Avaya Pressures Cisco With Nortel Deal

Networking specialist Avaya has boosted its ability to challenge Cisco (CSCO) with its $900 million acquisition of Nortel's (NT) enterprise solutions business but now faces the challenge of integrating the unit as quickly as possible.

Avaya had launched a $475 million "stalking horse" bid for the enterprise assets in July and subsequently fought off Siemens Enterprise Communications in a court-approved auction. The deal also marks the latest chapter in the demise of Canadian telecom giant Nortel, which entered Chapter 11 earlier this year.

"Although anti-climatic, it establishes that Avaya will be the leader in business voice and that the market is further consolidating, leaving two big vendors in the tops spots, Cisco and Avaya," wrote Vanessa Alvarez, an analyst at Frost & Sullivan, in an email to TheStreet.com.

Avaya, a former public company taken private by two private equity firms two years ago, is now mounting a major challenge to Cisco's enterprise business. Nortel's corporate customers include 80 of the Fortune 100, according to The Wall Street Journal, which says that Avaya's market share will now surpass Cisco's in North America.

The deal is also expected to make Avaya itself more attractive to potential buyers.

Alvarez, however, warned that the Basking Ridge, N.J.-based company has a big job on its hands swallowing the Nortel unit, which makes phone systems for businesses.

"This market evolves quickly and it remains to be seen if Avaya can quickly integrate Nortel's business and successfully capture the potential customer growth opportunity that Nortel offers to them," she wrote. "We have seen many acquisitions go awry, so only time will tell."

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