Avaya Incorporated was founded by Lucent Technologies in late 1999 to “unlock shareholder value” by focusing on mostly carrier switches such as the 5ESS products. The company was fully spun off as an IPO that was listed on the New York Stock Exchange under the symbol AV. Meanwhile, Lucent spun off other vendors such as Agere, a semiconductor company that went into their own products, with chips that even had Western Electric prints from the mid 1980s.
With the basics of the company’s founding, it’s important to go back to the beginnings dating as far back as the telephone itself. The history is on Avaya and the track related to Avaya’s past and present assets, products and services.
1850s – 1983
Avaya’s roots date back to the Western Electric Manufacturing Company. The origins began as a electrical engineering business in Ohio in 1856. Thirteen years later, the founder partnered with Enos M. Barton, and then sold his share to the inventor of the first commercial telephone, Elisha Gray. They moved to Chicago, and opened a plant on Clinton Street, were they produced early telecommunications gear. It became part of the Bell corporation in 1881, and became the exclusive supplier of telephones to the Bell System and of such kept the costs down by supplying in-house technologies. As years progressed, the unit became under scrutiny of US regulatory officials as a form of a monopoly.
1983 – 1996
The Divestiture between the Justice Department and AT&T had finalized the Consent Decree, which meant AT&T could go into data processing, PCs, as well as providing long distance services, etc. The Justice Department suit against AT&T’s monopoly ironically was the handling of their Long Lines (Long distance) unit. At this time, AT&T renamed Western Electric as American Bell, which was renamed AT&T Information Services the following year. In 1983 to 1985, AT&T started to market the first modern telephone systems, which has been on American desktops, counters and walls from small businesses to Fortune 500 companies. In 1983, AT&T introduced the infamous Merlin key based telephone system, the following year the introduction of System 75, a midline PBX system that was fully digital; then around 1985, a quasi-digital telephone system based on the Dimension, the System 85 (due to technical physics, with a decade old switch and scalability of digital telephony, a similar system would not be in the market for another decade.) In the mid to late 1980s, AT&T introduced a voicemail service for their PBX offerings known as the Audio Information Exchange or AUDIX.
In the late 1980s, AT&T rebranded their larger PBX offerings and renamed Definity 75/85, a couple years later, renamed them Definity Generic 1, Generic 2 and Generic 3. The latter brand and platform became the de facto standard in their PBX development. In 1990, AT&T introduced Partner, a small key based system based off the Merlin, but more electronic, and with some additional feature, while competing on later generations of Merlin, and the Spirit, a very cheap phone system.
Despite the development of the Partner, AT&T continued to take care of customers on older systems, and AT&T continued to build upon the “classic” Merlin customers, with Merlin fax machine, where a user can install a BIS 34D set and be able to place calls and fax. Merlin phones were unable to support caller line identification natively, but special adjuncts were released, after the release of the Spirit and Partner.
The cousin to the Partner, for stations under 200 was the Merlin II, later Merlin Legend. (System 25 was sold in the late 1980s as a gradual step to Systems 75 or 85 but was discontinued by the turn of the decade.) The Legend was based loosely on the 1070/1030 models, but support for digital telephony, as ISDN and fractional T1 was becoming the standard for small enterprises.
As AT&T struggled in computers, AT&T sold UNIX to Novell in the late 1980s; and AT&T made a very gutsy and costly move by acquiring the National Cash Register corporation in 1991, the same year IBM sold ROLM off to Siemens, after seven years of failed business due to IBM’s uber-conservative business practices. AT&T disrupted NCR’s transition from manual and electronic cash registers to PC-based networked systems later to be known as Point of Sale, and POS became a household word (20 years later…)
In mid 1995, AT&T and shocked the industry when they were announcing a planned spinoff of NCR (the failed acquisition four years before), and the entire hardware unit as Lucent Technologies. The Lucent spinoff included their internationally respected research and development unit Bell Labs; which was funded mostly through the monopoly till 1984 and averaged a patent a day. Key executives of the Lucent company included Henry Schacht, Don Peterson, Pat Russo and former 2016 Presidential candidate, Carly Fiorina all of which worked for AT&T. AT&T was mostly a long distance and mobile carrier by this point.
