To me, that comment also suggests that Silver Lake and its co-owner of Avaya, TPG, believe they can't earn back their $8 billion initial investment in Avaya just by taking the company public at more or less the scale they bought it in 2007--not surprising, given that the market ain't what it was back then. (For more on this element, see Allan Sulkin's blog post from today.) They need to try to build Avaya into a much more substantial, broad-reaching communications powerhouse.
One open question is what Avaya should do about Nortel's data networking portfolio. If they're going head-to-head with Cisco, that would suggest they should keep it and try to make these products a serious contender. But maybe the smarter move would be to sell off this business unit to help recoup some of the Nortel purchase price, and emphasize Avaya's strategic partnership with HP, whose ProCurve line of products has gained traction as a lower-cost alternative to Cisco. This would also be one fewer organizational issue to deal with in the merger; unless the new, expanded Avaya is really going to put significant weight behind the Nortel data line, that product family could find itself neglected and further fading away.
Besides, is the data element so critical? Neither Microsoft nor IBM are coming to the Unified Communications market with data gear. Avaya's gone the data route in the past with the Cajun switch products, and might be wiser to avoid treading that path again.
And what about Cisco? Does the Avaya-Nortel deal change what Cisco should be doing? I don't think it will. To get where it is today in enterprise communications, Cisco's strategy consisted primarily of leveraging its existing position in enterprise IT, and there's no evidence that this strategy is flagging. In fact, Cisco is gaining market share in contact centers, where they had not been as strong--suggesting that the "can't get fired for buying Cisco" mentality is not only alive and well, but spreading. And Microsoft? Well, their joint venture with Nortel, the Innovative Communications Alliance (ICA) probably isn't long for this world now.
More relevant, however, is what happens to Nortel's customer base in the wake of the Avaya purchase. If Avaya locks down the channel and comes up with a coherent production integration and migration strategy for the Nortel base, Microsoft has much less chance to poach these customers when Release 3 of OCS comes out next year. If, on the other hand, Avaya stumbles, allowing confusion to reign among customers and distributors, Microsoft could have an opening.Could Nortel just be an appetizer for Avaya?