While Avaya Inc. may have won the right to acquire Nortel's (OTCPK:NRTLQ) Enterprise Solutions business, it appears another communications company may be the real winners.
Kris Thompson, analyst with National Bank Financial, sees Concord, Ont.-based Aastra Technologies Ltd. (GM:AATSF) as benefiting from the $915-million Avaya-Nortel union because it is less of a concern than if Siemens (SI) had won the bidding.
He said in a note to clients:
The Nortel-Avaya combo is a lesser threat to Aastra in its core Western European markets where Aastra has similar market share to Alcatel-Lucent (ALU) and SEC [Siemens Enterprise Communicaions].
With Nortel-Avaya entering the scene, each group will have between 16% and 18% market share, preferrable to a dominant Siemens-Nortel combination.
"Aastra may have some sales opportunities as channel partnerships are disrupted," Mr. Thompson said. "Avaya already has a heavy debt burden and won't be able to survive witth aggressive product pricing."
However, he still considers the move as neutral for Aastra overall.
Q3 could be another weak quarter (seasonally weak quarter and economic weakness in Germany and Nordic region) so in the near-term we would wait for those results to come out before getting aggressive," he said. "Once Aastra's revenue visibility improves owning this stock before the seasonally strong fourth quarter may be a rewarding trade.
National Bank maintains an Outperform - Above Average risk rating on Aastra with a C$37 price target.