Avaya Holdings Corp. kicked off the month of October with some major news.
While it didn’t get acquired like many were anticipating, the unified communications and contact center solutions provider today announced a strategic partnership with RingCentral.
Through this exclusive partnership, Avaya, which also provides desktop equipment and services, announced the introduction of Avaya Cloud Office by RingCentral, a new global unified communications as a service (UCaaS) solution that’s set to launch in 2020.
Avaya chief executive officer Jim Chirico said the partnership will deliver a dramatic boost to the company’s ongoing shift to the cloud, which is good news for both customers and partners. According to Avaya’s second quarter fiscal 2019 financial results, the company’s public cloud seats increased more than 165 per cent year-over-year.
“This also gives us the opportunity to unlock value from a largely unmonetized base of our business as it brings compelling value to our customers and partners,” said Chirico in a press release.
Vlad Shmunis, founder, chairman and CEO of RingCentral, said the pairing will lead to a differentiated solution that will lean on Avaya’s installed base of more than 100 million users and 4,700 partners.
RingCentral is contributing $500 million to its partnership with Avaya, including a $125 million investment of 3 per cent redeemable preferred equity that is convertible at $16 per share. RingCentral will also pay Avaya an advance of $375 million, primarily in stock, for future payments and certain licensing rights.
The transaction, still subject to customary closing conditions and regulatory approvals, is expected to close in the fourth quarter of this year.
The news comes after several months of speculation around the future of Avaya, which began in May when Avaya announced it had “engaged J.P. Morgan to evaluate strategic alternatives to maximize shareholder value.”
Avaya has nearly 4 million subscribers on their platform and is furthering their growth into UCaaS, as evidenced by the company’s growing as-a-service model. An Avaya acquisition appeared imminent.
Chirico today appeared to suggest the door isn’t closed on that opportunity.
“The strategic actions that we are executing as a result of our comprehensive review create new growth opportunities, return capital to our shareholders and de-lever our balance sheet. With a clear path forward, we will further invest in technology and innovation to continue bringing state-of-the-art solutions to our valued customers and partners.”
Avaya exited bankruptcy protection in December 2017 and began trading publicly almost a year after being placed in Chapter 11 by its private equity owners TPG and Silver Lake.