RingCentral is set to become the sole provider of UCaaS solutions to Avaya in a joint offering called Avaya Cloud Office by RingCentral or ACO. RingCentral and Avaya will jointly develop programs to leverage Avaya’s global sales and partner network, as well as build automated technologies for customer transition to RingCentral’s global UCaaS solution.
Avaya expects to launch ACO in the first quarter of calendar 2020.
RingCentral is contributing $500 million to its partnership with Avaya, including a $125 million investment of 3% redeemable preferred equity that is convertible at $16 per share, representing an approximate 6% position in Avaya on as-converted basis. RingCentral will also pay Avaya an advance of $375 million primarily in stock for future payments and certain licensing rights.
Avaya Cloud Office expands the company’s portfolio to offer a full suite of UC, CC, UCaaS and CCaaS solutions to a global customer base, which includes more than 120,000 customers, over 100 million UC lines and 5 million CC users in over 180 countries.
“Avaya and RingCentral’s joint investment and commitment to bringing Avaya Cloud Office to market creates an unprecedented opportunity to accelerate the transition to the cloud with attractive economics for our customers and partners,” said Jim Chirico, President and CEO of Avaya. “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. We believe this highly complementary partnership is a game changer that expands the total addressable market for Avaya and creates meaningful value for both Avaya and RingCentral.”
“This strategic partnership leverages the respective strengths of Avaya and RingCentral to provide a definitive differentiated solution,” said Vlad Shmunis, Founder, Chairman and CEO of RingCentral. “We are excited to bring RingCentral’s leading UCaaS platform to Avaya’s installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both our companies.”
Chirico added, “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.”
Is this the deal the industry expected? Probably not as it appears RingCentral will get hold of Avaya’s IP office base for a relatively low investment. However, Avaya maybe playing to its own strengths within the contact centre space (particularly CCaaS) which is growing exponentially. With restless investors off his back Chirico can focus on the new relationship and mobilising his 4,700 strong partner network.
RingCentral’s share price has exploded on the news jumping roughly 30 per cent since the news broke on the 4th October.
Jim Chirico spoke to Comms Business five months ago when the rumblings in the market were still fresh. You can catch that interview below.
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