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Avaya/Nortel: Some Survey Results

Two weeks ago I did a webcast for The Voice Report, sponsored by AVST, on the pending Avaya/Nortel deal. No Jitter readers can register to listen to the archived audio. During my presentation we had several poll questions to gauge the views of the audience.The first question was to gauge the number of current Nortel customers. About two thirds of the audience was Nortel customers: About one third of these indicated they had a mix of systems. Please note that about one fourth of the total audience did not respond to this survey question or others (when appropriate).

That the audience was skewed towards Nortel customers should not have been surprising, since this is a group with a lot at stake regarding the future of their installed Nortel systems and the service support they will receive.

Question 1: Which type of telecom system do you have installed? (338 respondents)

When the audience was asked if they were concerned that an Avaya acquisition of Nortel would result in too much concentrated market control, almost half said no, one third said yes, and the remainder did not know. I don't know how to read the results, because it is without precedent in the industry that the number two and three competitors have combined forces, resulting in a new market leader.

The fact that a sizable percent of the audience was concerned about market concentration issues could possibly, but not definitely, foreshadow future Department of Justice interest in the acquisition as regards anti-trust issues. A combined Avaya/Nortel control more than a quarter of the total domestic installed base of premises communications systems (measured by line stations), but a much higher percent of the large line size enterprise segment of the market. Avaya/Nortel would also control more than half of the installed contact center customer installed base (measured by agent seats), though Avaya, itself, controls more than one third by itself.

Question 2: Are you concerned that an Avaya acquisition of Nortel concentrates too much market control among fewer competitors? (361 respondents)

The results of the next question were none too good for Avaya, because a large percent of respondents will be less likely to continue buying Nortel-branded products if the acquisition goes through. If Avaya loses the loyalty of anywhere near 43% of Nortel customers, as per the survey, it will be a boon for the competition. Some of the customers will obviously shift to Avaya-branded products, but I am guessing that far more than half would look towards a competitor, such as Cisco or perhaps even Microsoft in a few years, for their next generation solution.

It would have been interesting to pursue the underlying issues for the results of this question to ascertain why customers would cease buying Nortel product supported by Avaya. Avaya is on record as saying that current Nortel products will continue to be available for at least 18 months, but after this time period it is still anyone's guess what products will be pruned afterwards when the two suppliers' portfolios are fully merged.

Question 3: For Nortel customers, only, if the Avaya acquisition goes through, how likely are you to continue buying Nortel-branded products?(253 respondents)

The merger transition period, as opposed to just the acquisition phase, is expected to last three or more years according to the majority of the respondents; a 3:1 ratio for those expressing an opinion. If this becomes the reality, it will not be good for Avaya, who had previous merger problems following its Tenovis acquisition a few years ago. As a point of reference, the Mitel/Inter-Tel merger process was effectively completed in less than one year--but it was not on the same scope of an Avaya/Nortel. While the merger process goes forward, it will afford competitors an opportunity to make inroads into both suppliers' customer bases, because of the usual chaotic internal atmosphere diverting resources from the outward customer environment.

Question 4: How long do you think the merger transition period will last?(355 respondents)

The final question was general in nature and resulted in the most evenly distributed number of responses. Positive responses outnumbered negative responses by several percentage points, but trailed neutral responses. It may be too early to properly assess the acquisition, because details have not been released regarding a number of issues (employee retention, product pruning, distributor support, et al). It would be an interesting exercise to ask the same question in five years with the benefit of 20/20 hindsight. Remember that the disastrous AOL/Time Warner merger was greeted positively when announced, though it quickly soured when synergies failed to materialize and AOL's business model eventually imploded.

Question 5: How do you feel about an Avaya acquisition of Nortel's Enterprise Solutions division? (336 respondents)