Summary
As I write this, Verizon has formally protested the sale of Nortel’s enterprise unit to Avaya. By the time this gets printed the matter may be resolved.
Analysis
Citing national security concerns as their basis for protesting the sale of Nortel’s enterprise unit to Avaya; I say bully for Verizon.
Verizon is taking the appropriate stance. Verizon is correct in blocking the sale. Yes, I know M&A advisors are cringing. Yes, I know I supported the sale of Nortel’s enterprise unit to Avaya but I was not aware that anyone would be dumb enough to drop a contract involving Verizon and the United States government. When I first heard this story I thought it was a joke.
Do you know how hard it is to get a contract with either Verizon or the United States government? Do you know how hard it is to get a contract with Verizon that involves the United States government? I will say it in two words: “nearly impossible”.
There are companies that would do almost anything to get a contract with either. Corporate presidents would be willing to stand on their heads and whistle Dixie.
I am stunned.
If Avaya wanted to really get Verizon’s dander up it just did. You know how to lose Verizon’s current and future business? You do it by dumping the current business without so much as a by-your-leave.
If Avaya does not believe it has the resources to deal with Verizon well that is a valid but sad argument. If Avaya does not want to do any business with Verizon now and in the future then dumping Verizon now is away of guaranteeing that.
I am just plain stunned.
For decades, government communications contracts have been one of the major objectives for telecom infrastructure vendors. I have never seen a big player walk away from an opportunity to compete for such business.
This is a message for investors – government telecommunications contracts are a pain to manage but they are worth a massive fortune to any company willing and capable of servicing the contracts. Is Avaya saying it does not have the resources to service such a large contract? If the answer is “Yes” then I say there is something seriously wrong.
P.J. Louis consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
