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Avaya Taps RingCentral in UCaaS Partnership

Putting an end to months of speculation about dealings between them, Avaya and RingCentral today announced a strategic UCaaS partnership and investment that gives RingCentral a minority stake in the venerable enterprise communications vendor.
Per terms of the agreement, the pair will introduce an exclusive UCaaS offering, Avaya Cloud Office by RingCentral — or just ACO for simplicity’s sake. ACO will be available in the first quarter of 2020, Avaya said.
In addition, Avaya and RingCentral have committed to develop programs aimed at automating the transition for current Avaya customers to the new RingCentral-based ACO solution, the companies said. The intent is to let Avaya customers leverage their existing investments while easing the complexity and shrinking the timeframe of a cloud migration, RingCentral said in its press release. It did not, however, provide specifics on how this would play out for customers.
For RingCentral, the deal provides access to Avaya’s sprawling installed customer and partner bases, Vlad Shmunis, RingCentral CEO, said in a prepared statement. For Avaya, the relationship provides an “unprecedented opportunity to accelerate” its transition to the cloud, Jim Chirico, president and CEO of Avaya, stated.
As part of the agreement, Avaya and RingCentral will each contribute resources toward ACO’s future product development, sales, and marketing, the companies said. RingCentral said it will pay Avaya an advance of $375 million, predominantly for future commissions and primarily paid in stock, as well as certain licensing rights.
In addition, RingCentral said it will buy $125 million aggregate principal amount of 3% convertible and redeemable preferred stock, thereby obtaining approximately a 6% position in Avaya on an as-converted basis. This brings RingCentral’s total investment to $500 million, as Avaya noted in its press release. RingCentral will fund this purchase with existing cash on balance sheet, the company added.
This agreement, expected to close in the fourth quarter, doesn’t require shareholder vote of either company but is subject to customary regulatory approvals, the companies said. The deal has already received the thumbs-up from both companies’ boards of directors.
Watch for more No Jitter coverage on this partnership!