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Avaya names new CEO

As its earnings slip and it tries to control costs, the maker of corporate phone gear names a new chief.

Avaya said Monday after the stock market closed that it's replacing its chief executive officer, amid disappointing earnings.

Avaya, which makes corporate phone equipment, said that Louis D'Ambrosio will replace Don Peterson as CEO. Peterson has been Avaya's CEO since the company was spun off from Lucent Technologies in 2000. The company said he will remain chairman of the board of directors through Sept. 30. D'Ambrosio joined Avaya in 2002 after working at IBM for several years.

Louis D'Ambrosio
Credit: Avaya
Louis D'Ambrosio

In addition to its traditional phone business, Avaya is a leader in Internet Protocol communications. The company ranks a close second to Cisco Systems in terms of overall IP communications sales.

But despite its position as a leader in a growing market, Avaya has been struggling recently to control costs. On Monday, the company reported profits of $44 million, or 10 cents a share, with revenue of $1.3 billion for its third fiscal quarter, which ended June 30. During the same quarter a year ago, Avaya earned $194 million, or 40 cents a share, on $1.24 billion in revenue.

Even though the year-ago earnings were boosted by a one-time tax gain of $123 million, higher costs are having an impact on Avaya's business, Chief Financial Officer Garry McGuire said in a statement.

"While we are encouraged by these positive trends, higher costs and expenses during the quarter affected operating results," he said. "We remain focused on improving our cost and expense profile across geographies and businesses, particularly in Europe."

Avaya is trying to win business from large companies switching from traditional phone networks to new ones based on IP. But it is facing stiff competition as Microsoft enters the IP communications market with new products and a partnership with Avaya rival Nortel Networks.

Part of Avaya's new strategy in the changing voice market is to focus more on providing software products rather than hardware. Analysts said the change in leadership at the top is a good sign that the company is ready for the market transition.

"This is a good move for Avaya," said Zeus Kerravala, an analyst at Yankee Group Research. "Lou (D'Ambrosio) is the right person to have in place as Avaya moves from selling hardware to becoming a software and services company. He came directly from IBM, which went through that shift years ago."