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Welcome to Avaya ENGAGE 2020

Avaya President and CEO Jim Chirico kicks off our users group event with a look into our powerhouse 2020 portfolio, including the new Avaya Cloud Office by RingCentral.


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>> [APPLAUSE]

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>> Thank you very much. Great job.
>> Yeah.

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Good morning.
>> Good morning.
>> Check it out, check it out, check it out, right?
>> [LAUGH]
>> Avaya is on the next level going fast and furious, that's what we're all about. So funny story I told my wife I said, hey, Bridge, we're going to have this like, pretty upbeat song in the morning and maybe I'll dance my way out onstage.

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And she goes, Jimmy, Jimmy, so when wife says my name twice I know she's pretty serious. She goes, you better not, you're gonna embarrass yourself. You may not realize this but you dance like Elaine Benes from Seinfeld.
>> [LAUGH]
>> I was like, seriously? After 33 years I thought I was John Travolta in Saturday Night Fever?

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I mean really, you got to be kidding me? But on a serious note, good morning, and a real warm welcome. And we couldn't be any more glad and proud to have you join us for what's gonna be a really exciting week. This week, you'll see many new products and solutions that will be showcased here in the exhibit hall and onstage, but while we're all together 2020 engagement Phoenix, you'll hear from our strategic partners.

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And more importantly, or equally as importantly, our customers. And you'll learn about our rapidly expanding and evolving portfolio. The fact is, we've never been better positioned to empower the enterprise, to customize and extend your communication platforms. It really is a great time to be at Avaya. For those of you don't realized that you probably saw my picture, I'm pretty proud of that, I haven't aged in 13 years that I have been with the company.

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I looked exactly the same regardless but I have been here 13 years. I can honestly stand on stage that this is the best time in 13 years in this company that we're on right now in Avaya. It is absolutely a great time to be part of this company.

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It is more or equally as important. It's a real honor to be here on stage to represent the 8,000 Avayans and our extended ecosystem. And on behalf of all of them, I like to thank you for your partnership. We really value the relationship. We're grateful for the trust that you have in Avaya, and for your loyalty, not only for what we've done in the past, but we're really excited about what we're gonna do together in the future.

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I had the opportunity to meet many of you last night at the Super Bowl. Wasn't that a great venue? I mean seriously, talk about the new Avaya.
>> [APPLAUSE]
>> On the stadium field, in the dugout, actually got a chance to go on the locker room. For those of you that were there, I answered a question, right?

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With the New York Giants, I'm from New York. Yankees are my favorite team. I walk in the locker room and they say, hey Jim, get your picture taken with the 2001 World Series trophy. Oh, you mean the year they beat the Yankees?
>> [LAUGH]
>> And I was like seriously?

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It just kinda rub it in a little bit. I thought it must have been a New England Patriot fan or Red Sox fans wanting me to get that picture. But what a great way, and then end it all with the fireworks. I thought the city of Phoenix was under attack unbelievable is like went on for ten minutes.

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But I hope everybody had a chance to experience a great Super Bowl, and really one of the better games that we had. There's been a lot of talk the past, whatever 12 to 14 hours about the Kansas City Chiefs, Kansas City Chiefs. However, thinking about the 49ers. There really is some interesting parallels.

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You may not know this, but the 49ers last year, won 4 games, lost 12. That team didn't win a single game on the road or away from their home stadium. In fact, they had the league's worst defense. They only intercepted the ball as a team two times in the entire season, last season, two times as a team, they intercepted twice yesterday.

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But there were 40 players alone in the NFL, that had more interceptions than the entire San Francisco 49ers team. And on the offensive side of the ball, they weren't much better, they pretty much ranked in the bottom on any statistic you wanna look at. So that's a team that clearly needed to transform.

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In one year, they became one of the best teams in football. How did they do it? Well, if you're paying any attention to the left side of this morning, the answer is simple, they went all in. They went all in, much like business. They brought in the talent that was necessary to compete in today's game.

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They went off and developed new plays, they focused on execution, and they changed the culture of that team. Always remaining focused on winning outcomes and doing exactly what the fans wanted. The bottom line, they understood it was gonna be difficult to transform, they stuck to their knitting, they invested in the future, made bold moves to become stronger.

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They stayed true to their course and they never lost sight on their objectives and the strategy that they laid out. Not unlike the changes we've made at Avaya. In the last year, we made some groundbreaking industry moves in this company. We've invested significantly in our product portfolio. We've been executing on our customer first strategy.

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And we've remained committed to our company roadmap despite the quarterly pressures. And that's why we're so excited to be here with all of you so we can share what we've done. And that's a good segue in providing you a bit of a perspective on 2019. And some thoughts on what's occurred in our industry.

