Avaya profitable in Q3 for the first time in two years

Avaya profitable in Q3 for the first time in two years

Avaya has announced a profit of $US8 million for its third fiscal quarter yesterday on revenue of $US1.07 billion, its first profitable quarter in two years, atop a major customer win. The communications equipment and services provider said Merrill Lynch & Co is purchasing Avaya IP telephony gear to serve 7600 workers at its corporate offices and its Tokyo regional headquarters.

Chairman and CEO Donald Peterson said the Merrill Lynch deal is an example of increasing purchases of IP gear offsetting declining sales of traditional circuit-switched private branch exchange (PBX) hardware for telephony.

A Merrill Lynch spokesperson said the Avaya technology will replace equipment from Cisco Systems, because the company is adopting a global policy to keep redundancy in its networks that isn't possible with Cisco's IP networking gear. Essentially, Merrill Lynch is purchasing both digital and IP telephones from Avaya so that the circuit- and packet-switched networks will provide backup for each other.

Avaya has PBXs that operate in the time division multiplexing mode, which is packet-switched, with the capability of adding IP telephony, the spokesperson said.

In regard to financials, Peterson also said in an earnings call that "confidence is slowly returning" with revenue "seeming to stabilise, particularly in the US".

Third-quarter revenue of $US1.072 billion was slightly below the second quarter's $US1.081 billion.

For the first three quarters of 2003, revenue totalled $US3.22 billion, a decline of 15.4 per cent from the $US3.804 billion posted during the same nine months in 2002. In an interview before the earnings call, Peterson said the most difficult thing he had faced as CEO was growing Avaya's revenue.

Services offered by Avaya were by far the most profitable segment of the company, bringing in $US458 million in revenue and $US43 million in profits. In comparison, the sale of hardware and software to enterprises resulted in a $US13 million loss on revenue of $US416 million, the company said.

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