We all know by now that Avaya has won the bid for the purchase of Nortel Enterprise Solutions, which includes all voice enterprise products, data and security products and the CS2100, the replacement for the Meridian SL100. The transaction also includes:

* All global Nortel Enterprise assets
* Shares of Nortel Government Solutions
* DiamondWare, LTD

We now at least have a roadmap for Nortel enterprise users going forward, and the general "fear factor" is over (at least we think).

Avaya's winning bid was $900M in cash, with an additional $15M for employee retention. Together, Avaya and Nortel support the largest installed base of customers and telecommunications infrastructure in the world. Note that the Nortel data roadmap and the CS2100 is a key part of Avaya's acquisition strategy and fills a gap in the Avaya portfolio.

The projected timeline of events looks like this:

The most significant dates above are 1/2/10--transaction officially closes and 2/1/10--product roadmaps announced.

Here is what Avaya is saying to the enterprise community:

* Nortel customers should feel confident they are joining a financially strong company with a healthy supply chain to meet their business needs.
* For data products, the Nortel roadmap and investment plan will be adopted
* Upon the deal's close, continuity will be provided for Nortel customers
* Avaya will utilize the vertical and professional services of both companies to drive realizable value
* Avaya will honor the standard 3-5 year product life cycle support policy

Avaya is also stating that Nortel & Avaya customers will benefit as follows:

* Enhanced product and support service capabilities
* Investment protection through open architecture standards
* Enhanced and increased technology innovation
* Increased expertise and specialization
* Supply chain stabilization
* Compelling evolutionary path for both Avaya and Nortel customer bases
* Minimal customer service disruption

Yet, CIO Magazine published an article on 9/15/09, the day after the Avaya/Nortel announcement, and posted some significant statements/hints of what is about to come. To quote them (and my interpretation of each):

* "Nortel enterprise customers will be able to buy the company's current line of products for 12 to 18 months after Avaya officially takes ownership of Nortel's enterprise division."
--My take: Indirectly this is a statement for end of life for Nortel products

* "Support for Nortel gear will continue throughout that transition, an Avaya spokesperson says."
--My take: They want (and need) to keep the base

* "Because the two companies' products overlap, some analysts think the deal was more about customers than it was technology."
--My take: I totally agree

* "Regardless of the migration path, Avaya says it will honor three- to-five year product support for all customers."
--My take: Yes they should, but do NOT expect any new product releases for Nortel product line, or integration with newer technologies

* "Avaya says it will honor all Nortel's service contracts including those that Verizon claimed in a legal filing would be canceled."
--My take: That's positive

* "Long term Avaya says it will rely on its Aura Session Manager platform to unify customers' Session Initiation Protocol-based communications gear into a single system."
--My take: Expect Aura announcements near term to be the solution to start the migration towards Avaya and away from Nortel products

The above statements are very significant. Just pause for a moment and reread the above. They are market-shifting statements, based on the sheer size of the Nortel base. There are also Avaya cost and corporate ratings at stake. For example:

* We know that Avaya purchased Nortel Enterprise for $900+M
* What you don't likely know is that there is an estimated $400M-$600M additional transitional and operations costs, as Allan Sulkin reported in this No Jitter blog.
* According to this article in the Ottawa Citizen, after Avaya's successful auction bid, "Standard & Poor's Rating Service warned that deal could increase Avaya debt and create integration problems. It put Avaya debt ratings on a credit watch with negative implications."
* Silver Lake's goal: generate ROI sooner than later

So what's going to happen to Nortel and its enterprise product line, which accounts for 80M phones worldwide? I predict an end to Nortel Enterprise as we know it. In my opinion we are losing one of the "Good Guys" in Telecom.

On the other hand, Avaya may learn from Nortel's successful VAR program and may utilize that expertise. I do not expect Nortel engineering in Canada to be brought over to Avaya. Most likely, Avaya Aura will be introduced to layer on top of Nortel as first step in migration.

Also of note, there are conflicts between Avaya and Nortel cultures, and you can expect the Avaya culture to win out.

The chart below indicates my "bets" for where the Nortel product line will end up post 2/1/10:

Based on other recent discussions, there appears to be interest in keeping the CS1000 over the CS2100 as the platform of choice, based on the possible conflicts with Nortel's central-office based products, which belong to a separate business unit that wasn't part of the Avaya sale. The CS1000 will possibly have the potential to grow to 10,000 end points and higher. Nortel's Contact Center 7.0 could possibly be manufacturer independent, and could be layered on top of anyone's hardware platform.

All of these are possible positives in Nortel's favor, but let us not forget who purchased whom: Avaya bought Nortel, and not the other way around. It is up to Avaya to determine which products should "stay" and which ones should "go." My bets are based on similar product lines that conflict and therefore in the end will only have one winner. Those that complement, including either a high end CS1000 or CS2100 and Nortel's data product line, should survive.

All of this is speculation at this juncture. After 2/1/10, the final verdict will appear.

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