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There's been some major transformations that continued. But in 2019, the rate in pays accelerated significantly. There is like the shift from prem to cloud. There is the shift to mobility. The rise of video. And the growth of partnerships in ecosystem. Nothing new, nothing different than we've talked about for the last couple years, except the rate and pace of adoption.

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On the MNA strategic partnership front, they remain in the headlines. And what we've seen that there are partnerships that are out there that are not only driving scale, extending reach, but also capitalizing on market share. We've seen partnerships that have accelerated technology capabilities to provide you the customers with the latest solutions.

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And partnerships that have expanded the ecosystem via strategic alliances to grow their accessible market base. Avaya narrowly participated in these 2019 moves but in many ways we set the standard and we lead the way. Along with that, we continue to focus on positioning this company for growth. And we strengthen our foundation in three key areas.

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And all the while not losing sight on the engagement. Let me quickly highlight some of those accomplishments, in key focus areas, that have really built a solid bedrock, a solid foundation, as we go into 2020. First, was innovation, and that was by design. This company needed to get back to its roots.

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As hard as it is for me to stand up here, we lost our way a bit on innovation. We needed to get back to basics, we needed to get back to our roots. And we need to fundamentally invest more and more on being the innovative leader, the bedrock of this company.

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So what did we do? We focused on delivering differentiated solutions, that can operate at scale. We delivered on our roadmap as we committed, week in and week out, month in and month out, quarter in and quarter out, throughout 2019. We launched solutions into the market, that have higher value for our customers.

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So how did we do that? First, we greatly intensified our efforts in the cloud. We'll share a lot of that with you this week. We also increased our investment in technology. We increased our investment in technology in 2019 by over a $100 million. We expanded our product and portfolio solutions, and we enhanced our ecosystem.

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The set a number of results. First, we launched our ReadyNow Private Cloud Solution. We released a number of our next generation contact center initiatives. We delivered device as a service, we launched auto rooms for collaboration. We have an integration with Google on CCAI. We've brought to market vertical solutions, such as attendance solution for healthcare.

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And we added AI capability and enhancements throughout our contact center experiences. And there were many more, and I encourage all of you to learn about those in breakouts this week. But there's one I also like to highlight and that's Avaya Cloud Office, better known as ACO. We launched ACO with our strategic partner, as you all know, RingCentral.

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Customers and partners have been asking Avaya for years, to please, bring to market a multi-tenant UCaaS solution. So what we did in response, is we ran a very deliberate and purposeful process. And we looked at the options across four specific criteria. The first, improve our technology capabilities, especially in that UCaaS multi- tenant segment.

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Secondly, we needed to ensure whatever we did, would leverage the strength of the Avaya brand. We also needed to make sure that we would be highly accretive and profitable for the company. And no matter what we did, we needed to look at this with the lens of a customer first program.

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We're here to deliver solutions our customers want. And we can never lose sight and therefore provided that lens, that whatever we do is gonna be in response to our customers. As a result, as you know, we entered into a landmark agreement with RingCentral. And this outcome allows Avaya to activate our base, our base, and as such, will continue to fuel our growth.

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Secondly, we needed to build out our strategic partnership with industry leaders. We needed to put some wood behind the arrow on the strategic partnerships. There's been a few years we've all been up here, we announced these great strategic partnerships and everybody says, so what are you doing with this and what are you doing with that?

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We put a lot of time, a lot of effort, a lot of thought, and we enhanced and built out our ecosystem with industry leaders. They are providing us the opportunity to finally unlock the edge. Bring the best technology to bear and accelerate the value that we can bring to all of your customers.

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Now let me explain. We made some significant commitments to some of the most industry known and wide companies out there. Companies like AT&T, Google, IBM, Microsoft, Varon, Amazon, Verizon, among many others who are here with us this week. These partnerships are game changers. What do I mean by game changers?

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I mean, they are creating a differentiation in our offers that we can bring to market. There are allowing us to grow our total addressable market. Avaya now has relevance and they are providing us with leading edge technology to propel your businesses. Giving you the flexibility and optionality, but at the end of the day, all being delivered by Avaya.

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We're expanding our partnerships. And by expanding these partnerships, has also given us an opportunity to do some self reflection. It's allowed us the opportunity to sort of open up if you will. It's allowed us to bring in adoption of new technology to market. It's given us the capability to break through the inertia.

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Also, proof points, that we live and breathe the mantra of being a customer first company. This is truly transformational for Avaya, sounds simple, but it needs conviction. And as such, we brought in leaders that support this mindset and promote a culture of teaming and partnership. Third, and certainly not to be lost, it's extremely important, is the fact through all of this, we continue to strengthen our financials.

