Avaya investigates whistleblower allegations; New CEO navigates financial challenges

from Avaya The audit committee is investigating a whistleblower’s allegations, according to one SEC file – although the matter appears to be separate from a major Avaya revenue shortfall that the board is also investigating.

Among the main conclusions of the August 9, 2022 presentation:

Avaya “may not, without undue effort and expense, file its quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2022 (the “Form 10-Q”).” The audit committee of Avaya’s board has “initiated an internal investigation to review the circumstances surrounding the company’s financial results for the quarter ended June 30, 2022.”

The audit committee has “engaged outside counsel to assist in these investigations and has notified the Securities and Exchange Commission (the “SEC”) and the Company’s external auditor, PricewaterhouseCoopers LLP, of its investigations. investigations are not complete, the Audit Committee requires additional time to complete its initial assessments.”

“In addition, and separately, the Audit Committee has also initiated an internal investigation to review matters related to a whistleblower letter that remains ongoing.”

In a separate press release, Avaya shared preliminary financial results for the third quarter. Among the areas of concern: Revenue was $577 million, down 20% year-over-year in constant currency.

Avaya Removes Former CEO; Vonage Hires Veteran to Lead UCaaS Enterprise

The revelations come about a week after Avaya’s board removed former CEO James Chirico from the company and installed Vonage veteran Alan Masarek will lead the business from August 2022.

In a statement regarding Avaya’s preliminary financial results and financial basis, Masarek on August 9, 2022 received:

“Our preliminary financial results for the quarter reflect operational and execution deficiencies, amplified in the context of a volatile economic environment. We are taking aggressive actions to adjust Avaya’s cost structure to align with our contract and recurring revenue business. We have already begun to operationalize our recently announced savings initiatives and look forward to identifying additional areas as our work continues. At the same time, we will focus our investments on driving innovation and moving forward in product development for the benefit of our customers.The July 2022 financings, along with our cost reduction initiatives, are important steps in maintaining our financial and operational flexibility to continue investing in our business and to maintain the transition of our business model Although we have a lot of work to do, we have a formidable foundation for c build as we become a stronger, leaner, more agile and innovative organization.”

Avaya did not say specifically whether the cost cutting involves layoffs, although it appears to be the case. In fact, year investor presentation (see slide 20) said the company will take an $11 million restructuring charge to cover “employee separation costs and facility exit costs.”

Unified Communications as a Service (UCaaS) Market: Under Pressure?

Avaya and other players in the UCaaS market are scrambling to manage their businesses very carefully amid talk of a recession on Wall Street and potential competition from mainstream collaboration and video conferencing services such as Microsoft Teams, Salesforce Slack i Zoom.

Among the anecdotal highlights in the UCaaS market:

Take a closer look and you’ll notice that RingCentral invested in Avaya in 2019 and that RingCentral acquired certain Mitel technologies in 2021.

Elsewhere, UCaaS provider Intermedia called off an IPO in 2021 amid “adverse conditions” in the IPO market. Shortly thereafter, NEC announced plans to invest $40 million in Intermedia.

Meanwhile, M&A activity in the UCaaS market has slowed in 2022 after a strong showing in 2021.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!