Mitel Acquisition of Mavenir Indicates New Directions
The Mitel acquisition of Mavenir for $560M seems to reflect both a current need as well as a future direction for Mitel. Clearly, the current revenue of Mavenir at about $130M indicates that this acquisition is about opportunity and change, not accretive revenue and margin. Even at a 20% profit margin, the acquisition would take long time to pay back without significant revenue growth.
A first clear value of the acquisition is the ability of Mitel to deliver a superior mobile solution for their UC customers. A number of UC Experts, including Michael Finneran, have chided the UC vendors as a group for not delivering mobile clients and device integration in a way that provides seamless use and accelerates adoption. In fact, surveys show that the overall adoption of enterprise mobile UC apps is actually fairly small. With the expertise that Mavenir brings, as well as technology designed to integrate with IMS and RCS, Mitel may see a clear path to providing a better integrated mobile UC experience, while at the same time providing an overall user experience that will increase adoption. As Mitel is rapidly focusing movement to the cloud as well, this will be a logical enhancement to those offers.
A second area of focus may be through the carriers. Mavenir is primarily a vendor to the carriers, enabling them to enhance their offers, delivering Wi-Fi integration, WebRTC integration, and other capabilities. The potential of Mitel offering their UC capabilities and technology as a way for service providers to deliver a complete business communications solution through their wireless networks and OTT delivery for off net devices could become a major focus. While many analysts have talked about the potential of customers eliminating either premise or separate cloud telecom/UC solutions in favor of the wireless network, with a few exceptions, this has not taken off. However, by combining the cloud UC services that Mitel has with the capability acquired with Mavenir to integrate those to a wireless carrier’s infrastructure, Mitel may be moving to being a provider in an entirely new version of business communications and UC. By combining a rich UC offer that can be delivered from the cloud on existing mobile devices through apps, on RCS-enabled devices, and OTT to off net devices and BYOD, Mitel may be focusing on a new market that seems to be held back at this point due to a lack of capability, not demand. For mobile carriers, enabling complete mobile business communications solutions could both expand the market, but also provide a source of better margin and stability as compared to the consumer marketplace.
It will be interesting to watch how Mitel moves forward over the next few months/years in this area. With this acquisition and the preceding acquisitions of Aastra, Oasis, and prairieFyre, it is clear that Mitel President and CEO, Richard McBee, and the Mitel team are focused on investing to both grow and differentiate. It is clear that the Mitel team believes that aggressive acquisition of critical components is necessary for success. In a market where major competitors like Cisco and Microsoft are challenging from adjacent market spaces, the size and differentiation that the Mitel M&A strategy is delivering may be critical for long term success. Mobile usage continues to grow. The growth in available bandwidth in the LTE network, combined with VoLTE essentially eliminating the need for terrestrial bandwidth for voice, investing for mobile excellence seems like a great play.