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To: Johnny Canuck who wrote (40919)	4/2/2004 12:15:36 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70549

Investor's Business Daily Avaya Hooks Up With Internet Friday April 2, 10:57 am ET By Mike Angell Don Petersen sells a product he says has great promise, though he admits it can be annoying. Petersen, chief executive of phone network gear maker Avaya Inc., is pushing new software that forwards phone calls anywhere. The person you're calling isn't at his desk? The software can ring his cell phone, home phone and pager, and send e-mail alerting him to the call. Not that everyone would want such a service all the time. "When I get home, I don't want to be bothered," Petersen said, "so I turn the cell phone off." This new feature is one of many new products made by Avaya as it establishes itself as a force in emerging voice-over Internet protocol phone networks. VoIP gear takes speech and breaks it into data to be transmitted over the Internet. This system means phone calls can travel anywhere data can, at times at lower cost. Petersen says VoIP's progress is inevitable, and his company's push into that field is one reason its stock is up above 15 from less than 2 a year ago. VoIP "is where the market's going to go," Petersen said. Analysts are bullish. Synergy Research Group forecasts sales of VoIP software and hardware will rise 70% this year to $2.9 billion. But VoIP is forcing Avaya and others to change gears. When companies move to VoIP, they usually move away from older business phone systems called PBX, for public branch exchange. Avaya, spun off from Lucent Technologies Inc.in 2000, is a top seller of PBX gear, along with Siemens AG, Nortel Networks Corp. and NEC Corp. Avaya's yearly sales have fallen since 1999 in part because it still relies heavily on PBX sales. For its fiscal 2003 ended in September, sales fell 12% to $4.3 billion. Analysts expect sales to bottom out at about $4 billion this fiscal year, and then rise. The improved fortunes will coincide with expected gains in VoIP adoption. The quality of VoIP phone service has improved enough for businesses to begin taking a look at it, says JMP Securities analyst Sam Wilson. JMP itself is doing just that. "Our chief information officer said Avaya's a company that gets it," Wilson said. "I thought, 'Wow that's a great comment.' " VoIP has some advantages for gear makers, Wilson says. For one thing, it's cheaper to make than PBX systems. Avaya has to make all the chips and software that go into PBXs. VoIP gear uses standard Intel Corp.-type chips and open-source software known as Linux. "Now they can ride other people's cost curves," Wilson said. "If Intel comes out with a faster chip in 18 months, Avaya can use that." Avaya faces a tough rival in Cisco Systems Inc., while Siemens, Nortel and NEC also have moved into the field. Cisco, the world's largest maker of networking gear, started selling VoIP gear in 1998. Avaya started volume sales just last year, but Petersen says Avaya has caught up. "Cisco got to VoIP before we did," Petersen said. "We're doing quite well, though." Cisco sold $436 million worth of VoIP gear last year, leading the market, says Synergy Research. It says No. 2 Avaya sold $385 million. Petersen is counting on customers that don't want to junk their old phone systems completely. Avaya's VoIP can work with many types of old phones. Cisco's VoIP gear requires a new type of phone. And phones are up to half the cost of new voice networks, no small expense. What make VoIP compelling to business users? It offers new features. Investment bank Barclays Global Investors loaded Avaya software onto laptop computers. So employees can use their laptop as phones while on the road. Privately held Charter Steel uses Avaya VoIP phones and software to do teleconferences on the fly, and employees can get company phone numbers by 'asking' their phones. biz.yahoo.com