Avaya has begun to buy its way into the European telecoms market with the purchase of Tenovis, Germany's second-largest telephony vendor, for $370m in cash.
The purchase, which is subject to regulatory approval, will increase Avaya's international revenues from 25 to 40 per cent of its total turnover. Avaya usually holds a top-three position in port shipments in the UK, but is less successful in Europe, where vendors such as Alcatel and Siemens have strong domestic markets.
"What is driving this is our desire to be in the top two or three companies [for telephony port shipments] globally by 2007," said Martyn Lambert, vice-president of marketing and applications EMEA at Avaya.
"This will take European revenues from 12 per cent of total sales at Avaya to 30 per cent. There's not too many acquisitions like this going on at the moment."
Lambert deflected suggestions that Avaya may come up against tough competition from large incumbent vendors in Europe by saying a small number of large competitors is "easier to compete with" than the UK's plethora of smaller companies.
However, he added that some technologies owned by Tenovis might be fed back to the rest of Avaya's business.
Fausto Amoroso, vice-president of marketing at telecoms integrator Omnetica, said: "This is a very interesting move for Avaya. If you think of the German marketplace, the only way in is to acquire. This deal will make it number two in Germany behind Siemens.
"Avaya is trying to compete with country incumbents such as Siemens in Germany, Alcatel in France and Nortel in the UK. The incumbents have been very slow to react to IP telephony, so this is a good opportunity for Avaya to hit the large companies."
The deal will also see Avaya taking on a debt of about $265m, although Tenovis also holds $115m in cash. Tenovis is currently owned by venture capitalist firm Kohlberg Kravis Roberts.
"There is no immediate impact in the UK as a result of this deal," said Matthew Ball, research analyst for commercial telecoms at Canalys.
"In Germany, Avaya really hasn't succeeded in penetrating the market because of the dominance of Tenovis and Siemens. This news puts Avaya in second place in Germany and in third place in EMEA."
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