Rumors are spreading that corporate telecom equipment maker Avaya (AV) may be for sale. The Wall Street Journal writes that the firm, which was once part of the old AT&T and them Lucent, may be taken over by Cisco (CSCO) or Nortel (NT). Private equity interests may also be involved.
Avaya’s stock is actually not terribly expensive. It switching products could be useful to Cisco.
Over the last year, Avaya’s stock is up about 20%, the same as the S&P. Cisco’s shares are up about 30%. Avaya trades for 1.2x revenue, not much better than Nortel.. Cisco is at 4.6x.
With a revenue run rate of over $5 billion and a operating profit run rate of $325 million, Avaya is probably a good buy.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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