Coverage: Telecom compay Avaya files for bankruptcy protection

Telecommunications company Avaya Inc. filed for Chapter 11 bankruptcy court protection as a way to get rid of mounting debt and said it would sell its call center business.

Jessica DiNapoli and Tom Hals of Reuters had the news:

The bankruptcy underscores the challenges telecommunications companies face as they transition to software and services from hardware. Early last year, Avaya had planned to sell its call center business but did not reach a deal with buyout firm Clayton, Dubilier & Rice LLC, which had been in the lead to acquire it for about $4 billion.

Avaya said it must focus on its debt and that a sale of the call center would not maximize value for its customers or creditors. It is still negotiating deals to sell parts of its business.

The company is hashing out terms of a restructuring deal with creditors. The original goal was to have one in place before bankruptcy, but an agreement was not reached.

The company said an affiliate of Citigroup Inc would provide a $725 million loan for up to a year to fund its operations during the reorganization.

Stephanie Lawson of PCWorld writes that the move signals a step toward software and services for the company:

On Thursday, the company reported $3.7 billion in in revenue for the year ended Sept. 30, 2016, down 9 percent from the previous year. It posted an operating loss of $262 million. Not counting some one-time charges, the company said it made $756 million.

Like much of the networking and collaboration industry, Avaya is looking toward software-defined networking, IoT, and cloud-based platforms that work on many different devices and the web.

In October, it announced an all-in-one collaboration platform called Avaya Equinox that can carry voice and video calls, text messaging, web collaboration and streaming of events. Equinox can run on mobile clients, PCs, and Avaya’s Vantage, a desktop device that’s like a phone but with a large touchscreen for running applications. The company also announced a single SDK (software development kit) for integrating Equinox into productivity applications.

George Avalos of the San Jose Mercury News reported that a turnaround could prove elusive:

Still, that turnaround could prove elusive. Avaya on Thursday announced financial resultsfor its 2016 fiscal year that ended Sept. 30. The company lost $750 million in fiscal 2016, a much deeper pool of red ink than the $144 million in losses for fiscal 2015. Avaya lost $505 million in the fourth quarter alone.

Revenue totaled $3.7 billion in fiscal 2016, down 9.3 percent from the previous year, the company reported.

Avaya attempted to sell its call-center business, it said Thursday. However, the attempt fell through. The firm decided it would be in its best interest to focus on its debt structure rather than to seek a sale of the call-center operations.

Avaya said it’s still negotiating to extract cash from certain other assets, which weren’t identified.

“We need to recapitalize the company,” Kennedy said. “Our business is performing well, and we are confident that we can emerge from this process stronger than ever. This path is a reflection of our debt structure, not the strength of our operations or business model.”