Mitel in mid-2012, about a year into Richard McBee’s tenure as CEO, found itself with disappointing quarterly financial numbers, delayed orders for its unified communications technology and a global economy that was continuing to struggle.
In response, the company announced it was cutting 200 jobs—about 10 percent of its workforce worldwide—as part of a larger restructuring plan that also included closing some facilities.
However, over the past year, Mitel officials relatively quietly have been rebuilding the company through internal reorganization, outside partnerships and at least one acquisition. This week the company made its biggest move yet, announcing a $392 million merger with fellow unified communications (UC) vendor Aastra Technologies that will create a $1 billion business—including a $100 million cloud business—that has more than 60 million end users in more than 100 countries, and more than 2,500 channel partners.
The deal, announced Nov. 11, also will create a company with significantly more global reach and more size in a market that analysts expect will see more consolidation.
“The business communications market is ripe for consolidation and on the cusp of a mass migration to cloud-based services,” McBee said in a statement. “We believe that small competitors with narrow focus and limited global reach will quickly be marginalized. Aastra’s solid financial structure, complementary portfolios, geographic reach, and large installed-base immediately augment and expand Mitel’s market footprint.”
The companies are calling the deal a merger, but the new organization will retain the Mitel name, the headquarters will be in Ottawa, Ontario, and McBee will be the CEO. Aastra co-CEOs will stay with the new company, with Francis Shen becoming chief strategy officer and Tony Shen chief operating officer.
The deal is expected to close in January 2014.
The global UC market is large one, with IDC analysts expecting it to grow from more than $26.2 billion this year to almost $38 billion by 2016. However, some challenges like complexity and integration have kept the market from growing as quickly as some analysts had expected. That should change, though, due to a number of trends, including a more mobile workforce, the bring-your-own-device (BYOD) and the growing interest in all things cloud.
Mitel and Aastra are looking to combine forces to capitalize on those trends in a space that offers a range of competitors, including Cisco Systems, Avaya and ShoreTel. McBee said he expects the merger will enable Mitel and Aastra to “leap-frog the competition and lead the market.”
Mitel sells a range of hosted and on-premises UC technologies, including its Freedom Fabric. McBee has aggressively restructured Mitel during his two-plus years as CEO. Soon after taking the reins, he reorganized the business units, shifted the company’s focus to the midmarket and started growing the company’s channel.
Just this year, Mitel has announced partnerships with such vendors as Sprint (for cloud UC solutions for small and midsize businesses), Vidyo (to expand telepresence in Mitel’s cloud UC offerings) and Black Box (for more cloud UC), and bought prairieFrye, a contact center software vendor.
In June, Mitel adopted a new product naming strategy which officials said was more straightforward: MiCloud (for cloud-based communications), MiCollab (for UC offerings that include products once called UCA, MCA and NuPoint), MiVoice (for voice platforms and phones) and MiContactCenter (for contact center solutions).
Merging with Aastra not only will give the new company size, but also will expand its reach through Aastra’s enterprise business, not only in North America, but particularly in Europe.
“The companies believe the combination will result in an expanded global footprint, cloud leadership, reduced leverage on the balance sheet, and an attractive operating model,” David Michaels, president of Verge1Consulting, said in a post on the No Jitter blog site. “Product wise, the combination is a bit more complex. Both firms have made recent big bets on the cloud. Mitel’s cloud focus is through virtualization, IaaS [infrastructure as a service], managed services for private clouds, and Mi-Cloud UCaaS for public cloud. Mitel also sells infrastructure directly to service providers.”
Aastra comes at it via its Clearspan platform, that is targeted at large enterprises and service providers, said Michaels, who was overall positive about the merger. However, there are other questions that need to be answered, including whether Mitel can handle such a large merger and how to make the companies’ technologies and approaches mesh.