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Avaya Buy Powers European Push

Avaya is buying Tenovis for $370 million in cash, a bid that will more than double the IP telephony specialist's revenues from Europe, the companies said today.

Provided the deal passes muster with regulators, Avaya's European revenues from the continent will jump from 12 percent to 30 percent.

"Together, we'll create the third-largest enterprise communications company in Europe ... and just as IP telephony is about to [accelerate]," Avaya CEO Don Peterson said in a conference call with reporters.

Citing industry research, Avaya expects Europe, the Middle East and Africa (EMEA) to represent a third of global enterprise communication spending by 2007, jumping from $31 billion this year to $42 billion in 2007.

Other factors that made the deal attractive is Tenovis' strong services, call centers and customer relationship management operations.

The Frankfurt, Germany, company has 5,400 employees in offices in Austria, Belgium, France, Germany, Italy, Spain, Switzerland and The Netherlands. For Tenovis, the merger provides global reach, a key in selling to multinationals.

The major acquisition comes almost four years to the day after Avaya's spinout from telecom network giant Lucent Technologies .

More recently, the announcement comes a day after the Basking Ridge, N.J., company closed its $103 million purchase of Dublin-based audio and Web conferencing firm Spectel.

Avaya, which competes with Cisco , Nortel and others, may not be done buying either.

"We want to grow the company and we're looking to do that in all regions around the world," Peterson said.

Avaya plans on taking a market-specific approach. For example, it recently took a majority stake in Tata Telecom (renamed Avaya GlobalConnect) to expand its presence in India and Asia-Pacific.

The purchase of Tenovis from affiliates of Kohlberg Kravis Roberts & Co. also calls for Avaya to assume $255 million in debt. It is expected, however, to dilute Avaya's earnings by 3 cents per share in fiscal 2005 and add 7 cents per share in fiscal 2006, the first full year of combined results, the company said.