Last week saw Avaya take a historic step in the world of comms by re-listing after their Chapter 11 woes of last year. Comms Business were invited along to the ceremony and spoke to CEO Jim Chirico on the day about Avaya’s recent restructure. On the morning of the ceremony the Avaya team was in high spirits as the build up to the ringing of the bell ceremony approached. Chirico thanked his staff, customers and partners in his opening speech at the event.
Chirico commented “Over the last five years we have transformed and moved ourselves from a hardware centric company to one that is software and services. Over 80% of our revenues are software and services today. Roughly 60% of that is recurring revenues.”
“That movement to software and services is significant for us, we are very profitable. We did $3.3 bn in revenue last year and our EBITDA is more that 25% of revenue. Gross margins are north of 65%…” Chirico rattled of the financial metrics to bring home his point that Avaya is now financially stable.
“We generate cash flow of about 10% of our revenue. Most people don’t know that. With the restructure we also freed up over $300m of cash flow. That’s roughly $600m of cash that we have. Our competition doesn’t have that, we are going to take that as it gives us the ability to manoeuvre, invest in R&D, invest in sales, process and systems. We are going to invest in areas which I call sustained performance which means revenue growth.”
Chirico admitted that previously Avaya had been playing a defensive strategy hoping not to lose rather than trying to win. He said, “It’s like driving with the parking brake on.”
“We went through a significant amount of time when I first got here (10 years ago) when we were not predictable, we were bleeding cash, we were quite wasteful with our R&D expenditures and frankly the company had a level of arrogance that was simply not good, and not one that lends itself to success. So we have been working on that.”
“We have over 3million seats installed today. 10% of our revenue is driven by cloud, granted that is private. 2.5m of those are UC and 0.5 m are CC. We are pure play, we are the only pure play provider.”
“We have been very defensive, we have the world’s largest install base – we have installed more UC systems than anyone else in the world over the last 15 years.
“A company often relies on that base; it doesn’t look for new logos. Maybe we weren’t as quick on the innovation because we could just rely on that massive base. If we take all of what we do, and pivot in a more competitive motion, it makes us sharper and makes us more innovative.”
Falling Behind in Cloud?
Mercer Rowe, Head of Avaya’s cloud unit, addressed questions about Avaya being late to come to market with their cloud propositon.
He said, “As we talk to our customers they’re not rushing to cloud,” he said. “What they’re clambering for is cloud consumption models.
“What they’re saying is ‘we want different ways to consume your products – we want as-a-service models and we want innovation on top of that’. For us, moving in the cloud direction is more about the consumption model, as well as a platform for innovation.”
“Voice is hard and both of those companies have had their fits and starts,” he said.
“Skype for Businesses was acquired, looked hot 10 years ago and now it’s not so hot. It hasn’t been innovated on and hasn’t been invested in.
“Cisco has played around in the field, acquired Broadsoft, but it’s not a big focus for them.
“I think both of them are realising that voice is hard and they don’t have the service providers that you need and the strong install base.”
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