Year after year of losses and a mountain of debt shall not prevent Avaya from gobbling up companies. Apparently Avaya is interested in Israel-based RADVISION, a maker of videoconferencing solutions, according to Globes:
Sources inform ”Globes” that Avaya plc (NYSE: AV) is in advanced talks to acquire video conferencing solutions developer Radvision Ltd. (Nasdaq:RVSN; TASE: RVSN) for $200 million, a 30% premium on yesterday’s market cap.
The acquisition of RadVision would give Avaya a new business, where it would compete against Cisco Systems Inc. (Nasdaq: CSCO) and Polycom Inc. (Nasdaq: PLCM). However, it cannot be ruled out that other companies will open talks to acquire RadVision.
Zohar Zisapel owns 26.4% of RadVision and his brother, Yehuda, owns 6.3%. RadVision’s share price rose 10% in the ten days through yesterday. The company’s business has been going through rough times. Revenue totaled $56.2 million in January-September 18.2% less than in the corresponding period of 2010, and its net loss nearly quadrupled to $19 million. The company fourth quarter guidance is equally bleak: $18 million revenue, 31% less than for the corresponding quarter, and a net loss of $6.8 million.
Let’s see — $200 million… No problem, that’s only a fraction of the $863 million Avaya lost in 2011! What’s another couple of million dollars…
Here’s the thing: Why does Avaya think it needs to get deeper into the telepresence and videoconferencing business? Clearly, this is a reaction to Cisco’s dominance in the area, but is it a wise move? Avaya has also been trying to nip at Cisco’s market share in network equipment, an area that’s undoubtedly Cisco’s crown jewel.
Telepresence and networking are two markets that Cisco will strongly defend until its death. And shareholders expect that, just look at what transpired a few months ago with the company.
Avaya must think $200 million for RADVISION is a steal or something? It’s a money-losing operation so far, but we get to expand our videoconferencing business!
It’s a crowded business. It’s not just Cisco, it’s also established firms like Polycom and Microsoft, plus the fairly new tech disrupters like Vidyo and Google. Last I checked, these companies haven’t been losing $700M-1.3B for the past few years or been burdened with $6B in long-term debts…
The company that Avaya needs to look into is CommonSense. It’s a private company with a very large global footprint, although a lot of times it prefers to be in stealth mode. Scoop it up before others do…