During the Lucent years, continued to indirectly market and sell decade old hardware, some new Merlin sets would be sold with Lucent labels, a new PBX that merged the respected System 85’s capacity and System 75’s fully digital system as the Definity Enterprise Communications Server. In 1997, Lucent introduced a digital based Partner key system for small business, later capable of PCMCIA software upgrades, AUDIX-like voice mail – Partner Messaging; and DSL and T1 support with separate add on modules. Lucent acquired the first successful voice mail system dating from the 1980s, Octel in the late 1990s.
As the growth innovation and technology, the stock market was also growing. In Lucent’s first four years, the Dow Industrials was trading around 4,000 and by the end of the century broke past 10,000. The NASDAQ Composite went from 2,000 to 5,000 in nearly a year. Despite a crash in the economy that occurred in March of 2000 to the end of that year, Lucent was already in plans to spin off companies not because of a requirement of government, but the laid back, free market, and greedy bankers wanting “shareholder value” (whatever that means today.)
Avaya was spun off along with Agere in 2000. The CEO that would run the company was Don Peterson, an executive with Bell descendants for almost a decade. During this period, Avaya was weathering a crash of the US economy (over a couple of years) and changes in technology (move from circuit board based PCs to servers and later virtualized technologies.)
Avaya lucked out with September 11th, customers loosing PBX service due to damage in impacted areas, and got latest-and-greatest hardware; and eventual changes to start marketing voice over IP. Avaya acquired an English company that made a digital/IPT system called INDEX. This would later become IP Office, and for the first time since the Merlin, backwards compatibility such as using the 6400 phones didn’t need to be on a Definity G3 PBX. At the same time, Avaya introduced VOIP phones that looked similar to 4400 series phones from a new phone system called the Merlin Magix, a system that succeeded the Legend a decade before.
Partners sold well, but on the 20,000 line level, Avaya was in a branding crisis. After Definity ECS R10, the system was rebranded from the “definitive solutions for an infinite number of possibilities” to a clunky name called MultiVantage. By ECS R12, they kinda got a better albeit generic named called Communication Manager. After Release 10, they just dropped the “1” and new software was branded with the latter number. For an example, my Communication Manager board, with a version 2.2 was really G3 Release 12.2.
During this time, for the first time ever under a Bell- decedent, Avaya touted for a number of years of having 90% customer base of the Fortune 500 companies like Apple, GE, Wal-Mart, the Trump Organization, etc. Avaya’s stock did relativity well (as a niche player of selling customer premise systems). Similar companies like their former mothership, Lucent bought out Alcatel on a belief that the combined entities would also combine the stock price. Nortel had tried to do a reverse stock split, and the actions did the adverse effect. The stock dropped even further.
In 2006, Lou D’Ambrosio was appointed the CEO of the company. Basically his leadership was continuing the same ol, because again, why reinvent the wheel entirely if they were doing better? Some of Avaya’s “profits” were via sale of manufacturing to a third party called Celextica, and offshoring the manufacturing elsewhere. Some of the manufacturing plants for their own equipment, Shreveport and the Merrimack Valley Works were shut down in the early 2000s by both Lucent and Avaya.
The 2007 Buyout
In 2007, another surprise hit the financial community with headlines that Avaya was in talks for a leveraged buyout by TPG Capital and Silver Lake Partners. The buyout at the time made no sense logically since Avaya was touted for having no debt (surprisingly in the telecom industry in the 2000s) and was doing decent financially for a niche telecom player. However technology companies, especially if moving towards software defined technologies are not as tangible financially unlike hardware, so many tech companies were toast-on-light or grilling-beyond-well-done in the books, depending on the company. By the fall of that year, Avaya was bought out and was delisted from the NYSE seven years to the day of their IPO.
The Financial Crisis and the Nortel buyout
Since Avaya went private, the financial numbers were no longer for public consumption or inspection. Nortel after years of financial restatements, finally went for bankruptcy, and Avaya was one of the first lucky bidders of the company’s Enterprise Services or NES. This included brands like the Norstar key system, the Meridian 1 digital PBX, and the CS1000 software based PBX, and the CS2000/SL100 software/hardware central office grade PBX systems. Avaya’s assets included a boatload of employees, hardware heavy businesses and obsession to patents.