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This provides us a capability to fuel our investments. Frankly, at levels others cannot. Avaya is one of the most profitable companies in our space. Easily in a top quartile with 25% of EBITDA, margins well north of 60% and we grew our cash to be above $750 million. We invested over $300 million in technology just last year and we executed as promised, on our strategic capital allocation process.

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We reduced our debt by $250 million last year. And as of January 6th, 2020, we have bought back approximately 12 million of our outstanding shares, 12 million of our outstanding shares. A true vote of confidence and evidence of where we believe this company can go, and more importantly, where this company is going.

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Simply put, we went all in in 2019. We reset our business and behind me are a number of highlights or a few KPIs if you will. The point is, we are stronger than ever, in many aspects of our business as we enter 2020. Let me shift gears little bit.

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Let me talk about our focus on what we're doing with customer journey and digital transformation. Digital transformation is not new for us, we've been at this game for some time. And you'll hear from a number of customers today, tomorrow, and Wednesday, on what we're doing and how we're modernizing their base.

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How we're partnering with them and what we like to do is modernize all of your bases and partner with all of you. A favorite quote of mine is from Peter Drucker, pretty simple. Purpose of a business is to create and keep customers. Really simple, it's create and keep customers, right?

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Stands the test of time and in fact, couldn't be any more true today. I take great pride in this company, and what they've been able to accomplish and what the people in this company are doing, and what we have all accomplished together, and what we will accomplish moving forward.

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Let's not forget, our install base with over 100 million seats with hundreds of thousands of customers, 90% of the Fortune 100, this is truly an amazing asset. It's the envy of our competition. Your customers are the greatest strength of this company and we do not take that lightly.

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Everything we do is centered around activating and monetizing your investments. Also worth noting, and not to be lost, is that we are creating many new customers. As we publicly reported, we added over 6,000 new customers last year alone. How many companies in our space set it over 6,000 customers alone last year?

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That also includes over 500 competitive displacements. Contrary to what you may read, contrary to what you may hear, these wins, were against the likes of Cisco, Five Nines, Genesis, Eight by Eight, and Mitel. And I can tell you we're just warming up, but we're not stopping there. We've identified four strategies that we're executing on today to build on our successes of the past.

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The first thing we did is we went out, protect the enterprise. We went out and we focused on building a private hybrid cloud, along with the services capabilities to support. Private and hybrid cloud uniquely tackles the variables that large enterprises have to consider in their move to cloud.

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And they're variables like geographic reach, compliance, security, application integration, just to name a few. Importantly, it provides the flexibility to allow you to involve your core infrastructure in a stepwise approach that aligns with your business requirements. Secondly, we went off to extend the benefits of cloud across our entire customer base.

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We call this our all in cloud initiatives. First thing we did is we turned our attention to UCAS, which we addressed through the strategic partnership with RingCentral. We're now focusing on C CAS. And we will do that through our own cloud native development efforts. And you will hear a lot more this week on what we're doing to bring our C CAS solution to market this year.

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Thirdly, is something that actually we're all quite excited about. We're already realizing significant revenues and a momentum is gaining and that's around a new OPX consumption model, like subscription. Subscription provides and allows, if you will, a more easily opportunity or easy opportunity for all of you to take full advantage of the expanding cloud native micro-services that will drive further innovation.

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It provides new methods of collaboration, through video, through mobile, through AI, and open API's, along with many more. And you'll hear a lot more about what we're doing with subscription this week. And last, is that we take a look at our cloud technologies which we blended UC and CC.

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And we're using that to power the digital workplace of the future. And what are these technologies? Virtual assistant, speech recognition, transcription of sorry, recording, behavioral pairing, reporting and analytics. These capabilities are unique to Avaya and allows for us to address a more personalized customer journey for all of you.

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Let me spend a minute on being customer-led. And for contrast I'll talk about what it means to be vendor-led. Today, more established PC vendors are focused on pushing their technology that they've developed to their customers. It's really complex, it really lacks the flexibility needed to personalize all of your customer journeys.

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On the other hand, you have a group of ECC vendors who are more, if you will, API rich, pulling customers to more of a DevOps model. It provides a high degree of creativity. However, it's very costly, it's very time consuming, because it lacks the basic capabilities. And from a feature perspective, it's got a long tail of features that are missing and we're having mature solution.

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So what are we doing at Avaya? At Avaya, our approach is to bring the best of both worlds together, very simple. One, build a technology that's customer centric, two provide significant flexibility over CX, allow for that personalization, do it at scale, and ensure that we do it on a feature rich platform.

