Frank Isola of the New York Daily News is reporting a three-team deal with Orlando, Cleveland, and Portland. Cleveland will acquire Channing Frye from Orlando, and Orlando will receive Anderson Varejao, who will then be moved to Portland for an expiring contract and a draft pick. CBS Sport's Ken Berger has noted that the pick is likely a second rounder, and the player moving to Orlando will likely be waived.
Adrian Wojnarowski of The Verticle previously reported that the Clippers were uncertain about agreeing to a trade for Orlando's Channing Frye, making Cleveland a serious contender to acquire him.
Given the particulars of each potential deal, Orlando's biggest concern appears to be freeing additional cap room for the coming offseason. In the previously rumored Clipper deal, Orlando would have waived Lance Stephenson after acquiring him, but would still have C.J. Wilcox's rookie scale contract on the roster. In the reported Cavalier trade, Orlando has no firm salary obligations beyond this season aside from draft considerations.
Orlando, then, seems likely to look for an impact player this offseason, rather than in the trade market. To that end, they also traded Tobias Harris for two contracts that also will expire in Brandon Jennings and Ersan Ilyasova (team option on his last year).
UPDATE: Dave McMenamin of ESPN is reporting that Orlando will in fact get the second round pick via Cleveland, and that Jared Cunningham will be the player landing in Orlando, though he will most likely be waived.