Avaya bankruptcy 'no concern' for channel - Westcon European VP
Jeremy Butt tells CRN that business will not be disrupted by bankruptcy filing in US and that the distributor is sitting on $20m of Avaya inventory, while other partners also supportive of move
Avaya's bankruptcy filing is positive news for the channel and will have no impact on channel partners, according to Jeremy Butt, the EMEA vice president of Westcon, one of the comms vendor's largest distributors.
Avaya filed for Chapter 11 bankruptcy in US court yesterday after rumours started to circulate at the end of last year.
Speaking to CRN, Butt said that yesterday's news came as a relief after speculation started to mount that the Avaya business could possibly have been broken up and parts sold.
"Obviously we've been concerned about it because of the amount of rumours that have been going around in the market, so when this got announced yesterday we had a collective feeling of ‘good, that's the decision, we can get on with business now'," he said.
"I think it's better than a fragmentation because the rumours have been kicking around all over the place for weeks about either a chapter 11 or a fragmentation - in others words the thing getting broken up," he said. "I actually think for the channel and for the customers it's good that the thing is still in one piece."
Butt said that Avaya channel partners will be understandably concerned for trading in the immediate future, but looked to reassure the partner community saying that Westcon, Avaya's largest distributor in Europe, is sitting on around $20m worth of inventory, with Avaya having "plenty of hardware" in Europe itself.
Butt added that he personally made calls to Avaya on hearing the news last night to establish if he could still get more stock quickly if needed, and was assured that he can.
"From our perspective there's absolutely no change whatsoever in the provision of products, pricing, pre-sales or post-sales into the reseller community. There are absolutely no concerns there whatsoever," he said.
"It'll come down to whether it unnerves some end users, or do some end users go ‘at least it's definitive now'?
"Personally I think it gives people definitive news on what's going on and the channel is still perfectly capable of providing hardware, software and solutions. From a channel perspective there'll be no disruption."
Channel debt
Documents filed with the court show that Avaya owes millions of dollars to channel partners, with Avnet owed $8.8m in unsecured debt.
World Wide Technology and SHI are also owed $1.6m and $1.25 million respectively.
Rufus Grig, group strategy director at Avaya partner Maintel, said that Avaya's decision to file for bankruptcy is a good decision in the long term, but warned that competitors might look to capitalise on the announcement.
"While it's going to be a tricky period to manage presently, I think it's actually a positive thing for Avaya," he said. "It gives them the breathing space to sort out their debt position without the looming deadline.
"We are continuing to, and expect to continue to, get full support from them. They'll continue with R&D, they'll continue releasing products and they'll continue providing us and our customers support on the product lines.
"Clearly competitors are going to make mischief and it's not ideal, but I don't think it's disastrous by any means. We expect to have a strong relationship with Avaya long into the future."
Restructuring
In a press release Avaya CEO Kevin Kennedy said that the bankruptcy, along with a $725m funding package from Citibank, would allow Avaya to change its dated business model and become more services orientated.
"This is a critical step in our ongoing transformation to a successful software and services business," he said.
"Avaya's current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya's debt obligations and the upcoming debt maturities, we need to recapitalise the company,"
Butt agreed that a shift in model is important to stabilise Avaya financially, adding that it would have been a shame to see the company broken up and sold off.
"Their current finance was put in place back in 2007 when Silver Lake Partners and TPG Capital purchased Avaya, so 10 years on they're running with that model which is clearly a very stressed model - everyone new about that.
"They were carrying quite a lot of debt, so this gives them the chance to get things sorted and I think it's a good thing because they have a very loyal reseller base and customer base and they've got really good products, so I think it would have been tragic all round if things hadn't gone how they appear to be going."