Telecoms and network equipment manufacturer Avaya has filed for Chapter 11 Bankruptcy Protection in the US so it can reorganise its debt structure and continue with a shift away from network hardware to services.
Chief executive Kevin Kennedy claimed the move would give Avaya the freedom to restructure its affairs and did not reflect the strength of its business.
The move only affects Avaya in the US and the company was keen to stress to customers, partners and investors that the business would operate as usual during the unspecified period. As part of the arrangement, Avaya has secured a $725 million (£589m) loan to assist.
“This is a critical step in our ongoing transformation to a successful software and services business,” Kennedy said. “Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time.
“Our business is performing well, and we are confident that we can emerge from this process stronger than ever, as this path is a reflection of our debt structure, not the strength of our operations or business model.”
Revenues at Avaya fell from $1 billion to $958 million during the most recent quarter, while net losses widened from $76 million to $505 million. The company lost $750 million during the financial year.
The company had been looking for a buyer for its call centre business but this will not happen during bankruptcy protection as it doesn’t feel it would get the right price. Instead it will look at other assets that can be sold off.
Avaya is best known for its unified communications and collaboration technologies, but entered the networking market with its acquisition of Nortel Networks’ enterprise business back in 2009.
However that market has shifted significantly in the meantime, with vendors now looking at open, software-defined technologies that allow for rapid innovation and reduce the cost of equipment costs.
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