|
|
|
|
|
|
|
|
host posted on July 08, 2010 00:21
Part 2 – Avaya’s Financial Health
Part 2 in a 3-part series posted by Laura Kleekamp at VITEC, Inc. www.vitecinc.com
I think that both Nortel and Avaya users should monitor not only the equipment roadmap as it unfolds, but also Avaya’s ongoing financial health. As part of my research, I delved into Avaya’s financials, to better understand their ability to invest in the technology integration, and support the ongoing base of business.
The financial facts as of first quarter, 2010:
- Avaya has been operating at a net loss since October, 2007. Revenues have been declining over time, and FY 2009 revenues were down 21% compared to FY 2007.
- Almost three fourths of Avaya’s assets on the March 31, 2010 balance sheet were intangible assets and goodwill, primarily associated with the Nortel purchase. Avaya reported a $747M stockholder deficiency on their balance sheet.
- Avaya incurred substantial debt to acquire the Nortel equipment assets and customer base. Avaya stated in their S4 securities filing that their substantial leverage could adversely affect their ability to raise additional capital to fund operations and repay debt. Two notes totaling $1.2M are due in November, 2010.
- Moody’s downgraded Avaya’s bond rating to B3 in January; six levels below investment grade status.
- After the Nortel purchase, Standard & Poor’s put Avaya debt ratings on credit watch with negative implications.
- In their independent audit of the S4 filing, KPMG provided conditional consent to the report, pertaining to Nortel’s bankruptcy prior to the purchase, stating “These conditions raise substantial doubt about Nortel Networks Corporation’s and the Businesses ability to continue as a going concern.”
I also believe that Silver Lake, the equity company with considerable stake in Avaya, will be looking for ROI sooner rather than later, and at some point will announce a plan to sell Avaya assets. Avaya’s quarterly financials, particularly cash flow, bear watching.
There are currently no comments, be the first to post one.
|
|
|
|
|
|
|
|
|