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The Mitel Ahead
Mitel intends to swallow ShoreTel quickly, which means it will be ready to acquire more this year. Mitel expects to close the all-cash deal in just a couple of months, and foresees $60 million in synergies within two years. These are big claims, but Mitel's got a track record here. It will achieve the cost savings with economies of scale, and reductions in inventory, data centers, and, of course, staff. Expect significant changes over the next six to 12 months.
Regarding leadership, Mitel has only indicated its current CEO, Rich McBee, and CFO, Steve Spooner, will lead the merged company. That suggests some of ShoreTel's executives might stay, but Mitel adopted few executives in its previous acquisitions.
There are lots of unanswered questions about the surviving portfolio, and sorting out the answers will take time. There is quite a bit of overlap between the two companies portfolios, with the major exception being ShoreTel Summit, as noted above.
From my perspective, I don't see long-term support for ShoreTel's contact center solution, given the significant contact center investments Mitel has made in that area. Also, I don't see long-term roadmaps for ShoreTel's appliance or endpoint hardware. And in workstream messaging, Mitel's MiTeam is more robust than ShoreTel's Teamwork. Even though MiTeam is based on third-party technology I expect MiTeam to survive. The category is too important and too competitive for ShoreTel's mobile-only offer.
Competitive Impacts
If Mitel can retain the market share it's getting from ShoreTel and Toshiba's UC systems business, closed earlier this month, it'll get quite a promotion. According to Synergy Research, Mitel (with ShoreTel and Toshiba) is poised to become a strong contender for the #2 ranking in premises-based market share, behind Cisco, as it closes in on Avaya, The merger also pushes Mitel ahead of 8x8 into the #2 slot in UCaaS share, not far behind RingCentral.
Mitel looks well positioned with strong global capabilities in premises-based, cloud, and hybrid communications solutions. The consolidation also gives Mitel a powerful dealer network.
I like this deal because Mitel will actually be getting some value from ShoreTel instead of just getting rid of a competitor. Mitel will more than double its UCaaS revenue, and that will put recurring revenue at 39% of total revenue. Mitel should also value Connect and Summit.
It also makes sense for ShoreTel, which is running out of options. ShoreTel just isn't as relevant as it once was. The core company is fine, but the gap between it and its larger competitors continues to grow. It hasn't been very successful with international expansion or enterprise penetration. Mitel is providing a reasonable exit for ShoreTel's investors and management, and I'm confident that Mitel will embrace its customers and dealers.
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Dave Michels is a contributing editor and analyst at TalkingPointz.
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