exchange (PBX) segment.  The use of PBXs allowed businesses to have thousands of telephone extensions connected and linked to the public telephone network. In its history the term PBX was first used to describe a switch board operator that literally connected your business phone with a public network phone line to receive or make telephone calls.  Over the years these switches have grown to become more electronic switches and then on to software switching.

Over the past eight years voice communications and data have begin to merge as data like  instant messaging (IM) and voice were provided over the same network, and Unified Communications (UC) was born.  Today there are even more options available as video, video conferencing, data sharing with electronic white boards, speech recognition, and digital Voice over an Internet Protocol or VoIP have become available.

Avaya as a company believed they could become a leader in this new UC market but after several years their S1 has a dark story to tell. Avaya’s Fiscal Year that ended in September of 2010 logged a staggering $800 million dollar loss for the year. For 2011 it is not going any better, with just half a year down, the loss has grown $200 million on a run rate basis to $600 million dollars.

The balance sheet is also dreary with around $6 billion dollars in accumulated debt most of what can attributed to the $8.2 billion take private deal and the purchase of Nortel’s networking division for $900 million back in 2009.

If successful in the IPO the 503 page S-1 discloses what the current shareholders hope to do with the Proceeds. First they want to pay down dome if the long-term debt, in other words TPG and Silver Lake want some of their money back.  Second they want to redeem outstanding preferred stock, in other words TPG and Silver Lake want some more of their money back, and thirdly they want to pay “certain amounts” to Silver Lake Partners and TPG for management services that were contracted under the take private scenario, in other words TPG and Silver Lake want some more of their money back.

Under the “Uses of Proceeds” section of the S-1 there is no discussion on investing in UC and other new technologies to keep the company competitive. There is mention of a growth strategy to leverage their market position to drive adoption of collaboration solutions in the prospectus summary.

In April it was reported that rival Alcatel Lucent was looking to sell its enterprise business unit with Private Equity Gores Group a potential buyer. Gores pruchaased Siemens Enterprise Communications in 2008.

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