If one assumes industry consolidation is inevitable (and it is), then this one seems pretty good.
Mitel and Aastra agreed on Monday to provide the industry's latest example of consolidation. The result will be a firm named Mitel with over $1 billion in revenue and a global footprint of 60 million end users. Mitel will be using both stock and cash to acquire Aastra for about $400 million CAD. The deal rewards Aastra stockholders with a 20.9% premium over the 30-day weighted average share price.
The combined company will have about 3,700 employees (initially), and about 2,500 channel partners. 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. It will likely make Mitel the largest high-tech company in Canada, which could open new government incentives. Previous owners of this elite title include Nortel and RIM.
Both Mitel and Aastra are based in Canada, but the bulk of Aastra's business comes from Europe. The geographic fit between the firms is strikingly compatible, with Mitel's stronger regions being North America, UK, and Netherlands and Aastra's being Scandinavia, Germany, and France.
The merger brings together different customer demographics. Mitel has largely been focused on the mid-market. Aastra is mixed, but US customers include very large implementations, particularly in higher-education.
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, managed services for private clouds, and Mi-Cloud UCaaS for public cloud. Mitel also sells infrastructure directly to service providers.
Aastra's cloud strategy relies on Clearspan, a premises-based solution aimed at large enterprise and service provider implementations. Clearspan is also powering the Internet2 consortium's offer of hosted services to universities and labs. Clearspan was recently selected by the US Postal Service for its internal deployment of 400,000 endpoints.
The new firm will have a stronger menu for customers of Microsoft Lync. Earlier this year, Mitel acquired Prairie Fyre, its contact center partner. MiContact Center is available as a native Lync enterprise voice solution. Mitel also offers a version of its MiVoice call manager as an alternative voice solution for Lync. Aastra produces Lync Optimized endpoints.
Both firms produce endpoints. Mitel supports SIP, but its endpoints are typically associated with Mitel deployments. Aastra's SIP endpoints are popular in third party premises and hosted solutions. Aastra brings to the table wireless (Wi-Fi and DECT) and video endpoints. Both firms, especially Aastra, have multiple call managers. Both have developed rich UC clients, and both have made significant investments in contact center solutions.
I've heard various rumors of several mergers and acquisitions, but none that really seemed to make any sense. This one looks reasonably strong on paper, but of course there's several unanswered questions, the first being: Can Mitel pull this off? Aastra is a fairly large ($571 Million revenue, 1,900 employees, and customers in 100 countries) organization to integrate. The concern stems from Mitel's rocky acquisition of Inter-Tel in 2007.
It's also unclear how the merger will yield "leading cloud capabilities." Mitel has been very focused on optimizing its own solutions for cloud delivery--in which it owns the intellectual property of the solution. Additionally, Mitel has been reaping the benefits of its "Single-Stream" solution, using one core base of software for its entire solution portfolio. A recent UCaaS report by Gartner recognized Mitel for its significant advances with its cloud offers.
Aastra's solution is based on technology from BroadSoft--a direct competitor to Mitel. Will Mitel host Clearspan? Will Mitel forgo its single stream economies or attempt to move customers off Clearspan?
Channel overlaps don't seem to be a big concern, but there will be some distribution issues to settle. In the US, Aastra uses Jenne and Synnex and Mitel uses Tech Data. Aastra IP phones are widely available on the Internet, whereas Mitel's products go through a controlled distribution channel of authorized partners. Mitel largely stopped selling direct to end users, and Aastra does directly sell Clearspan in the US.
Due to Aastra's acquisitive history, Mitel is picking up an entire catalog of telecommunication solutions including Nortel assets that Aastra acquired in the early 2000s. In 2003, Aastra acquired ASCOM PBX, which extended its endpoint offerings and SMB reach. Then came EADS (Intecom) in 2005, which extended its reach into medium and large accounts. Acquiring DeTeWe in 2005 gave Aastra strong in-house DECT capabilities. In 2008, Aastra bought Ericsson's enterprise division and with it, leadership in several European markets. In 2012 Aastra acquired Comdasys, which strengthened its wireless capabilities.
If one assumes industry consolidation is inevitable (and it is), then this one seems pretty good. Of course, only time will tell.
Dave Michels is a Contributing Editor and Analyst at TalkingPointz.