Last month, Mitel disclosed it had made an offer to acquire ShoreTel, an offer ShoreTel’s Board of Directors refused. After releasing its quarterly financial results last week, ShoreTel released a statement explaining why it had rejected the Mitel offer.
As is typical of many spurned takeovers, ShoreTel’s Board explained in a statement that the Mitel "proposal significantly undervalues ShoreTel and its strong prospects for continued growth and value creation as it continues to implement its long-term strategic plan, and is not in the best interests of ShoreTel stockholders."
Chuck Kissner, Chair of ShoreTel’s Board of Directors, characterized Mitel's proposal as "financially inadequate" and "an opportunistic attempt to acquire ShoreTel’s assets."
ShoreTel president and CEO Don Joos elaborated, saying "ShoreTel is executing on a number of strategic initiatives to continue to accelerate growth and profitability, including our previously announced strategic plan to introduce our next-generation common platform in April 2015. We are also making the necessary investments to achieve our strategic goals of growth, enhanced technology and world-class customer service."
Joos added, "We are confident that we have the right people, technology and products in place to execute our strategic plan and deliver significant value to our stockholders, and that the continued execution of this strategic plan will deliver substantially more value to ShoreTel stockholders than Mitel's inadequate proposal."
ShoreTel's Board emphasized three strategic priorities that it believes will be successful in delivering increased shareholder value:
- Executing on its strategy to increase its cloud bookings and recurring revenue.
- Developing its next-generation common platform that can be deployed across cloud, hybrid and on-premises environments through a single ShoreTel solution. (ShoreTel expects to launch the platform in April 2015, and it has executed numerous infrastructure initiatives to support expected growth in its cloud business.)
- Continuing to earn a world-class reputation for customer service and satisfaction.
ShoreTel contends that its financial results reflect the company's ongoing successful execution of its strategic priorities: the company has realized organic revenue growth for the past six consecutive quarters, with year-over-year hosted revenue growth of 27% in fiscal 2014, and an expansion of recurring revenue to 39% of total revenue.
Our observation: we’re not weighing in on either side of this attempted takeover. However, as competitive pressures increase for premise-based unified communications systems, we expect to see further supplier consolidation. The bad news for infrastructure suppliers will continue to face very high competitive pressure given the growing acceptance of cloud-based UC services - plus the multitude of premise-based competitors. The good news is that the market for UC systems and UC cloud services is still growing, and we expect to see continued opportunities for many years.