Saying it needs to focus on UC&C, Mitel sells former Mavenir to the parent company of service provider vendor Xura.
Less than two years after announcing the acquisition of Mavenir Systems for $560 million, Mitel today said it's selling the mobile business division it built on that deal to Siris Capital Group, the parent company of Wakefield, MA-based Xura, Inc., which sells systems to service providers. A limited partnership, Sierra Private Investments L.P., will own both Xura and the former Mitel mobile division, and Mitel will get $350 million in cash, a $35 million non-interest bearing promissory note and an equity interest in Sierra Private Investments L.P.
Mitel made the move so as to focus on the unified communications and collaboration market, and because pursuing the 5G wireless market would have required increased capital investments, CEO Rich McBee said in a conference call this morning.
Mitel's UC&C play, which focuses on the CPE-to-cloud transition, "is going very well," McBee said. "We feel very good with what we have." But he added that both digital transformation as a UC&C driver, and separately, mobility carriers' push to 5G are entering "periods of rapid and in some cases hyper technology transition," requiring greater focus, and that Mitel's size and scale currently doesn't permit it to pursue both.
As mobile carriers begin 5G lab trials, Mitel would have required "investment back into the labs again, which would have definitely hurt the margins on the mobile business for the next two years," McBee said. "So this was going to be a big capital investment for us." Furthermore, the company's annual strategic review of the business found that the mobility division hadn't returned the shareholder value that had been expected, he added.
One interesting note: The IMS PBX solution that Mitel built on the intersection of its UC&C and mobility technologies will live on as a product that "we still have great excitement for," McBee said. Xura will resell this capability, he said.
For a company that's positioned itself as a consolidator, today's move is definitely a step in the opposite direction. "Our acquisition/consolidation strategy hasn't gone away," McBee said, but he added that Mitel will be "intensely disciplined" when doing M&A -- "You're not going to see us paying outlandish multiples." He added that, "There is nothing that we need to acquire at this time" in order to pursue the UC&C focus.
This return to core focus is key, McBee said, noting that mobility was an adjacency for Mitel when it acquired Mavenir. "We will not be doing any adjacencies" in the future, he said.
Concurrent with the mobility division sale announcement, Mitel also announced a share buyback program--though the cash for this program won't come from today's sale, but from cash on hand.
"Mitel remains strong, stable, and profitable," McBee said.
The sale is expected to close 1Q2017.