Mitel is a developer of communications systems and software for businesses of all sizes. The company has had particular success in targeting small and mid-size businesses, but plays a role in the enterprise market as well. Mitel’s portfolio encompasses telephony (IP, TDM and key) systems, handsets and software applications. The Ottawa-based company was founded in 1972 by Terrance Matthews, who presently serves as chairman and owns a 38% stake in Mitel. CEO Don Smith is a former Mitel sales and marketing executive who left the company to found optical start-up Cambrian Systems. Following Cambrian’s acquisition by Nortel, Smith became President of Nortel’s Optical Internet Solutions division before returning to Mitel in 2001.

Though Mitel is privately held, as a Canadian company selling into the U.S. it files annual revenues with the U.S. Securities and Exchange Commission. The company recorded revenues of approximately $384 million in 2007, $387 million in 2006, and $342 million in 2005. Mitel generates approximately 60% of its aggregate revenues in the U.S. EMEA is the company’s second largest market, comprising about another 31%, while sales in Canada and CALA make up about 8% of Mitel revenues. In August 2007, Mitel closed on its purchase of Inter-Tel, a rival developer of SMB communications systems, for $729 million. Including Inter-Tel’s contributions, Mitel reported $692 million in revenues in its fiscal 2008.

Mitel divides itself into two business segments: Solutions and Services. The former develops voice, video and data communications systems and applications sold to SMBs and enterprises, while the latter consists of direct product sales initiatives, professional services, managed services, and installation, maintenance, technical support services for both voice and data networks. Mitel also resells the telecommunications access services of various carriers. The company operates in more than 90 countries and employs approximately 3,000 people.

We are taking a slightly positive stance on Mitel. The company is particularly well established in the SME space, with a long history of serving customers in this particular market segment. The acquisition of Inter-Tel in 2007, which further solidified the company’s position as an SME communications powerhouse, adds revenues, personnel resources, an expanded product portfolio and a greater presence in the U.S. Mitel has a proven record of product innovation. It has regularly introduced new and enhanced applications for mobility, teleworking and conferencing, as well as new end points and peripherals that expand the capability and flexibility of its communications systems. Mitel has a longstanding relationship with Microsoft, which has led to interesting product development (i.e., Live Business Gateway) and joint sales opportunities. In addition to its SME stronghold, Mitel also plays an active role in the enterprise market, with its 3300 IP PBX able to scale up to meet the communications needs of very large sized businesses. Mitel has also shown a certain degree of success in positioning its products as the basis for carrier’s hosted services offerings. With its 3600 Hosted Key System and endpoint designs, Mitel has attracted interest among hosted telephony service providers and the softswitch vendors supplying them (e.g., Tekelec, Natural Convergence).

Mitel, however, has its work cut out for it. The Inter-Tel acquisition solidified Mitel’s role in the North American market for SME communications solutions, did not necessarily help corporate initiatives aimed at increasing the number of enterprise accounts or expanding into Europe or Asia. There were a number of synergies between Mitel and Inter-Tel regarding business models, target customers and point products, and some integration work has been done, however Mitel still must create a cohesive whole between what are now essentially two separate product portfolios. Separately, scalability improvements to its 3300 ICP open up marketing opportunities for Mitel within enterprise accounts; however, Mitel’s traction among large enterprises is limited in comparison to its rivals. Mitel’s Microsoft-based unified communications solutions are competitive, but are grossly overshadowed by alternatives Alcatel-Lucent, Avaya, Cisco, Nortel and Siemens Communications. The company is also beginning to fall behind these rivals which are aggressively targeting large enterprises with advanced FMC, SOA and web services solutions. These same competitors and a host of others are also proving committed to claiming a larger share of the SME market where Mitel has been most successful.

Module	Perspective	Market Tier	Market Status	Momentum	Vision
Enterprise Communications	Neutral/Positive	2nd Tier	Established	Neutral/Positive	Neutral/Positive
Enterprise Communications	Neutral/Positive	2nd Tier	Established	Neutral/Positive	Neutral/Positive

• Mitel has successfully carved out a market niche in the U.S. and the UK with under-200 seat organizations, which remains one of the largest enterprise telephony market segments globally.

• Mitel’s acquisition of Inter-Tel expanded the company’s role in the SME market segment. The move particularly benefited Mitel in the U.S. where Inter-Tel maintained a sizable base of enterprise customers, as well as a channel that is now a conduit for Mitel products and services. Further, the Inter-Tel acquisition expanded Mitel’s portfolio of products and brought to Mitel a successful managed services program that has been adopted by the company for all of its products

• Mitel moved aggressively in integrating Inter-Tel’s business operations. The company has rationalized some of the Inter-Tel product line, most notable the Inter-Tel 7000 platform). Some Inter-Tel-developed applications can now work with Mitel telephony systems, while Mitel-developed end stations operate with Inter-Tel-developed voice platforms. There is a combined reseller program, and the company’s Managed Services program now covers both Mitel and Inter-Tel products.

• Mitel has done a respectable job in building out its global channel network with well-known top tier players. Its partners include BT, Verizon, Allstream, Rogers, Bell Canada, IBM, Westcon, Ingram Micro, TechData, Crane and others, greatly improves Mitel’s sales footprint, provides an advantage over smaller rivals and enables it to better compete with larger, more resource rich competitors.

• Mitel has provided its legacy PBX customers with a coherent migration path to IP telephony that retains the core value of its original PBX system and gives customers the necessary confidence to follow the company's strategy of moving toward voice/data convergence.

• Mitel’s partner ecosystem has been pivotal in keeping the company’s portfolio competitive. The benefits of Mitel’s partnership with Microsoft for UC and other applications development are well documented. Also critical however are partnerships with Foundry Networks and Hewlett-Packard’s ProCurve Networking, and more recently Sun Microsystems, which have helped drive the convergence of data on Mitel’s otherwise voice-centric products.

• The process of combining Mitel and Inter-Tel has moved rapidly from an organizational standpoint. However, integrating what are today two separate portfolios into a single cohesive catalog will be a long-term process. It will require considerable R&D and financial resources. In addition, both Mitel and Inter-Tel’s international operations focused largely in the UK and were limited elsewhere in Europe. As such, the merger of the two companies has not significantly expanded the combined company’s international operations.

• In November 2008 Mitel announced a number of initiatives to help lower its operational expenses and improve sales opportunities in a down global economy. The company has claimed profitability in several recent quarters, but it carries debt of over $430 million. Taken together these circumstances may shake the confidence of Mitel’s partners and customers.

• Despite its years of activity in the enterprise telephony market, Mitel suffers greatly from comparatively low brand awareness, particularly outside its native Canada. This not only adversely affects its standing in its traditional SME markets, but also in the enterprise communications markets targeted by the company. Decisions by executive management not to advertise the company aggressively promise that this situation will not change soon.

• Mitel now draws a substantial portion of its revenues in the UK and US from direct sales and services. However, the company does not promote third-party product support as part of its services offerings. The company also does little to publicize the ability of its services organization to consult businesses on integration of IT and communications software or for its ability to directly perform these integrations.

• Though not an uncommon occurrence, the majority of Mitel’s channel partners have relationships with multiple Mitel competitors. Many of these own larger shares of the world’s PBX markets (i.e., Nortel and Avaya in the U.S., and Siemens Enterprise Communications, Aastra and Alcatel-Lucent in Europe) that offer easier and faster sales for channel partners leveraging the incumbent supplier as an entry to upgrade and up sell opportunities.

• Mitel has no portfolio of data networking systems and as such could find it difficult to meet its customers’ end-to-end converged communications needs. The company’ partnerships with data networking systems vendors have had a tendency to change, with HP ProCurve and Foundry replacing a previous relationship with Extreme.

• Mitel’s top priority lies in eliminating product overlap and facilitating interoperability between Mitel and Inter-Tel products that will co-exist in the combined portfolio. However an emphasis on cross-training sales staff and resellers in Mitel and Inter-Tel solutions will continue to be equally important to maintain revenue momentum as the company rationalizes its portfolio and transitions customers.

• The Mitel brand is not well known in the U.S. or in its second largest market - the UK - where the company wants to increase its market share in upcoming years. This is perhaps less of an issue with Mitel able to market its products in the U.S. under the auspices of the Inter-Tel corporate brand. Mitel should nonetheless work to increase awareness of its own brand to bolster confidence among enterprise buyers.

• The company should do more to educate the market on the scope of its direct sales and services programs. For example, third-party product support, consultancy offerings, and ICT services will be needed in order for Mitel to not only build out its market share in general, but to attract larger enterprise specifically.

• Mitel needs to raise awareness for its advanced communications applications, particularly for its developments in the areas of multimedia collaboration, conferencing and unified communications. The company has a very competitive portfolio leveraging Microsoft-based solutions, but also needs to branch out to offer IBM-based solutions as well in order to broaden its addressable markets and to keep pace with UC developments from its larger rivals. Mitel should also readily position its applications capability as clear differentiation against smaller rivals.

• Mitel should ensure that its top-tier channel partners aggressively market its telephony systems. With many of these partners also promoting a number of alternative products as well, Mitel should ensure it is not lost in the crowd. Identifying and recruiting a wide range of Mitel resellers of all stripes is tantamount to improving awareness for and sales of Mitel products globally.

• Mitel should bring jointly developed voice-data solutions to market by leveraging its partnerships with HP and Foundry, and with its MiSolutions program. Being a single source provider of more complete end-to-end solutions would help Mitel shorten its sales cycles and enable it to compete more evenly with the likes of Alcatel-Lucent, Nortel, 3Com and Cisco.

• Legacy Inter-Tel customers and resellers should continue to seek guidance in which of the company’s voice systems will be actively developed and marketed on an ongoing basis. Some products, such as the Inter-Tel 7000 IP communications platform and Inter-Tel’s 5200 Series IP phones either have been phased out of the Mitel product portfolio or soon will be.

• U.S. and UK customers that are interested in Mitel’s communications systems and support services should inquire about certifications the company’s direct organization has to support third-party products. Alternatively, these customers should look to Mitel to pair them with qualified channel partners when necessary.

• Prospective customers should compare Mitel’s end-to-end product plans with those of their incumbent PBX supplier, evaluating scalability, networking, features, management, functionality and availability. Prospects should contact resellers that carry product lines from multiple vendors to assist in this regard.

• Customers interested in Mitel’s managed services and leasing programs should inquire about the scope of products covered under these offerings. While the programs now encompass both Mitel and Inter-Tel developed products, third-party applications (i.e., messaging, conferencing, contact center) are not included. As such alternative solutions and channel partner programs should be investigated.

• Prospective SME customers should investigate the numerous offerings, such as those from of Avaya, Aastra, Nortel, 3Com, Mitel, ShoreTel and others, before making a final choice on an IP telephony system.

• Service providers seeking CPE partnerships for SME-oriented managed IP telephony service offerings should include the Mitel systems and desktop endpoints in evaluations—if only to keep bigger-name suppliers honest.