Mitel: Digits Away!

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Today Mitel announced its intent to divest itself from Mitel Mobility (previously known as Mavenir) which Mitel acquired in April 2015. Mitel decided “to refocus the company exclusively on the Unified Communications and Collaboration (UCC) market.” This news comes just weeks after a fairly major win for Mitel Mobility with T-Mobile Digits (my coverage).

The news is interesting though not particularly surprising. MitelLogoTag4c

Many were confused when Mitel announced its intent to acquire Mavenir. Perhaps the most vociferous was friend Michael Finneran who wasted few syllables in his condemnation of the merger. I didn’t get the acquisition personally, but wasn’t dismissive of it either. I agreed with Mitel that enterprise communications and mobility will continue to converge, but I didn’t fully understand Mavenir to have a strong opinion on the merger. I’ve previously wondered why mobile carriers did not aggressively add PBX features such as auto attendants, call centers, call transfer, call park, etc. to their services. Mitel claimed that Mavenir together with broader adoption of LTE were the missing pieces.

The vision was right! I consider Verizon’s OneTalk among the most potentially disruptive plays in enterprise communications this year. Verizon OneTalk is very similar to what Mitel envisioned – at least as I understood it, however it doesn’t use Mavenir. Instead the carrier tied together its mobile network with BroadSoft’s IMS PBX. The service is limited today, but I expect 1) Verizon will enable more enterprise class features as it matures, and 2) more wireless carriers will unveil similar services. BroadSoft is really well positioned with its IMS PBX. There really are not that many scalable, enterprise-class IMS PBX alternatives. Mitel Telepo is an IMS PBX – but it is better suited for small business UCaaS. Mitel is keeping Telepo (acquired via Aastra). Maviner’s IMS core is going.

So Mitel Mobility will go to Xura which is owned by Siris which is the company that stole Polycom from Mitel just prior to Mitel’s planned acquisition of it. Siris is getting what Mitel acquired in 2015 for a fraction of the price Mitel paid, and doing so on the heels of a major win.

So with Mavenir undone – Mitel now has some cash to pursue its favorite activity: investing in undervalued UC companies. Thus it’s wasting no time buying-back its own shares.

Consolidator of What?
For the past several years Mitel has positioned itself as a UC market consolidator. This messaging started in 2013 when Mitel acquired Aastra. “The business communications market is ripe for consolidation and on the cusp of a mass migration to cloud-based services. We believe that small competitors with narrow focus and limited global reach will quickly be marginalized,” said Mr. McBee in the press release. Aastra was sandwiched between its acquisitions of PrairieFyre and Oaisys.

Aastra nearly doubled the size of Mitel (as Polycom would have). To this day (even today) CEO McBee still talks about the strategy of growth via acquisition. It’s a great story, but seems like a more appropriate description of Siris, BroadSoft, Cisco, and many others. Mitel claims to have an ongoing funnel operation where potential acquisitions are constantly being evaluated for strategic fit, financial fit, and executable fit. But this funnel appears to require adjustment. Mavenir got through it which was a mistake. Polycom got through it which never made any sense. More importantly nothing else is getting through it. Both ShoreTel and parts of Avaya have For Sale signs out front.

Mitel has not made a successful UC acquisition since Oaisys in March 2014. Mitel did successfully acquire TigerTMS in June of 2015 in response to BroadSoft’s acquisition of SDD. TigerTMS operates specifically in hospitality and is not a general UC consolidation play.

Here’s the problem. While Mitel is talking up its role as the UC consolidator, the rest of the industry is busy making strategic acquisitions. Mitel is missing out on some key inflections happening in the market.

Cisco and Microsoft will be competing with UC AND integrated room video in 2017, but Mitel lacks competitive room system technology. While the industry is rapidly shifting toward Workstream Messaging, Mitel does not own (or have exclusive rights to) the tech powering MiTeam. CPaaS is emerging as a potentially complementary business to UC, but Mitel isn’t there either.

It’s not as if consolidation is not occurring:

  • Contact Centers: Interactive Intelligence went to Genesys (I can see MItel and Interactive as a strong combination). 8×8 is building momentum with a spate of cloud contact center acquisitions, BroadSoft got Transcera, and NICE picked up InContact.
  • CPaaS: Vonage acquired Nexmo, and Avaya acquired TelAPI (now Zang is looking like a success for Avaya). Cisco is building momentum with Tropo, and even ShoreTel got into CPaaS with its acquisition of Corvisa.
  • Workstream Messaging: BroadSoft picked up Intellinote and RingCentral acquired Glip while Microsoft, Cisco, ALE, ShoreTel, and Unify all developed their own solutions.

Mitel and its activist investors seem willing to make big bets, but I’m not convinced the “whatever is on sale” strategy is working. I’d like to see Mitel earn its name as the UC Consolidator and make smart acquisitions that strategically fill portfolio gaps.

Dave Michels