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Does Mitel finally get it? May 20, 2011

Posted by TelUS Consulting Services in VoIP catagory.

Unified communications manufacturer Mitel (NASDAQ:MITL) is making yet another change in course as it attempts to regain the luster it had when it went public a little more than a year ago. The Canadian firm is looking to jumpstart a business that has seen its stock price slide from $14 per share to less than half that in recent months.

The latest move, includes plans to make it nimbler by simplifying its organizational structure, focusing R&D investment on the mid market, and realigning sales and channel in the U.S. And, just eight months after CEO Don Smith left the company, President and COO Paul Butcher is also out. CEO Rich McBee is assuming the role of president, and the COO post is being eliminated.
McBee is implementing a strategy anchored by three initiatives in a multi-step approach to grow Mitel’s business as a unified communications and collaboration provider.

The company plans to simplify its business, creating a flatter organization comprised of two geographical sales organizations– Americas and International– and three key business units, Mitel Communications Solutions, Mitel NetSolutions and Mitel DataNet. This new, more agile organizational structure may enable Mitel to better serve its customers and innovate more quickly, all with the goal of increasing shareholder value.

Mitel will focus it R&D efforts on products that address the high-growth market of 100 to 2,500 user organizations. Mitel also plans to reorganize its U.S. sales organization, hoping to more effectively deliver its products through partners by increasing its investment in its indirect channel, facilitating growth and expansion at local, regional, and national levels. They will also focus their direct sales team on a select group of customers.

Mitel will look to take advantage of its “market leadership in voice virtualization,” continuing to partner with the likes of VMware. This has been a differentiator for Mitel in acquiring new customers and providing a migration path for existing Mitel 3300 IP Communications Platform customers to Virtual Mitel Communications Director.

Mitel also looked to reassure investors that the changes wouldn’t negatively impact its earnings, reiterating its revenue and non-GAAP financial guidance for the fourth quarter as provided in its prior quarterly earnings press release from March 1. Mitel said it would incur a non-recurring charge in the fourth quarter of fiscal 2011 that wouldn’t impact non-GAAP operating expenses or any of the other non-GAAP outlook provided in its previous press release.

Mitel saw second quarter earnings drop by $4 million in the third fiscal year quarter, which was reported in March, although it did see some big sales, including a $43 million deal with the New York City schools and acceleration in the APAC region, Central and Latin America. The company said it expects essentially flat revenue of $160 million to $165 million for this quarter, compared to $162 million in the third quarter and $161.1 million in the second quarter.

I have been a Mitel distributor for many years and have to admit, their product is solid. Despite being a Mitel proponent, Mitel will most likely continue to founder until it either completes its product line with its own servers and switch product line or joins forces with the likes of an HP so to better address its primary competitors who have a more complete VoIP product portfolio. If you own this stock now you may be in for a rocky road ahead.

Joe Buck, NCE

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