In early 2010, Avaya started to merge the two vendors together. This could be similar to the AFL and NFL merger of 1970, but probably more differences in turf. A few years later, references of Avaya Red and Avaya Blue would circulate, validating there was a difference of turf. Nortel was a very technical company, and had zero tolerance of dumbing down the lingo to a management intellect. Most of the admins of Nortel systems typically were men who probably have domestic abuse records with women, because they often talked down and interrogated users on list-serves. Most lack social skills, again just read the list-serves. Nortel also employed celebrity staffers like Mark Fletcher, and Andrew Prokop years before. Both are not your typical Avaya types, maybe in the early days of ATT IS, because there was plenty of nerds out in the wild at Ma Bell. (Ok, I might had went over the line of taste, but hey, what’s wrong with some crass opinions at times?)
Not too long after, Avaya issued end of sale notices of the popular Norstar key system by Nortel, and the 20 years of the Partner went to an end. Avaya claimed it was harder to find parts to build new units. Avaya claimed they sold over a million units during it’s 20 year history.
During the 365 days in 2010, Avaya suddenly became a brand bigger than before acquiring NES. And brand didn’t suddenly grow the assets before NES, it was all of their products post NES. The bots on Wikipedia quickly rewrote all the Nortel articles (probably doubled than Avava ever had.)
In late 2008, Avaya appointed Kevin Kennedy as their new CEO, the third since the 2000 spinoff. This guy was trying to make communications sexy, and early 2010s started to market social media applications, etc. Around 2014, Avaya relocated their long time established New Jersey headquarters to Santa Clara, California, formerly offices of Nortel and the former hometown of Octel.
Avaya’s Unneeded Downfall
Again, in the 2007 buyout from private equity, Avaya was pretty healthy. Some had eluded to the private equity deal was to cover up to a possible debt of union workers dating back to the Bell System days, especially if such admins were working on ComKeys, Horizons or Dimensions for the RBOC prior to Divestiture. This was just another list-serve speculation most likely.
Avaya’s acquisition of NES did get them into a billion dollars shorter than before, and given it’s hardware biased/weaker financials, this ultimately was a killer virus that spread. In recent years, Avaya’s “over 90% of the Fortune 500” was no longer touted as Cisco who touted 70% of the Fortune 500 for data networking, seemed to take over the desktop with their “TROIP” solution. (TROIP is made up by your’s truly as Tip and Ring over IP, basically enough to make and receive a call since you know…VOIP can be a vague technical phrase. And Cisco not understanding fundamentals of true digital business telephony, just reverse engineering what they use at home…)
In late 2016, Avaya did a “Friday afternoon-like political coverup” with “sources familiar to the matter” telling The Wall Street Journal like the Tuesday before Thanksgiving (while many US workers are preparing to meet family) that they were exploring sales of their contact center business. (This is actually the only customer base they haven’t lost.) A possible bankruptcy would follow after.
And it did. On Thursday, January 19th, Avaya announced its intentions to file for Chapter 11 bankruptcy protection at the Southern New York Federal Court. Citing the statement issued by Avaya, Kennedy stated “This is a critical step in our ongoing transformation to a successful software and services business. Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time.”
Right because Avaya Red was moving towards (albeit slow as snails) to a software defined company. Of course the aforementioned focus was really by NES not “Avaya” prior to buying NES in the first place!
“Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalize the Company,’ continued Mr. Kennedy. ”
Suggestions to recapitalize could include laying off VPs who are in the bed with the Federal government for imposing ridiculous E911 regulations, as a conflict of interests of private enterprise and government; sure as hell focus on software, but don’t throw away hardware assets like phones. A basic SIP phone is just a glorified POTS phone with an IP stack; but something that functions like a classic 8434 could be a good defense to sell hardware.
Avaya has forgotten it’s roots. Despite AT&T (nee SBC) having a social media platform posting film and video from the company, what has been missing is all the enterprise hardware of any spinoffs. Avaya has been taken over by both nerds and marketing types. Avaya could’ve lead with their legacy mindset with flashy new technologies such as running on IP and virtualized systems, much like how Novell did to NetWare a few years ago in the PC world.
Avaya’s downfall has marked an end of over two centuries combined of innovation, thrown at the wayside by nerds, marketing and clueless salesmen and women. Oh and the millennials too!
Avaya was speeding way into the future and got into a big car wreck. They are in the ICU with a possibility they could recover and be in “stable” condition, but the spin doctors of the competition that sells crappy VOIP service will make FUD claims, such fake news and blatant lies that Avaya will die, will actually come true.