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Avaya Trades, Delivers Hosting Solutions

Avaya, the enterprise network spinoff of giant Lucent Technologies Inc., Monday witnessed a busy morning -- it began trading independently on the New York Stock Exchange and introduced a suite of integrated communications software, hardware and services.

Looking to fulfill market demand for hosted solutions, Avaya, which sells phone systems and software to help businesses field customer service queries, will cater to next-generation service providers who are looking to pad their communications offerings.

Avaya Hosted Solutions will enable so-called xSPs to go beyond just Web hosting and messaging -- the suite will provide Internet Protocol (IP) telephony for employees located in central headquarters and remote offices, contact centers, messaging, and hosted collaboration, as well as multiservice infrastructure.

According to industry data, xSPs constitute a hot new market and are expected to grow from $15 billion now to $85 billion in 2003. xSPs include Application Service Providers, hosting providers, communications service providers, portals, and trading exchanges. Avaya hopes to help its customers, which include Agora Interactive Inc. and PowerSchool Inc., reduce the time to market and implementation costs of offering their customers e-business solutions.

PowerSchool, which has over 900,000 subscribers in more than 1,180 K-12 schools in 32 states, has built an interactive, Web-based portal that runs through Avaya Hosted Solutions' multiservice networking products. Over 17,200 classrooms a day access the PowerSchool portal.

"PowerSchool is using Avaya Hosted Solutions to help us bring students, teachers, parents, and administrators closer by facilitating communication via the Web," said Greg Porter, president and CEO for PowerSchool.

Don Peterson, president and CEO of Avaya, said that nearly one million business customers in more than 90 countries have purchased Avaya communications software, products and services, giving the company a solid base on which to grow its market.

Lucent's move to spinoff Avaya, which Monday became one of the most widely held companies in America with nearly five million shareowners, came as a result of getting burned in the fiber optic market when it experienced component shortages in trying to service their customers. That reason and stiff competition from rival superpowers Cisco Systems Inc. and Nortel Networks have forced Lucent to focus on high-end optical, data networking and wireless businesses -- of all of which are more fruitful at this point.

Yankee Group Senior Analyst Joe Gagan told InternetNews.com Monday that the move was a good for both companies because Avaya is a mature company that is not experiencing the growth rate that Lucent's higher-end fiber optics divisions are seeing. Analysts are seeing Avaya's sector experience single digits growth, while Lucent's other businesses might be seeing 40 to 50 percent growth, Gagan said.

"This is a large business. Avaya is concentrating on products delivered to the enterprise, including call center applications," Gagan said. "And its hosting suite is going to result in good growth."

But Lucent isn't the only firm to face component shortages. Its greatest competitor Cisco told Bloomberg News that as of Monday, its order backlog more than quadrupled to $3.83 billion from $922 million a year earlier -- a sign analysts say that points to equipment shortages.

However, while Lucent struggled because of its device shortcomings, analysts say Cisco has high visibility and is very much in demand despite experiencing a backlog. Most financial analysts list Cisco as a "strong buy."

As of midday, Avaya was down 12.3 percent, trading at $20-1/8.