Wall Street Occupies the Thoughts of UC Developers

Brian Riggs

B. Riggs

Summary Bullets:

  • Financial market-related worries are causing major corporate shifts among UC solution developers.
  • IT buyers should ensure UC solution developers’ problems are not passed on to them.

Many major developers of UC solutions are in a state of disarray thanks in part to the financial markets.  Cisco, in response to investor complaints about its stagnant stock price, is in the latter phases of a corporate re-organization that saw major shifts in its business strategy and widespread layoffs.  Alcatel-Lucent, in what many believe to be a bid to raise a quick $1.5 billion in cash to help it make good on promises for a financial turnaround, is excising its Genesys contact center business from the larger enterprise organization – something that for years the company said it would never do.  Moreover, Avaya is preparing itself for an IPO to help pay back investor Silver Lake and reduce the debt incurred from its 2009 acquisition of Nortel’s enterprise business.

Polycom, for its part, instituted a round of layoffs after announcing Q3 financials that, while generally positive, failed to impress the financial analysts tracking the company.  In addition, Wall Street’s reactions to HP’s financial performance contributed heavily to CEO turnover and the resulting pendulum swings in its corporate strategy.  Meanwhile, Mitel’s stock has tumbled in the past year, ShoreTel’s has been on a rollercoaster ride, and Aastra’s has been generally flat and trending slightly downward.

Of course, it is impossible for UC solution developers – many of them publicly traded or private yet filing with the SEC – to ignore the rules and whims of the financial markets.  If financial analysts view a profitable quarter as not profitable enough or an increase in revenues as less impressive than reduced cash on hand, share prices are likely to be negatively affected and the company under Wall Street’s microscope must respond accordingly.  However, enterprise buyers should make sure they are not getting the short end of the stick as financial market reaction occupies the thoughts of their UC solutions suppliers.

Developers concerned about profitability could start squeezing their channel partners’ margins, which could result in higher product costs.  Software updates could be impacted as R&D budgets are squeezed.  The development of new products and solutions as strategic directives could change as the executives in charge of them come and go.  Layoffs could result in a reduced capacity to provide as high a degree of support compared with recent years, and a vendor’s services organization could begin relying more on third-party services firms, complicating the overall delivery of its professional or managed services.  There is no way to predict which, if any, of these paths a communications solution developer under Wall Street’s close scrutiny may take, but in these financially turbulent times, it is in the IT buyer’s best interest to examine carefully changes to suppliers’ pricing, support, and products in order to ensure that suppliers’ financial woes are not being passed down to their customers.

About Brian Riggs
As Research Director, Enterprise Software and Communications, Brian Riggs oversees three practice areas: Application Infrastructure, Contact Center Solutions, and Enterprise Communications. In addition, he actively monitors the markets for unified communications solutions, converged communications systems, communications applications, managed communications services, and enterprise FMC. Brian has tracked the enterprise communications market for Current Analysis since 2001.

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