Skype, Avaya Discuss Partnership

Silver Lake, an investor in both firms, has been working to broker a deal between the communications companies.

William Gardner

December 23, 2009

1 Min Read
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Skype's effort to crack enterprise corporate accounts may get a boost from major shareholder Silver Lake, which has been promoting talks between Skype and another Silver Lake investment, Avaya.

The situation is still fluid because Skype recently broke off from eBay and Avaya has acquired important telecommunications assets from bankrupt Nortel Networks. But Avaya CEO Kevin Kennedy said in recent days that Skype and Avaya have been talking about an arrangement.

The two companies are dominant in their respective fields -- Skype in VoIP communications and Avaya in enterprise business communications. Skype's users are primarily individual consumers, but it has been gradually moving into business communications. A partnership with Avaya could bolster its move into enterprise calling markets.

One potential stumbling block could be over the session initiation protocol-based standard, which Avaya utilizes in its Aura infrastructure. Skype hasn't embraced SIP, although workarounds could help overcome incompatible infrastructures. Help could also come from Avaya's acquisition of Nortel networking properties.

When Silver Lake and TPG Capital acquired Avaya in 2007, Silver Lake's David Roux took note of the former AT&T/Western Electric unit's capability to participate in the delivery of VoIP. Roux, a co-founder and managing director of Silver Lake, said Avaya could "deploy advanced IP communications solutions as a source of competitive advantage for customers."

Avaya's recent $900 million acquisition of Nortel's Enterprise Solutions unit further strengthens its potential VoIP hand.

Silver Lake was a major investor in the $1.9 billion transaction that spun out Skype from eBay. Skype's revenue has continued to grow in recent months, and eBay has estimated that Skype revenue will surpass $1 billion in 2011.

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