Avaya cuts staff, sells stock

The continued malaise in telecom has caused Avaya to lower its sales outlook for the second quarter ending March 31, the communications equipment maker announced today.

Avaya projects second-quarter revenues will fall short of previous estimates. The company expects to earn about $1.24 billion to $1.275 billion, compared to previously projected revenues of between $1.254 billion to $1.358 billion. In addition, Avaya expects to report a net loss from ongoing operations to be 6 cents to 10 cents per diluted share, compared to the eight-cent loss the company previously predicted.

In an attempt to shore up its balance sheet, Avaya will cut 1900 jobs, which should reduce annual expenses $180 million to $200 million, and sell $100 million of common stock--8% of the company--to Warburg Pincus Equity Partners for $6.26 per share. The private equity firm also will convert its Avaya preferred stock, valued at about $438 million, into Avaya common stock. Warburg Pincus also will have the option to buy an additional 286,000 shares of common stock.

Warburg Pincus will own about 53 million shares of Avaya common stock, or 15.5% of the company, when the transactions are complete.

--Amalia D. Parthenios, staff writer