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Avaya Solidifies Hold in Health Care With Acquisition

Stocks in this article: SI CSCO MCK

There are approximately 2,000 hospitals with 200+ beds in the U.S., and you can double that for the global market. If the average selling price of a discharge process is $200,000, which is a low number, you have a $500 million opportunity on your hands, or a solid billion globally. Combined with their other services, it's easily a $2 billion-to-$3 billion opportunity.

Avaya is currently implementing the technologies in a hospital in Orlando, where Sanjeev says they are perfecting these intense and involved processes. They're finding that this requires a change of culture and a shift from incubation to scale mode with a large pipeline. As it makes progress on these fronts, Avaya will be issuing press releases and we can expect that it will ramp up its customer base as quickly as it can. It already has clients in the pipeline.

Avaya's competitors include the traditional call server market for voice applications. This means that Cisco (CSCO) and Siemens' Enterprise Network (SI) are both competing, but they offer horizontal solutions marketed into health care, and neither really has a solution for these specific problems.

Although they have aspirations to be in health care, they haven't yet made the leaps necessary to take advantage of these coming changes. The advantage that Avaya offers is that they bring a whole suite of solutions together, not just the voice application to handle phone calls.

Partners. Avaya does not compete with EMR providers, but rather works with them to have their applications link together. These EMR providers might include McKesson (MCK), Cerner (CERN), Allscripts (MDRX), AthenaHealth (ATHN), Authentidate (ADAT), etc.

Avaya and Nortel's healthcare division, combined, are able to expand the customer base and further their reach. The acquisition means that their customer base almost doubled in North America because of their top 500 companies, there was less than a 10% overlap in identical customers.

Some hospitals like John Hopkins were using two-thirds of Nortel's solutions and one-third of Avaya's solutions. Now they have a complete presence in hospitals like these.

Sanjeev ended our discussion by saying, "We are very excited with the coming together of the companies, and we have many more opportunities, thanks to this."

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