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And let me touch on some notable examples of what we've done and what we're doing. We remain focused on helping you transform from premise telephony, to a cloud communications platform at your pace by executing on a very purposeful roadmap. What we've done is first, we've evolved our Aura enterprise to provide you unmatched flexibility.

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Secondly, on Aura 8 we made the enterprise architecture more standardized, and therefore more automated. You can now layer innovation using microservices for rapid innovation and delivery. We're gonna be delivering a purpose built C CAS architecture for all of you. We've enabled innovation at the edge with open API's.

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We've introduced new consumption models across our product set, and we're also continuing to invest, And our partner ecosystem. The reason why this chart behind me seems a little busy is because this Fred's Frank said we've been busy. But we're just sort of at that tip of the iceberg.

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There's a lot more going on. And we're excited about what we will be delivering in the future. You know with that, and on the partner ecosystem, this is a perfect opportunity for me to bring on stage and welcome RingCentral, founder and CEO to share his perspectives on the market and on the partnership that we announced last year.

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So with that, Vlad.

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>> All right.
>> You made it, good to see you.
>> Love your song.
>> Oh yeah.
>> Hi everyone.
>> I think we're gonna get a couple stools. By the way, Vlad was at the game yesterday and flew all night to be here with you today, so we'll take a quick seat here if you guys don't mind.

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>> Yes, I hope this one is gonna have a better ending.
>> Vlad. [LAUGH] That's right. Vlad, welcome.
>> Thank you for having me.
>> Oh you're welcome.
>> Good to be here. But I'm hoping maybe you could take a minute and just tell us all and provide us some insights and a little bit about RingCentral.

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>> Teriffic. Well for those of you who don't know, RingCentral is a leader in cloud based business communications. We are pretty much the first company the original pioneer in this space. The company is a born in the cloud company. We never had a software platform or a hardware platform.

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The idea was to always deliver full business communications functionality. Through the cloud, that meant any location, any device and of course, any time of day, that's what we set out to do and prove to be a successful task for us.
>> Yep, thanks for that. I agree, Ringcentral obviously has a long history in the cloud.

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And I was wondering maybe you could just provide some additional insights and perspective on the partnership that we have. And maybe a couple of keys for success.
>> Absolutely. Let's start with keys to for success. We see it anyway, so it has a lot to do with focus and sticking to your guns.

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And in the end delivering customers what they want to see. So, what we see and we saw this from pretty much day one was that customers wanted to have best of breed state of the art functionality. But they did not necessarily want to be tied down to a particular location or a particular underlying carrier because both are limiting and carriers are hard to manage.

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So what's this very unique RingCentral Avaya partnership has to offer is really bringing the two industry leaders together. Avaya is the very best brand in traditional business communications with I believe the undisputed largest footprint in the world at 100 million seats that's about what 25% market share. We at Ring have approximately the same market share in the cloud, but is much, much earlier, so we have just around 2 million seats.

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So really you go from strength to strength. You combine our unique technology which is global, which is robust. We've been at five ninths availability for three years and counting, that is unprecedented. And you combined with a wise brand Avaya's immensely loyal customer base Avaya's end points which are extremely well received.

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And as I believe you will see here in today and the last couple of days is what the combined product looks like. It's really very seamless experience, there will be a transition tools provided. Both companies are working on this together, which is also great to see. And the visionaires Avaya's customers will be able to retain.

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All of their Avaya functionality, but in now delivered through the cloud globally and across multiple devices.
>> Now that's great. Now I couldn't agree more. In fact, as we've highlighted we had that gap in our portfolio. But now with the RingCentral partnerships, we've actually been able to block the door on other public UCAS companies.

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Though we're sort of the few in the early innings. The fact of the matter is obviously we've run into a multiple number of cloud opportunities. That affect our customer base and partner base was getting positioned to switch to the likes of other providers of eight by eight fuse and Mittel.

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Know the product won't be available for a few more weeks. We've been able to prevent those folks from moving, they're staying with Avaya. And they will move to an ACO platform. So that's obviously very, very exciting for all of us. And secondly, as I touched on, not we haven't publicized that much, but our endpoints will now be qualified and shipped with our ACO offer.

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But they'll also be capable to ship with the RCO, Ring Central Offer. So it provides a couple new channels for us, for lack of better term, for us to go sell our endpoints now in the cloud. So we're quite excited about that opportunity as well. So why don't we talk Vlad just a little bit about sort of the perspective around the value that UCAC will bring to some of our customers.

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>> Terrific, well when Jim and I were announcing this deal initially a few months ago, I think we both made a point they really wanna reiterate. The point being, it's really four way win scenario. First and foremost, there is a strong belief that this is really, really good for the customer.

