Quick Thoughts on Mitel Toshiba

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Today Mitel confirmed that it has reached an agreement with Toshiba to assume its enterprise PBX business. The press release states: Mitel  will “transfer certain assets and support obligations, including existing inventory, from Toshiba Corporation. . .Combined with the transfer of existing inventory, the MoU also contemplates a transition services agreement ensuring product and service continuity for Toshiba customers. Both companies are committed to supporting warranty and maintenance obligations.”

A few thoughts:

  • Everyone was surprised when Toshiba suddenly announced plans to shutter its UC business earlier this year. Toshiba has been at this for a long time, has good products, and a solid reputation.
  • Toshiba was late to VoIP , then late to UC, and very late to the cloud.
  • It wasn’t a shock that Toshiba intended to exit the business. The shock was the sudden exit. The American way is to do an asset sale and  1) salvage some value and 2) provide the customers (end-users and dealers) a path. This was more the way of the Samurai — sudden death.
  • Mitel pulled a Geisha out of its hat with what appears to be a great deal for both Toshiba and Mitel. Unfortunately, without financial details we don’t know if it was a great deal. But Rich McBee only buys undervalued assets, so I’m guessing it was the deal of the decade. Mitel calls this a “land grab” maneuver.
  • It appears that at least temporarily Mitel will will sell Toshiba products. The press release mentioned existing inventory  – what happens after that? My guess is MiSomething either as a service or appliance. Mitel picks up a large installed base and dealer network.
  • Toshiba is very strong in retail. I see their phones in lots of big box retailers.
  • Mitel and Toshiba are reasonably complementary. Many dealers sell both products. The deal does not help Mitel with larger enterprises other than the branch office play.
  • This really is out of the Mitel playbook. Mitel likes to make plays for distressed companies. It profited from Aastra, PrairieFyre, and Oaisys. It didn’t do so well with Mavenir, and although the Polycom deal failed, Mitel still came out ahead due to the runaway-bride penalty.
  • NEC was an obvious fit as the two companies could have negotiated the agreement in Japan. ShoreTel too is likely jealous. Actually, just about any premises-based dealer may have been able to benefit from such a deal from Avaya to Digium. Though I doubt very many tried.
  • Mitel’s reseller conference later this month just got a bit more jolly.
  • I do have concerns that Mitel is not prioritizing enough on new products or making more strategic acquisitions. Distressed assets can inflate share temporarily. But remember, the industry is transitioning and every Toshiba customer didn’t buy a Mitel product.

By the way, I called this on May 4, 2017!

Dave Michels

  • Cort

    Is this a good move?

  • Derek Curry

    Better than letting the product die I guess. I’ve installed hundreds of Toshiba systems from their CIX to IPedge line. Things were really taking off on their IPedge systems, hope they keep the momentum going!

  • Richard Whitney

    ‘Way back, Fujitsu had a very robust product, the 9600, and exited the business by just walking away. No buyer, no fire sale.Collected all their liabilities such as service contracts and leases in one week, settled them and got out. Your first loss is your best loss.
    Shareholders have been agitating for Japanese companies to get out of the PBX business since forever.
    Has this been a good move for any of the previous consolidation examples?
    Isn’t the energy spent required to integrate these businesses at the expense of both?

  • Gary Harbeck

    Let’s do a recap of where the interconnect industry stands
    today. Avaya bought Nortel’s CPE in a marriage that did not work. Fujitsu is
    gone, Vodavi, Iwatsu gone… ShoreTel just laid off 100 workers and are moving
    more towards selling ShoreSky instead of their proprietary system. Long gone
    are Rolm, Comdial, Executone, Hitachi, Isotec, Solid State… Well over 50
    manufacturers of proprietary switches worldwide.

    The Toshiba-Mitel deal is good for Mitel because they’ll get Toshiba at fire
    sale pricing. The product lines do not work together and both product lines use
    legacy technology. It is not practical for Mitel to keep the Toshiba product
    alive, rather they will through pricing models “urge” Toshiba Users
    to convert to Milel. – basically Mitel is buying (1.) an installed base of
    another legacy system manufacturer to migrate and (2.) hopefully the Toshiba
    dealer base.

    There are now only a handful of legacy switch manufacturers left. Mitel has
    benefited because so many of the others have fallen by the wayside. They have
    survived.

    Mitel’s stated goal is to move customers to their MiCloud services as fast as
    possible and are active in trying to get as many Mitel dealers (and soon
    Toshiba dealers as well) to become MiCloud sales agents. Mitel has not and will
    very likely never advance their existing proprietary product line. Evidence
    their purchase of all the other legacy proprietary systems – PrairieFyre, Oaisys,
    InnOvation to help keep their product alive. Mitel doesn’t have a call
    accounting system, MOH, a competitive system for small sites, FAX Servers…
    It’s a long list. They will hold onto CPE as long as it still profits them and
    gets users migrate to their MiCloud base.

    My view is that Mitel made a very good purchase that will only minimally prop
    up their CPE sales while they continue accelerate their footprint in cloud
    service. CPE sales represents a small percentage of Mitel’s overall interests.
    They will continue to sell the existing Mitel product line because their
    development costs are sunk costs and the profits now are the highest at the end
    of the production life cycle. Keeping the existing products alive as long as
    possible is a good move for them.

    I don’t see much benefit for the Toshiba system user or the Toshiba dealer. The
    primary reason Toshiba closed their doors is because they stayed with pre-2004
    proprietary technology. Looking at how the telecommunications world has changed
    since 2004 it will likely be only short time before Mitel’s proprietary CPE
    product joins the long list of former switch manufacturers.

    From our vantage Remote Hosted/Cloud service is a newer more expensive version
    of Centrex with the intrinsic “benefits” of being vulnerable targets
    of hackers and high recurring costs. We see a current migration out of Hosted
    Service back to more efficient premise based, user controlled, standards based
    systems whether as a traditional purchase, expensed lease or as a managed
    service.