The mood at Mitel's partner conference in San Diego last week was upbeat, with both its top executives and its channel partners expressing confidence that the company has made it through a difficult post-IPO period of tepid sales and knotty channel conflicts, and emerged in shape to continue growth even in a weak economy.
The conference's kickoff coincided with a positive fiscal 4Q financial report from Mitel, showing 4% growth over the previous-year quarter, and annual revenue growth of 3.8% year/year, to $611.8 million in fiscal 2012. The company also saw higher gross margins and net income this year. More significantly, Mitel CEO Rich McBee expressed confidence that growth would continue despite economic headwinds.
When I met with Rich McBee, he told me that the success has come because "The team is executing the plan," particularly the part of the plan that calls for Mitel to eventually move almost all of its sales to the channel. Channel conflicts spiked in the wake of Mitel's 2007 acquisition of Inter-Tel and assumption of Inter-Tel's channel, which then proceeded to compete in some cases with Mitel's existing channel. In fact, McBee's biggest applause line at 2011's Business Partner Conference had been his promise that "We're no longer going to compete with our channel."
Now Mitel is down to 2,500 direct accounts and will continue shedding these until only a few dozen remain with customers that it's not feasible to switch to the channel, McBee told me. That made for a much less fraught atmosphere for this year's channel conference compared with previous years.
It's also contributed to the increase in revenues, McBee claimed. He explained that Mitel partners are increasingly working with Mitel technical sales personnel that can be called in by the channel partner to help with the specifics of a deal. Given their broader view, these execs have been able to drive larger deal sizes.
In addition, McBee said Mitel is able to compete for more deals because it offers every type of product configuration: CPE as well as hosted services via its own Network Services Group, which has CLEC status in the US and has also been seeing increased sales in its SIP Trunking offering, according to Group GM Jon Brinton. And as they have since the launch of Mitel's VMWare partnership, execs last week in San Diego stressed their company's leadership in the burgeoning area of virtualization as another source of customer wins.
Having all these products in their portfolio means that, "Anywhere the customer wants to go, we can go," McBee told me.
McBee also told me the same thing that other vendor companies have been saying about their own operations: Sales of IP phones are strong and growing; he called Mitel's phone set business "very healthy." The reason is simple, he said: "Phone communications are still the lifeblood of a lot of companies."
The biggest complaint McBee expressed is one that's common to the second-and-below tiers of vendors: "We don’t get enough at-bats." Mitel will increase its investment in marketing to try and get more shots at deals and overcome what McBee called the "Mitel Who?" problem.
In other areas for improvement, McBee reported on a customer survey that concluded Mitel needs to boost its customer support processes, simplify its product portfolio, improve service responsiveness, and continue channel enablement efforts. Another goal: Grow the Mitel user group, whose membership stagnated during the period of channel conflict—channel partners had no incentive to encourage their customers to join the user group: Now, "There's no longer a threat that Mitel's going to take that customer," McBee told the audience.
All in all, Mitel wrapped up its fiscal 2012 and kicked off the new year on a high note. Recent market research reports suggest that the entire industry is in for a tough 6-12 months, if not more. If Mitel can eke out even modest growth, that may be enough to make it a winner.
