Today Avaya's stock price went hog-wild, at one point dropping nearly 11% before regaining some of it's strength and ending only 1.73% down. Currently in the midst of a private equity buyout, Avaya is worrying investors because of continued turmoil in the credit market and the recent collapse of stereo-maker Harman International's own buyout deal. Fortunately, the Avaya's underlying business is solid as a rock.
As the economy moves forward over the next couple of quarters, skeptics and investors aplenty will cry wolf, but companies that provide VoIP equipment/software for businesses will remain on solid footing. VoIP is spreading throughout the business world and this will benefit
makers of VoIP equipment and software, especially one's with respected names in the
industry. The underlying logic is that even if our economy does enter into a recession, VoIP communications provides a means to simultanously reduce costs and enhance productivity. Therefore, the equipment makers for VoIP products stand to make considerable profits as businesses inevitably invest in this cost saving technology.
Two companies to keep an eye on are Level 3 and Shoretel. These stocks are a win-win situation in the long-run for two reasons. Firstly, as described above, high rates of adoption and considerable profit margins will allow these companies to grow over time. Secondly, this sector of the telecommunications industry will see much consolidation in the next few years in order to take advantage of VoIP's global spread.
Also, keep an eye on the equipment giants Nortel Networks and Alcatel-Lucent. Nortel is currently priced at a four-year low and it may still have a few bad quarters ahead of it, thus it's price may still go lower. Likewise, Alcatel-Lucent is nearing a four year low and is currently having difficulty realizing gains from it's recent merger. But for all their problems, Nortel and Alcatel-Lucent should not be trivialized. Their international presence and market size could see them reemerge as an increasingly important players in the next two year.
FYI: I do hold small stake in AVAYA. I don't (at least not yet) hold any stock in Level 3, Shoretel, Alcatel-Lucent or Nortel.
