Mitel to Acquire Toshiba Communications Assets

Mitel to Acquire Toshiba Communications Assets

By Phil Edholm May 12, 2017 2 Comments
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Mitel to Acquire Toshiba Communications Assets by Phil Edholm

Yesterday, Mitel announced a Memorandum of understanding (MoU) to acquire certain assets of Toshiba and assume ongoing support liabilities. While the announcement was not clear as the specific products or geographies, it is clear that Mitel will be taking over the Toshiba North American market that Toshiba recently announced to their channels Toshiba is exiting.

For all concerned, this appears to be a significant and good outcome. Toshiba, racked by financial issues, had decided to exit the North American communications market; this will reduce the impact on them of potentially abandoning their customer base.

For Mitel, this is another step in CEO Rich McBee’s strategy of being the consolidator of market shares in the communications space. While other large players like Cisco, Avaya, NEC, and Microsoft have large bases, each is much less than 20% of the global installed base. Mitel strategy to aggregate the rest of the market and provide both enhanced capabilities while maintaining the existing platforms and providing a persuasive path to the cloud is a great strategy. While there are challenges in minting the existing technology bases, Mitel has demonstrated the capability to increment the offer with enhanced UCC capabilities and cloud migrations. The Toshiba market share in North America is between 3% and 4%, however the actual installed base is a slightly higher percentage. With this, Mitel moves to a clear number 3 position in North America and will probably move to number 2 as the impact of the Avaya bankruptcy continues. While a large portion of the Toshiba installed base is SMB, the reality is that Toshiba has a strong position in large national branch/retail organizations like Lowes. The addition of these brands to the Mitel portfolio will further strengthen the company and open doors for new revenue.

For the Toshiba dealers, this is great news. A vendor exit like this can have significant impact on a VAR that is selling that brand. Moving to a new brand presents huge challenges in market position, training, stock, spares, etc. With the Toshiba products as part of the Mitel umbrella, the dealers/VARs have a clear path to maintain their existing Toshiba customers and revenue, while augmenting it with the full array of Mitel products.

For the Toshiba end customers, this MoU and potential sale is the best outcome. With Mitel, they will find a vendor partner that is both dedicated to protecting and growing the base, but also has the capability to add new value. Instead of being stranded with products and solutions that are moving to being unsupported, they are part of an ever-increasing capability set. The alternative of the Toshiba business moving to a PE firm or some other stand-alone option would be a dramatic reduction in options for the customers as the business would be small and not capable of really competing.

Overall this a good deal for all concerned and points the way for the continued Mitel strategy of being the consolidator in the space. The only real question is who is next. The answer to that probably lies in the price per acquired seat. To make sense, the price for an asset like this needs to be right. While the actual terms were not announced, when there is insight into the deal it will illuminate the actual value of a communications seat in an acquisition. With total cost of acquiring a new cloud seat being in the $100-300 range (depending on size and location), acquiring existing installed base seats for much less may prove to be a brilliant strategy, especially if the majority can be moved to a new offer and retained.

 

2 Responses to "Mitel to Acquire Toshiba Communications Assets" - Add Yours

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Ray Maccani 5/15/2017 8:50:52 AM

Phil, it was great spending time with you at the NEC Advantage event last week .If you knew of this then, you can be entrusted with keeping a secret! My question is, why didn't Toshiba attempt to sell the base before exiting NA? If they did, is this another example that "hardware" has little or no value?
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Phil Edholm 5/16/2017 12:06:33 PM

I do not have any information on why Toshiba decided to "exit" before closing the sale, however, Toshiba is in a major melt-down due to the Westinghouse nuclear group
http://www.kansas.com/news/business/article150538447.html

The reality is that the business may have been seen as a drag or not core, however, the key factor is Mitel buying it.

As to the question of HW value, that is always in the eye of the beholder. Without some hardware, solutoins cannot be delivered. The real value is in the installed base. With an installed base there are three options, continued monetization of the solution, movement to a new platform with potentially higher revenue and longer term use, and incrementally adding value. Based on the strategy of Mitel and Rich McBee, All three would seem to fit into the value. If Toshiba has a 4-5% installed base share int he NA market, that translates to about 5-7 M seats that Mitel can leverage to either enhance or transition. Also, the channels are critical in that motion. Finally, as the Toshiba base is generally smaller per user locations, the potential of migrating to a Mitel cloud could be higher.

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