Price doubles for Avaya, but it clinches the Nortel buy

Nortel Enterprise Solutions is going into the hands of its onetime arch-rival for voice premises equipment, Avaya.

That result was assured with Monday morning's announcement that an auction for the Nortel enterprise unit -- a key element of Nortel's bankruptcy proceeding -- had been completed. While not explicitly announced this way, it's widely believed that the Siemens enterprise unit bid up Avaya's original offer of $475 million over several rounds before letting Avaya have it for $900 million.

Avaya's clinching of the Nortel prize keeps intact many of the expected user impacts of the impending marriage of the one-time No. 1 and No. 2 U.S. PBX vendurs. Avaya gets feet on the street through Nortel's extensive distribution network, although much of that network is also now invested in the enterprise voice and convergence products of Cisco. Indeed, Cisco and Avaya are now set up as the Coke and Pepsi of the enterprise voice gear market, with the possibility of far more concentration than this market has ever seen in the past.

Acquirers often are ruthless wielders of power, deciding which of the acquired company's products, employees and projects to keep and which to get rid of. And let's be fair -- it's clear that Avaya would be justified in doing some rationalization. Possibilities include:

-- A convergence-products alliance that Nortel had with Microsoft has never really borne fruit, especially since Microsoft is pursuing enterprise voice in an explicitly Windows-based softphone environment, and that alliance may go.

-- Avaya may also see no value in the longstanding problem Nortel has had in making sense of its data switching product portfolio from the basically botched acquisition of Bay Networks in the 1990s.

-- Of perhaps more concern, support for some Nortel products (or some distributors) may change or drop, a concern being made explicit by Verizon as one of Nortel's legacy "RBOC"-type distributors.

Excellent discussions of these detailed matters are taking place with our friends at NoJitter.com; I particularly like a post by Allan Sulkin called Questions re the Future of Nortel ES.

But from a strategic standpoint, one thing that I think enterprise telecom managers should be asking themselves is what kind of role voice and unified communications equipment should play in managed services procurements going forward. Many corporate PBX footprints are very scattered and diverse based on long-lived legacy considerations in various business units, geographic divisions and even individual locations. But if Cisco and Avaya go head-to-head as the dominant players, we know that this can be played to strategic advantage going forward.

From a data perspective, obviously most companies are "Cisco shops." But from a VoIP/unified communications standpoint, holding out a large chunk of business for archrivals to bid on could be in the offing. Thus, the looming Cisco vs. Avaya war could be seen as a reduction of choice -- or, alternatively, a big opportunity for savvy enterprise users, especially when you consider that managed services procurements often offer the best transport pricing. Much remains to shake out, but we'll be watching this closely.