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What will Avaya do with Nortel's data networking business?

Avaya's acquisition of Nortel's enterprise division is clearly about gaining access to Nortel's voice customers and channel partners, but the deal also includes Nortel's significant data networking business. Avaya may try to retain that business and run it as a division within the company, or it could unload it. Whatever the case, Nortel's networking business will live on, no matter whose name is on the label.

Avaya's $475 million deal to buy Nortel's enterprise business is clearly about getting access to Nortel's voice customers and channel partners, but Nortel is also a major vendor in the enterprise data networking space. Avaya is certainly not a networking company, and many Nortel customers and partners are wondering what will happen to that part of the business.

It is not altogether clear that Avaya even knows what it will do with Nortel's networking business. When asked about Avaya's plans for Nortel's data products, Todd Abbot, Avaya's senior vice president of global field operations, said his company isn't ready to discuss it.

"We've still got more work to do relative to due diligence for our integration process, and we frankly won't be able to comment on any specific plans for voice or data product lines until we get through the regulatory process and the transaction is final," Abbot said. "My advice to customers is, they've got some great technology and they need to be making their decisions based on the strength of that technology. Good technology always survives in some way, shape or form. But we haven't had time in the bidding process to really do the deep dive relative to products and roadmaps and future directions from a strategy standpoint. To give you any direction would be premature at this point."

Rodney Hyde, president of Enterprise Systems Corp., a Houston-based, elite Nortel partner, has been struggling to sell networking and voice technology to customers during the Nortel bankruptcy. Now that Avaya appears to be the likely buyer of the division, he worries that customers will be even less inclined to buy Nortel switches and routers.

"Those customers who were fixing to spend a couple of million on expanding their network and upgrading their switches are going to say, 'Why would I dump this money on Avaya [when] I know Avaya is going to get rid of them?'" Hyde said.

Abner Germanow, research director at IDC, said Avaya might turn around and offload the networking business, but he said it is not a foregone conclusion.

"I don't think they do know yet [what to do with the business]," he said.

Germanow said Avaya may not have a history of selling data networking gear, but the current leadership of the company knows a few things about the industry.

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"I think the Avaya management, which is largely ex-Cisco executives, understands that business and is certainly capable of running it," he said. "The top echelon [of executives], about 80% of them, are former Cisco executives, from CEO Kevin Kennedy to guys like Chris McGugan, who runs Avaya's contact center marketing but who spent a lot of time in Cisco's switching business."

Germanow said Avaya has three options with Nortel's networking business: hold onto the business and run it as a part of Avaya; spin it off as its own independent company; or sell it to someone else.

Some people would argue that a pure-play networking vendor based on Nortel's product lines could compete very well with companies like Juniper Networks and HP ProCurve, he said, adding that some other companies would probably try to buy the networking business from Avaya, particularly Alcatel-Lucent, which wants a larger footprint in the United States.

"I think they're looking at those three options," Germanow said. "What's fairly clear is that the data business has a very good-sized installed base. It has a number of fairly satisfied customers. It has some new technologies that are interesting. That has value, but how you apply that value is certainly in question."

"[It's] very hard to kill a networking company," Germanow said, because enterprises like to keep their networks consistent, and they want to control costs by avoiding major rip-and-replacement projects. Because of this, he doubts that Avaya will simply scrap Nortel's networking business.

"The question for Nortel data partners and customers right now is: How quickly do you need refreshes, and are you refreshing platforms that are taking you in a direction you want to go?" Germanow said. "Our long-standing advice to all Nortel customers is to look very closely at -- and spend some time planning -- what their next-generation network and voice infrastructure should look like. If you have a good handle on the planning process and what you need, then the likelihood that you could be forced to do something you don't want is diminished significantly."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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