The TRUE FACTS about Mitel
This document is in response to the recent information making its way from ShoreTel’s sales organization to some of Mitel’s channel partners, existing customers and prospective customers.
| ShoreTel’s OPINION: Mitel is facing serious financial difficulties, which prompted the recent downgrading by Moody’s Financials a few days ago to confidence levels equivalent to junk bonds. They were also downgraded by Standard and Poors a few months ago. |
Mitel’s FACTS: Mitel’s recent press release, states its fiscal 2009 audit results. These results reflect 6.2% revenue growth, sustained gross margins and a dramatic improvement in operating profitability, with EBITDA of $85M, a 33% increase over the prior year’s performance. Both S&P and Moody’s have commented how this strong performance was achieved despite the global recession that all companies are faced with in recent quarters.
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| ShoreTel’s OPINION: They have significant debt of $450m, with $40m of annual debt payments, but have only $32 million in cash remaining. It will only become more costly for them to raise additional debt. Moody’s indicates the probability that Mitel will default on debt has grown. They are experiencing the same situation that Nortel faced, which drove them to Chapter 11. |
Mitel’s FACTS:
Mitel’s “significant” debt was raised, in addition to approximately $300M of new equity, to complete the even more significant $729M purchase of Inter-Tel, a leading SMB provider of telephony solutions. Mitel chose to suspend its IPO plans, in the spring of 2007, to instead complete this acquisition, to solidify its leadership position in the market, obtain scale and sales and service coverage in the US market, broaden our existing solutions portfolio and drive attractive operational synergies, as evidenced by our 2009 operating performance. The $40M of annual debt payments referenced by ShoreTel is factually incorrect. Mitel’s near term debt principal repayment obligations are less than $4M/year. This is a matter of public record, in our SEC filings. In fact, to date we have paid down principal ahead of what our debt agreement requires.
The bulk of our debt is due for repayment or re-financing in 2014 and 2015. It has always been and still remains Mitel’s intent to take the company public prior to these dates and to pay down some or all of this debt position. We also enjoy the backing of two very large and very powerful shareholders, including Sir Terence Matthews, a billionaire tech entrepreneur and founder of Mitel, as well as Francisco Partners, a $5B private equity sponsor, who partnered with the company to provide the bulk of the equity financing needed to acquire Inter-Tel.
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| ShoreTel’s OPINION: They spend only 8% of R&D across 5 different platforms. Mitel terminated 450 employees in 2009, which suggests technical support for the 5 platforms, will continue to deteriorate. |
Mitel’s FACTS:
Mitel’s R&D spent over the past 5 years amounts to $317M…ShoreTel’s R&D spend over the same period was $91M. This is approximately 3.5 times larger than ShoreTel’s R&D spending. Note as well, that unlike ShoreTel, Mitel completed the industry landscape changing acquisition of Inter-Tel in 2007, with roughly $85M of the $729M purchase price being allocated to technology acquired in that acquisition. The acquisition enhanced an already powerful and respected solutions portfolio by adding a SOHO offering, a highly respected hybrid key system in the Inter-Tel 5000 product, a broad line of digital sets and several powerful conferencing and collaboration applications. While this acquisition investment in R&D does not show up in our R&D expense line, it represents real investment, approaching the total ShoreTel R&D spend for the past 5 years.
This strength of R&D commitment is further evidenced by Mitel’s patent (filed and pending) portfolio numbering some 1100 vs. ShoreTel’s 45. While staff reductions have occurred, largely due to realizing synergies from our merger with Inter-Tel, we have 2400+ employees vs. ShoreTel’s 375 and are a truly global player with 34% of our revenue generated outside the US vs. 7% at ShoreTel. |
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ShoreTel’s OPINION: Mitel pricing becomes extremely expensive as you add their NuPoint Messaging systems, especially after about 400 lines. |
Mitel’s FACTS: Mitel offers a wide array of NuPoint Unified Messaging solutions in Mitel Applications Suite (MAS), NuPoint Standard, and NuPoint 640.
In MAS, NuPoint UM is extremely cost effective for up to 500 users. In upcoming MAS Rls 2.0, this will be extended to offer a cost effective messaging solution up to 2500 users. For larger installations of 500 users and more, NuPoint Standard UM provides a highly featured, standalone unified messaging solution. For customers that require a true High Availability solution for centralized data centers, NuPoint 640 UM cost effectively and gracefully scales to hundreds of thousands of users. Customers who choose Mitel Applications suite for NuPoint UM can also leverage the same server and investment to implement
- Mitel Border Gateway
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| ShoreTel’s OPINION: Mitel did improve their centralized administration software applications and simplify their licensing models on the 3300 in their last release, which is an attempt to catch up to ShoreTel. Our administration is still much easier. |
Mitel’s FACTS: Mitel has invested significantly and will continue to invest in simplifying the management and administrative capabilities associated with a Mitel Communications Director based solution. Implementation and management of the Mitel Solution leverages its Enterprise Manager, Wizard (which enables simultaneous programming of applications) and unique self-learning capabilities. The self learning reduces programming in a network by enabling network nodes to learn and stay updated automatically by communicating with each other. The network database is held in the network itself, so can never get out of step, unlike the Shareware Director – a separate windows-based application that uses spinning media and needs to be on-line for the correct functioning of the ShoreTel system. It should also be noted that Mitel’s administration suite enables support of very large installations and large numbers of users, such as:
- One of the largest school districts in the U.S., which has over 600 systems deployed,
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