Avaya's Nortel buy could cause trouble for Cisco

Avaya's US$475 million bid for Nortel's Enterprise Solutions Business could spell trouble for Cisco in Australia's enterprise telephony market, according to an industry analyst, but it would also be good news for customers.

"They would be a very credible challenger to Cisco," Telsyte telco analyst Gary Tsang told ZDNet.com.au today. He estimated the companies' joint market share would be close to 30 per cent in Australia by 2010: "If they can sustain their current sales level they should become the market leader by 2010."

The planned acquisition of the Nortel division has come at a time of major change for Avaya, which recently appointed its new managing director, Rob Wells, a former executive of Business Objects. Avaya also recently ditched its direct sales model, reverting back to a pure channel model, said Tsang.

The company this week announced it would supply 6000 IP handsets to Macquarie University via a deal won by one its two major distribution partners, NSC. Nortel had previously been contracted for the university's network refresh.

Should the deal proceed, Avaya is likely to achieve better negotiating terms with the major telcos too, according to Tsang.

Optus' integration arm, Alphawest, currently has a distribution deal with Nortel and Cisco. Telstra, meanwhile, has flagged Polycom as its preferred IP handset supplier, while on the unified communications front its preferred suppliers are Cisco and Microsoft.

"The market is very fragmented and bringing Nortel and Avaya together will be good for the Australian market in terms of challenging Cisco," said Tsang.