Mitel Talks Frankly About the "Elephants in the Room"

At its analyst conference in Dallas, Mitel's CEO, Rich McBee, was open and frank with the industry analysts, and didn't shy away from questions about "the elephant in the room," notably Mitel's offer to acquire rival ShoreTel.

McBee began by explaining Mitel's M&A strategy, stating, "We have a very definite plan we've been executing to," adding that Mitel's merger and acquisition plans are part of a "strategy, not a random walk." Noting that Mitel has had a deliberate strategy and has been taking very specific steps towards market leadership, McBee stated, "We've been looking at the brand and making changes to it for a long time. The house is in order, and we're moving, but in a very organized way." Mitel's "definitive strategy" includes consolidating the market and buying into adjacencies (although specific adjacencies weren't identified).

As McBee explained, "We have a proactive M&A program, and continually evaluate opportunities." He explained that these things take time, and it's important to have several things in the funnel. For example, Mitel started talking to Aastra two years before the acquisition took place.

"The market is an ecosystem, especially for a vendor like Mitel that believes in openness," said McBee, noting that the industry is consolidating and "Mitel intends to be a consolidator." He added, "We have 40-50 companies in our funnel - we're always cultivating."

Mitel looks at mergers and acquisitions through multiple lenses:

• Technology tuck-ins,
• Vertical adjacencies,
• Near adjacencies, and
• Consolidation for scale (this is where a ShoreTel acquisition would fit).

Showing a slide depicting two elephants with company logos, McBee directly addressed the "elephant in the room," discussing its offer to acquire ShoreTel. This acquisition is a consolidation play, as Mitel attempts to "lead the pack and expand the herd." Part of Mitel's strategy is to mine its installed base of 60 million users in order to drive cloud growth by "providing the best path to the cloud." By adding the ShoreTel installed base, Mitel has the opportunity to move more customers to its cloud offerings. While I'm not necessarily a fan of this particular acquisition move (see my nojitter article), I now understand the thinking behind it.

Expect to see Mitel continue to acquire and consolidate the marketplace, while acquiring companies in specific vertical markets and ancillary markets. The company is putting a good deal of focus on the contact center, and I anticipate several acquisitions in that area.

In addition to its M&A strategy, Mitel representatives discussed the company's go-to-market strategy, cloud strategy, and platform strategy.

Its 3 + 1 strategy includes:

• Maximizing value in the core (core telephony and UC products), as customers move from TDM to IP to the cloud. Its core products remain a big part of the business;
• Accelerate in the cloud. While not all customers will want to move to the cloud, Mitel will provide a path for customers that want to go in that direction;
• Rapidly expand in the contact center, including the contact center ecosystem; and
• Focus on specific verticals.

When asked if it will continue developing and supporting several platforms (based on its various acquisitions and product offerings) or move customers to a single platform, McBee clearly stated that Mitel has no plans to have just one platform. The breadth and depth of the organization means that they won't have one platform, but will have separate platforms for small, medium, and large customers. In addition, the company will not force existing customers to move from their existing platform to a new one. McBee stated, "We made a conscious decision to spend money so that we don't strand customers. We don't want to rationalize platforms and make customers move to a new platform." Rather than standardizing on a singe platform, the company will standardize applications and desktops first, and then standardize provisioning, management, diagnostics and gateways, and eventually evolve call controls.

Addressing the other "elephant in the room," Mitel discussed its roadmap for Lync (soon to be called Skype for Business). The two key elements of its Lync roadmap include:

• Providing a "non-threatening overlay," including contact center, phones, attendant console, and IP DECT phones (Aastra was one of a few certified phones to work with Lync); and
• Integration and interoperability, by offering call manager integrations and fully-secure SIP trunking.

Clearly there was a lot of information shared at this event, and this article covers just a small part of the day and a half meeting. The bottom line is that "Mitel is Moving" as the company is growing and energized. There are still challenges ahead, especially as the company tries to come from behind in a crowded contact center space, as more cloud competitors enhance their offerings, and as Microsoft moves forward with its UC offerings.

Mitel is clearly stronger than it was just two years ago, when some of us were ready to write it off. The company has an experienced and skilled management and executive staff, money in the bank, and a well-thought out go-forward product and marketing strategy. Hopefully it will continue to make wise decisions.

Author's Note: On Monday November 17, Mitel has withdrawn its bid to buy ShoreTel, after ShoreTel refused to engage in any talks regarding a potential transaction.