With Rich McBee as its CEO, Mitel has had a singular vision: Roll up many of the smaller UC vendors to create a supplier with enough size and scale to give Microsoft and Cisco a run for their money. While there are dozens, maybe hundreds of companies that fall into the broad category of "unified communications," the dominant share held by the top two players effectively creates a duopoly. The coming together of a number of smaller vendors could eventually create a third vendor strong enough to go toe to toe with the big two on a global scale.
During McBee's tenure Mitel has acquired Aastra, prarieFyre, and a couple of technology tuck-ins. The company also took a shot at both ShoreTel and Polycom, the latter of which was broken up at the 11th hour by Siris Capital. Yesterday, the next piece of the puzzle fell into place as Mitel announced a memorandum of understanding (MOU) to transfer the unified communications assets from Toshiba Corporation.
Earlier this year, in somewhat a surprising announcement, Toshiba stated it was exiting the unified communications market. While it's true that Toshiba share had been sliding and it had lost its way as an innovator, it was still a shocker given it has about 3% market share in the U.S. and 4% in Canada, as well as a number of blue chip customers such as Whole Foods, Firestone, and Lowes.
No purchase price was given but knowing McBee negotiates as hard as J.R. Ewing of the '80s TV drama Dallas and that Toshiba was just going to pull out, I imagine Mitel got a more than sweet deal.
For Toshiba this is a much more graceful exit than abruptly saying bye-bye to UC and leaving its customers holding the bag. The company still has a well-known brand and is in many other markets, and I'm sure it wanted to avoid leaving its customers with a bad taste in their mouth, which could tarnish the broader brand. In addition to transferring the existing inventory, Mitel will also transition all of the maintenance and service contracts to give Toshiba customers existing product support and a path forward.
For Mitel the deal fits perfectly into its long-term strategy. First, there's the immediate financial benefit. My estimate is that Toshiba does in the range of $50M annually and Mitel should be able to retain at least 50% of that through the transition process. In the past, Mitel has taken a "cap and transition" approach with its customers where it puts a cap on the existing platforms and looks to migrate the customers to a common application strategy. I see no reason it would not do the same with Toshiba.
Much of Toshiba's business is retail, which is a market that Mitel knows well. I mentioned some of Toshiba's top customers already, but Mitel has brands like Pep Boys and Toys"R"Us. It should be able to take its experience selling its UC suite into its own customer base to drive a broader set of products into Toshiba's.
Mitel should also pick up a couple of hundred channel partners. Toshiba certainly didn't have the largest number of channel partners, but the ones it had were loyal and typically spoke highly of the company. I'm sure the acquisition is of great relief to the Toshiba resellers as they now have a road forward with little disruption to their business.
The path that Mitel is following certainly isn't easy -- it takes patience and a willingness to walk a way from a deal if it isn't right. So far most of McBee's moves have worked well, and
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