Mitel to Buy Polycom, Will Create Enterprise Communications Giant

By Jeffrey Burt  |  Posted 2016-04-15 Print this article Print
unified communications

With mobile becoming an increasingly important component in the market, Mitel's acquisition last year of Mavenir Systems will enable the combined company to have its products built into carrier networks and deliver a better quality of service than the over-the-top (OTT) mobile offerings of many competitors, which will be important as such trends as 5G continue to grow, Kerravala said. In addition, Polycom's Acoustic Fence technology also will improve the quality of products by better eliminating the surrounding noise during video conferences.

The deal comes during a time of high competition and rapid changes in the collaboration market. The changes over the past couple of years include Nokia buying Alcatel-Lucent, Siemens Enterprise Communications becoming Unify and then being bought by Atos, ShoreTel releasing its Connect common platform, Avaya restructuring its leadership team and growing its services capabilities, and Lifesize moving aggressively to the cloud and spinning out of Logitech as an independent company.

Mitel has done its share in reshaping the market, through its acquisitions of Mavenir and Aastra Technologies in 2013.

Kerravala said that the combined Mitel-Polycom company will become the world's fourth-largest collaboration vendor, behind Cisco, Microsoft and Avaya. Being in a market dominated by Cisco and Microsoft is difficult, he said, but growing into a $2.5 billion company will give Mitel more leverage in the space.

Some of the challenges facing the new vendor will be managing its relationships with other vendors, the analyst said. Polycom has a deep relationship with Microsoft, with more than 40 products that support such Microsoft products as Skype for Business and Office 365. However, Microsoft might now see a stronger Mitel as a competitor, which is one probable reason Mitel is keeping the Polycom name. In addition, IP telephony companies like RingCentral, 8x8, Sprint and Vonage also might see the new company as more of a competitor in the cloud communications space.

During the conference call, McBee noted that both Mitel and Polycom offer open platforms that allow for such partnerships with companies such as Microsoft, and he doesn't expect that to change once the deal closes.

Officials expect the deal to close in the third quarter. The boards of directors for both Mitel and Polycom have approved the merger. Shareholders for both still must vote on the acquisition. After the deal closes, Polycom shareholders will own about 60 percent of the combined company, and Mitel shareholders will have about 40 percent.

Part of Elliott's push for the deal was for the new company to be headquartered in Canada—Mitel is a Canadian company, while Polycom is based in San Jose, Calif.—for tax purposes. Such deals—called "inversions"—have been highly criticized by U.S. lawmakers as a dodge by companies to get out of paying their fair share of taxes in the United States.

Kerravala noted that the way the deal is structured—with the help of Polycom cash—Mitel's net debt leverage is reduced and its balance sheet strengthened, giving it financial leeway to consider other acquisitions. Mitel officials acknowledged that once the integration of Polycom is complete, other deals could be considered.

The analyst speculated that Mitel's acquiring a networking vendor like Extreme Networks would make sense, giving the company a more complete product portfolio in such areas as WiFi that would broaden its competition with companies like Cisco.



Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel