Mitel CEO To Partners: Get Ready For The Next Level

As Mitel solution providers descend on San Diego this week for the company's annual Business Partner Conference, Mitel's chief executive sees more reasons than ever for the channel to be excited. It all starts with the fact that in North America, Mitel now sells 70 percent through solution providers -- a dramatic increase from previous years -- and nearly 100 percent in the rest of the world.

"The biggest most challenging thing on the plate was the channel conversion we needed to make," Richard McBee, Mitel's CEO, told CRN in a brief interview Tuesday. "We moved a large percentage of our business to channels, and the team never skipped a beat, and our channel partners, I think, are recognizing the value of our portfolio."

McBee told CRN in June 2011 that Mitel needed to clean up its act in the channel and do more to change the company's longstanding reputation for channel conflict.

[Related: Mitel Opens Previously Direct-Only Customer Accounts To VAR Opportunity ]

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Eighteen months into McBee's tenure as CEO, Mitel is viewed as a much more channel-friendly UC company that's bet heavily on virtualization's role in communications, and also one that's seen its financial standing stabilize after some rocky years.

Mitel on Tuesday reported revenue for its fourth fiscal quarter of $157.6 million, up 4 percent from the year-earlier quarter, and profit of $49.8 million -- a surge compared to $3.9 million a year earlier. The fourth-quarter profits did include relief from a valuation allowance of about $35 million from Mitel's deferred tax assets in Canada, the company said.

The results are significant because they mark five quarters in a row of year-over-year growth. Mitel is projecting revenues of $150 million to $155 million for its first fiscal quarter.

What came during McBee's first year as CEO was a strategy called 3+1, in which Mitel would focus on unified communications opportunities, the lucrative midmarket customer segment and the emerging trend around voice virtualization, in which Mitel partners tightly with VMware.

"We believe we've got a solid strategy in place and that we can take it to the next level," McBee said. "We strongly believe in partnership where a manufacturer and solution provider have to be tied at the hip and delivering solutions the customer wants and needs."

There have been ongoing structural changes, and several executive hires and exits since McBee joined. During the company's third-quarter earnings call in March, Mitel also said it intended to sell its DataNet/Comm Source business unit, which primarily distributes other telephony and networking products complementary to Mitel sales and came to Mitel during its acquisition of Inter-Tel in 2007.

But some of the biggest changes in the McBee era have been in channel -- and for the positive. For example, Mitel made the decision last December to open up service support contracts to Mitel solution providers on accounts that were previously direct-only.

NEXT: Mitel Stays Focused On Channel Roadmap

Mitel's goal now is to ensure its strategic partners are protected, both from a profitability standpoint and in competitive situations against bigger UC rivals like Cisco, Avaya and ShoreTel.

"We're not looking to be over-distributed," McBee said. "We added 17 strategic channel partners in the quarter, but you don't hear us talking about adding 500 channel partners."

Recent technology announcements by Mitel reflect a company looking at how to leverage its various businesses in more cross-functional ways. In May, for example, Mitel launched a new offering called AnyWare IaaS that lets organizations host Mitel's virtualized UC and collaboration software in virtual private data centers using Mitel NetSolutions, the company's CLEC business.

In early June, Mitel expanded its Mitel Solutions Alliance developer partner program with a new partnering tier, Mitel Platinum Preferred (MPP), which recognizes third-party solutions it deems particularly strategic and that Mitel partners should look to first for pre-integrated solutions.

Additional channel program enhancements and a significant new product launch are expected at the Mitel conference later this week. For now, McBee said the plan is not to take a victory lap but to inspire Mitel partners to continue the hard work.

"I stood on the stage a year ago and had to say 'trust me, we're not going back to the way it was,'" McBee said. "This year, I'll be able to stand on stage and say thanks for helping us make the transition, and it's time to go to the next level. We've got a unique portfolio, and we can virtualize any piece of it. There's no customer here we can't compete for."