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.

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