Photographer: Chris Ratcliffe/Bloomberg

Elliott-Backed Mitel Hunts for Smaller Purchases After ShoreTel

  • CEO says company aims to displace current leader RingCentral
  • Mitel aims to push recurring revenues above 50% by 2020

Canada’s Mitel Networks Corp. is on the hunt for smaller acquisitions after its $530 million purchase of ShoreTel Inc. as it steps up efforts to take market share from rivals.

The Ottawa-based company, backed by billionaire Paul Singer’s Elliott Management Corp., aims to boost recurring revenue up to more than 50 percent from about 35 percent by 2020, Mitel Chief Executive Officer Rich McBee said.

“We’re going to start picking up speed and we’re not going to be looking back,” McBee said in a phone interview. 

The CEO said he was determined to displace current market leader San Mateo, California-based RingCentral Inc. in the so-called unified communication services, an industry focused on allowing workers to communicate through different devices.

Elliott Management is Mitel’s second-largest shareholder with an 8.8 percent stake, according to data compiled by Bloomberg. The investor changed to a passive from active investor last month, McBee said. Elliott had cheered the ShoreTel deal this summer after pushing for consolidation in the industry.

“They have a fairly good shot at becoming the leader in the space,” said New York-based Gregory Burns, an analyst at Sidoti & Company LLC. The ShoreTel deal gives Mitel the increased scale and leverage to amp up their revenues.

Still, rivalry is heating up as Cisco Systems Inc. is expanding into the cloud-based communications space too, with plans to buy software communications vendor BroadSoft Inc. Cloud-based software maker RingCentral was also said to hire an adviser after takeover interest this summer, and its stock has gained 108 percent this year. 

Though Mitel has developed a strong growth strategy through acquisitions of ShoreTel, Aastra Technologies Ltd. and Mavenir Systems Inc., it will nonetheless be difficult for the company to compete against much larger competitors Cisco or Microsoft Corp., Burns said. Mitel shares have gained 13 percent this year for a market value of C$1.24 billion ($1 billion).

“We might not have some of the brand cache of a Cisco or a Microsoft, but in our space, we’re getting the job done,” McBee said.

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