I just took a peek at Avaya’s S-1 filing with the SEC.
To these admittedly non-financial eyes, this ain’t pretty.
We learn that this legacy PBX vendor, which had pinned its hopes on something called unified communications, ended its 2010 fiscal year last September with a net loss of over $800 million.
And it appears from their income performance for the first six months of 2011 that they are ahead of schedule: dripping red ink at the rate of $600 million.
On the balance sheet, they’ve accumulated around $6 billion in debt, a result of the pricey private equity buyout by Silver Lake and TPG in 2007 and then the purchase of Nortel’s Enterprise Solutions business in 2009.
And what about the shareholders? TPG, Silver Lake, and a few Avaya executives are holding stock in an enterprise with over $900 million in negative equity!
This deal makes me really appreciate the LinkedIn public offering, and Groupon’s financial condition is looking positively robust.
And what do they plan to do with the IPO cash—develop new products, or conquer markets or something else that’s bold and ambitious?
The top three items listed in the “Use of Proceeds” section is to pay down a portion of their long-term indebtedness, redeem outstanding preferred stock, and then “to pay certain amounts in connection with the termination of our management services agreement”.
That last clause is really about cash going to Silver Lake and TPG, the maestros of Avaya’s public-to-private and now private-to-public financial maneuverings.
This is a sucker’s IPO. It’s hard to imagine why any money manager would be interested in this underwriting. They are trying to raise 1B, valuing the company at about 5B. The only way to justify this valuation, IMHO would be if they have an attractive patent portfolio.
Once again the PE thugs aided by the IB crooks are shoving a loser down the throats of gullible and/or irresponsible money managers.
Let me just add, I think Avaya is the next Nortel. Eventually, its obituary is going to be written with merely whatever it’s Patent portfolio is worth.
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