RingCentral is investing in Avaya and the two companies are jointly developing a Unified Communications as a Service (UCaaS) solution, the firms confirmed today. The strategic alliance apparently involves shifting Avaya customers to new solutions jointly developed with RingCentral. Avaya's stock jumped 11 percent on the news.
Avaya had been seeking an outright buyer or strategic investors in recent months. Potential Avaya buyers, according to reports earlier this year, included Mitel Networks, Clayton Dubilier & Rice (CD&R) and RingCentral.
RingCentral Invests in Avaya: Financial Details
Although an outright Avaya sale has not materialized, the newly announced RingCentral deal involves a range of financial and business considerations. Under terms of the deal:
- Both companies will contribute resources towards development and sales & marketing of Avaya Cloud Office.
- RingCentral will pay Avaya an advance of $375 million, predominantly for future commissions. The Consideration Advance will be paid primarily in stock.
- RingCentral will also purchase $125 million aggregate principal amount of 3% convertible and redeemable preferred stock, obtaining approximately a 6% position in Avaya on an as-converted basis.
RingCentral Invests In Avaya: Business and Technology Details
On the business front, RingCentral will:
- Become the exclusive provider of UCaaS solutions to Avaya.
- Partner with Avaya will introduce a new solution, “Avaya Cloud Office by RingCentral" (ACO).
- Work with Avaya to jointly develop programs to leverage Avaya’s global sales and partner network, as well as build automated technologies for seamless customer transition to RingCentral’s leading global UCaaS solution.
The new ACO offering will be available in the first quarter of calendar 2020, the companies say. An earlier version of this article incorrectly stated that the delivery date had not been disclosed.
RingCentral Invests In Avaya: Executive Perspectives
In a prepared statement, RingCentral CEO Vlad Shmunis said:
“This strategic partnership leverages the respective strengths of Avaya and RingCentral to provide a definitive differentiated solution. We are excited to bring RingCentral’s leading UCaaS platform to Avaya’s installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both our companies.”
Added Jim Chirico, president and CEO of Avaya:
“Avaya and RingCentral’s joint investment and commitment to bringing Avaya Cloud Office to market creates an unprecedented opportunity to accelerate the transition to the cloud with attractive economics for our customers and partners. This also gives us the opportunity to unlock value from a largely unmonetized base of our business as it brings compelling value to our customers and partners. We believe this highly complementary partnership is a game changer that expands the total addressable market for Avaya and creates meaningful value for both Avaya and RingCentral.”
The two companies are holding a call with Wall Street analysts to further explain the deal. Stay tuned for more details.