Mitel Goes Private
Mitel loves to buy undervalued companies, so has it decided to buy itself.
Companies with consistent growth (share, revenues, and profits) generally see their stock price go up. It’s a happy story — until it’s not.
When share, revenue, and profits stall corporate leaders must take action. There are some initial, common steps – such as firing the CMO and blaming channels (Mitel didn’t do this), but then what?
Increasingly common, the ‘then what’ is a significant shift in something (business models, products, services, channels, etc.). We frequently refer these things broadly as disruption. And, disruption is all too frequent these days. Suddenly, the world is consuming entirely different products and services in new ways. These transitions are painful and expensive, and especially brutal for public companies because changes necessary are often in conflict with short term quarterly results.
There are plenty of examples of public company transitions. Microsoft, Cisco (collaboration), and Vonage come to mind. Despite Mitel’s impressive move to the cloud, two-thirds of its revenue is still associated with premises-based, legacy installations.
Disruption has helped Mitel acquire many of its competitors. While acquiring legacy vendors has merit, it doesn’t necessarily accelerate its own transition.
Mitel’s move with Searchlight is not industry consolidation. It means that a PE firm believes that Mitel is under-valued. That conclusion is not difficult to reach if you look at Mitel’s installed base and RingCentral’s valuation.
What will Mitel do as a private company that accelerates transition? My guess is they will revamp licensing programs. Maybe even go as far as eliminating perpetual licenses completely. A move like that s nearly impossible for a public company.
Some of the questions I’m getting are about Mitel’s stability and viability. There is no indication the move is cause for concern in those areas. Going private will remove some pressure. That could be good for customers, its new shareholders, and especially for employees.
It is unfortunate, in my opinion, that Mitel sold-off Mavenir. I understand it was pressure from investors that forced that divestiture. I liked the combination, and had Mitel been private the combination may have lasted. Although, Mavenir seems to be doing fine with Siris.