What you need to know about Mitel's acquisition of Polycom
What's New
Mitel plans to acquire Polycom in a deal valued at $1.96 billion; the acquisition is expected to close in the Q3 2016. In the world of unified communications, this is a very big deal because it gives the combined companies a stronger product portfolio, globally diversified sales channels, and a solid balance sheet at the new Mitel continues to battle Cisco and Microsoft for market share and mindshare.
The Pros
- From a sales perspective, the two companies have complementary strengths both in terms of installed base and sales channels: Mitel has a strong sales presence in Europe, while Polycom has strong sales channels in the Asia Pacific region. Mitel's customer research suggests strong opportunities for cross-selling of the two companies' portfolios.
- The Mitel product portfolio holds a strong IP-telephony platform, mobile software and services and cloud services, adding to Polycom's strength in voice, video and content collaboration systems. Both companies have worked hard to integrate their platforms and systems with Microsoft's Lync and Skype for Business portfolios - an essential requirement for most enterprise collaboration-centric architectures.
The Cons
- One of the potential downsides to the acquisition is how Polycom's retail customers and OEM partners would perceive the deal. To counter this concern, Mitel will keep the brand and will operate Polycom as a division within Mitel since Polycom is a well-recognized brand. Mitel will also continue to fully support and evolve Polycom products - even if they are solution components provided by Mitel's competitors, according to Mitel CEO Rich McBee.
- To assure Polycom's OEM partners, McBee said that Mitel fully understands that "to change everything, change terms, change look and feel . . . is a recipe for disaster." Rather, he suggests that the Mitel will continue to "partner with the solutions that Polycom is providing to these OEMs. . . [and] enhance the capability with the broader technology portfolio."
Why this is important
From a competitive perspective, Mitel will continue to face Cisco and Microsoft as its two largest competitors. Both of these giants outweigh Mitel by an order of magnitude when it comes to overall sales, and both competitors have a much larger networking / cloud / software product portfolio that Mitel doesn't. But Mitel has something that Microsoft and Cisco don't have - a singular focus on providing real-time communications solutions that leverage premise, cloud, and mobile solutions.
This acquisition turns Mitel into a market-share leader with video systems and IP phones. Mitel contends that the combined companies will hold leading global market positions including "number one in business cloud communication, number one in PBX extensions in Europe, number three in the Americas and number four globally," according to the company's statement. It also touts that it will hold top share in conference phones and open SIP sets, taking the number two spot for video conferencing systems.
The increased sales revenue allows Mitel and Polycom a larger pool of resources for R&D that will further enhance their product portfolios. More importantly, the transaction allows Mitel to cut its net debt ratio by almost half, strengthening its balance sheet and opening the door to even more possible acquisitions. Mitel has been bold in recent years with it Astra merger in 2014 and its Mavenir acquisition in 2015.
The combined Mitel portfolio of IP telephone platforms, phones, video systems, and cloud improve its position against all of its top competitors- including Microsoft, Cisco, Avaya, and ShoreTel. Mitel is clearly girded for a long term battle with each of these companies. The next question: What will Avaya and ShoreTel do to counter Mitel? These competitors also depend almost exclusively on providing competitive real time communications solutions, and neither can afford to sit idly by as Mitel becomes an increasing threat.
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