LinkedIn this morning is buzzing with news that Mitel is going to file bankruptcy to deal with $1.15B in debt. Mitel has accumulated this debt, largely due to financial commitments to its owners, Searchlight Capital, with high interest payments to service the debt. [The telecom universe has many companies that are PE owned and weighted down with high interest debt.]
This financial crisis explains why Mitel wasn’t the winner in buying the NEC assets. Instead the NEC on-premise and private hosting assets went to an NEC dealer, Forerunner. And Forerunner probably has some PE debt as well now.
Some view this move as doom, others feel it is like Avaya who uses BK as a tool.
This does create uncertainty in the market – and uncertainty stalls sales.
Like Avaya, Mitel announced deals with both RingCentral and Zoom. Like Avaya I don’t think this was much more than buzz … for Zoom. Probably the only winner in both deals was Zoom.
Like Avaya, Mitel is focused on UC in on-premise and private hosted. Development is out the door. It is mainly about working with the largest customers to keep them happy. Hence, why Avaya is just working with its Global 1500 customers and all customers with less than 200 CC seats are dismissed. Avaya has presented its competitors with new opportunities. I think Mitel will too.
Will buyers not make parallels between Avaya and Mitel?
SMB prefers on-premise PBX due to a fixed cost. It also doesn’t have personnel to constantly hone and experiment with the communications systems. Out of the box, the comms package has to produce results. A small business doesn’t always get the outcomes they think with SaaS. That is what Mitel and Avaya are banking on, but they don’t want to serve SMB. Avaya has come out and said so. Mitel hasn’t yet.
The Global 1500 Avaya customers are kind of stuck because to migrate off their current duct-taped comms platform would require an interior godfather to evangelize and bet his ass on a new comms platform. That isn’t happening in today’s business environment. w
FURTHERMORE:
One reason it is working for Avaya is the focus and the execution on a strategy set up by Alan when he was brought in to re-imagine Avaya just before their 2nd BK. Mitel would need the same: a new CEO, a new strategy, a team to execute on that strategy. If you think same-same, but with less debt is going to work long term without a new strategy you are kidding yourself.
Many companies are tied to the on-premise hardware business. There is a large base of customers that still hold that iron dear. However, can you scratch a living off of customers with the old mentality? Metaswitch/Alianza, Avaya, Mitel, NEC/Forerunner and others have a large base of customers, but obviously cannot bring in enough revenue to grow and pay off debt. A large chunk of the customers are NOT moving off the iron. You have to accept that; identify what customers are profitable and will work with you (like Avaya did); work with that.
Another question: so Mitel has partnerships with Genesys, RNG and Zoom. What does it get from those partnerships? I assume that the partners did all the integration work, but is their a financial benefit for Mitel? Does it see a stream of revenue as a sales partner from these cloud partners – and is it a material amount?