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Customer being an enterprise, business that is consuming this product. Again, best of breed functionality, delivered through best of breed ,most robust, most global, most usable solution. And I really want you all to hear this very carefully. There is not another combination like this in the world today, okay?

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Jim mentioned some of the cloud competitors. But look at Cisco. There is nothing even close, okay? Simply if you have a conventional customer base and they wanna go cloud, this is the only way to get them into the cloud at a world leading effort, so that's from the customer perspective.

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Then very important for partners. I know there are lots of partners. Avaya is a partner centric company as RingCentral. But I have to say is they do have a little bit of a head start on us. Okay. And this is another beauty of this relationship is so for the partner community, there is a unique opportunity to add a very sticky.

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The good thing about the Cloud is stickiness and very very low watch on, okay? So to add a sticky profitable revenue stream while software engineers Of their customers because in the end is not only Gemini that has to solve customers needs, but every partner as well or else you will then business.

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Okay, so that's number 2. And that leaves of Andrew Central and we believe it's good for both companies, Avaya is able to leverage his brand. The via is able to dedicate it's very, very significant resources including innovation resources, in areas where it can realistically dominate which will have full confidence it will.

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And of course ringcentral we get better reach, we get world's best partner network. And we get to be associated with the premier established brand in this field. So, 4-way win.
>> Great. Yep, I couldn't agree more. And the momentum that we're seeing across the board, through all that, all channels be partner, be it.

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Through enterprise our direct sales force in combination frankly with the sales force at ringcentral. Again though early our pipeline continues to grow and in fairness help out even outpacing my expectations. So, with that fled, maybe you can, we can sort of wrap here on we're seeing from the product development standpoint and delivery standpoint.

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Because as we all know, when we're bringing this product to market this quarter.
>> Yeah, well, picture's worth 1000 words and seeing it actually get this problem was 1000 pictures so I believe you can do for yourself. It's the products getting there. It's very much on schedule. At least from our vantage point teams are working together extremely well.

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People seem to be liking each other which is quite important to think in, during success during success. Look, a CEO leverage is uniquely all of the thousands and actually 10s of thousands of men hours. Invested by bring into our platform already mentioned our app dimes is not a fluke.

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I mean, we've been working on it for many years. We've invested many hundreds of millions of dollars. And now we have a platform which is second to none. And again, they really want this audience to understand this. There will be no duplication of ACO versus the essential office any way, shape or form.

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It is the same product as it is Avaya branded. It will actually have a few advantages specifically aimed at Avaya's customers such as, we already mentioned, migration scripts.
>> Right.
>> such as a via endpoint support, such as another four years of is unique partner and support network of eyes watching content at countries.

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We natively or not okay, so it's really the best of all worlds and just can't wait to to be commercially available later this quarter.
>> Yeah, just on that point. I know there's a lot of different folks trying to understand what this relationship is all about. I can tell you this is not a commission based Relationship.

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This is not some type of joint venture. This is a true strategic partnership between ringcentral and Avaya and you'll all have an opportunity to take a look we have a booth here, sponsored by ringing in Avaya will be providing tremendous amount of information. With the certification training while we're here at engage, and I encourage all of you to take, take advantage of visiting the boot.

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bBut behalf of I am extremely excited for the work that we've done as lead said, we've now been partnered for the better part of 4 months. And to say we get along well, it's true, but I think it's a bit of an understatement. Just that well, the teams are working together and for that, I wanna thank you Vlad and the leadership team at at ringcentral.

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For for all the work that you've done, but more importantly for the work that will collectively doing the future. So thank you.
>> Thank you, Jim. Thank you so much more to come.
>> Yep.
>> Thank you all. Thank you for coming. [APPLAUSE]
>> Thank you, Vlad. So ringcentral is just one important example of how we are indeed changing the landscape.

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So in closing I just want to touch on a couple points first, we are really so extremely pleased with the significant progress that we've made in executing on our strategy. We remain focused on our core enterprize base. We've invested and delivered in our blended sort of cloud communications solutions by leveraging, as I mentioned are all in one cloud initiative.

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And we're starting to see great momentum as we move into 2020. We will continue to differentiate invest in our world class services capabilities, which have unmatched scale and breath. We're going to stay the course we're going to continue to invest We're gonna deliver on technology. We're gonna deliver on the solutions in the applications that you need.

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And we're gonna deliver on experiences that matter. So there's one thing you can count on via, you can count on that work. We're all in. And with that, I like to thank you. I look forward to spending time with you. While we're all here this week. And thank you very much, have a great day

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