Chess moves in the Telecommunications industry, Mitel to purchase ShoreTel

On July 27, 2017, ShoreTel and Mitel announced that Mitel will purchase ShoreTel for $7.50 per share for a total equity value of $530 million. It was only a few years ago in 2014 when Mitel tried to purchase ShoreTel, but the offer was declined by ShoreTel. What does this mean for ShoreTel customers and dealers?  I think looking over the past 40 years of history may give us part of the answer.

Mitel was founded in 1972 and was one of the largest manufactures of mid-sized phone systems in the late 70s. I started installing phone systems in 1979 and the Mitel SX100/200 was my first phone system I installed. The Mitel SX100/200 was the phone system most installed by mid-sized companies in the late 70s. Mitel has been in business for 45 years, and with the ShoreTel acquisition, will be the 2nd largest manufacturer of telecommunications equipment worldwide.

In July of this year, Mitel purchased the Telecommunications system division of Toshiba. Mitel also purchased Inter-Tel in 2007 for an estimated value of 723 million. In 2013, Mitel announced the purchase of Aastra. With the purchase of Aastra, Mitel also gained assets of Nortel Networks and the PBX division of Ericsson.

ShoreTel has also acquired several companies. In 2012, ShoreTel purchased M5 Networks, a leading provider of hosted unified communications. CorvisaCloud was purchased in 2016 and Agito Networks in 2010. Agito Networks gave ShoreTel the technology to provide the Mobility platform. ShoreTel now offers the Mobility server software for free on their new Connect Phone System.

Why M5 and CorvisaCloud? M5 laid the ground work for ShoreTel to enter the cloud based phone market and to work on a comprehensive UC platform. ShoreTel introduced its brand-new communications platform in 2015 “ShoreTel Connect.” ShoreTel Connect gave ShoreTel the ability to have a single code for both cloud and on-Premise systems.  This has allowed ShoreTel to offer a blended solution to its customers, having both cloud and on-Premise on the same software platform. CorvisaCloud, ShoreTel calls Summit, will give developers the ability to create powerful apps just like you see on your cell phones. The new Connect platform with Summit will give ShoreTel larger market share in the (UCaaS) Unified Communication as a Service market.

Business Telecommunication Systems has been working with Mitel, Toshiba, Inter-Tel and ShoreTel for many years. We have installed and serviced most of the companies Mitel has acquired. I believe the timing for Mitel to acquire ShoreTel could not have been better. It will expand the product offering to ShoreTel customers and have the backing of a 1.3-billion-dollar company.  ShoreTel has invested heavily in UCaaS and the ability to deliver a single communications platform for cloud and on-Premise customers.  I trust Mitel will continue to expand the ShoreTel Connect product and bring the benefits of both systems into one. We at BTS are very excited with the Mitel/ShoreTel product offering and feel we have gained a great partner. No action items are required by our customers at this time, it is business as usual. BTS will offer the complete Mitel/ShoreTel product line to our customers, both cloud and premise.

Sincerely,

Larry LaVorgna President BTS

 

Letter from Rich McBee president of Mitel:

Mitel is excited to announce that it has entered into a definitive merger agreement to acquire all of the outstanding common stock of ShoreTel. The transaction is expected to close in calendar Q3, 2017.

The proposed acquisition will create a more efficient and competitive company focused on Premise, Hybrid and Cloud solutions for the small, medium and large enterprise segments. Until the transaction has closed, we must operate as two separate and independent companies. Be assured that Mitel highly values the relationship ShoreTel has with its’ customers and channel partners and would not do anything to jeopardize that relationship now or in the future. In fact, Mitel’s desire is to retain all ShoreTel customer  relationships and associated revenues. Below is a framework to help you gain confidence in Mitel’s intentions and go forward plans.

As it relates to premise based ShoreTel products

  1. The ShoreTel platform for the SMB segment is a strong offering and we welcome the opportunity to expand the Mitel product portfolio with this solution.
  2. Mitel will seek to optimize the combined product lines and where sensible consolidate areas that are not disruptive to our customers, yet drive enhanced efficiencies for the combined company to enable greater innovation. A potential example would be phone endpoints and accessories where duplicative phone devices with overlapping capabilities may be confusing to customers. Although it is too soon to speculate as to the product line and roadmap for the combined company, in the event that Mitel decides to end the sale of any ShoreTel product, it will be done with at least a 12 month notice to the last date of purchase.
  3. Mitel’s standard policy of end of Hardware and Software support will apply to any ShoreTel product that is announced as end of sales. This policy is 5 years of support beyond the End of Sales date.

As it relates to cloud based ShoreTel solutions

  1. Mitel is committed to continuing to invest and support the ShoreTel Cloud UC Solution. It is our strategy to retain these customers by continuing to deliver a high level of service and to invest to expand the collaboration capabilities of these cloud offerings.
  2. Mitel will plan to capitalize on the best capabilities of both the ShoreTel and Mitel UC Cloud offerings by consolidating the solution portfolios over a multi-product release schedule, and without requiring any displacement of existing equipment on the customer’s location nor any disruption to the users of the UC solutions. This is one of the key benefits of a cloud deployment model, namely, the ability to evolve the software solutions and have them deployed across the customer base easily.
  3. Any customer committing to the ShoreTel or Mitel Cloud solution today will be protected and able to leverage the increased investment in collaboration solutions of the combined company.

Any integration of Mitel and ShoreTel products and services (whether premise or cloud based) will only occur after closing and will be designed to minimize disruption to ShoreTel end users.

Sincerely,

Rich McBee President & CEO