Elliott Management Suggests Polycom-Mitel Merger After Acquiring Stakes In Each

In another sign of the evolution of the voice industry, Elliott Management last week took a 6.6 percent stake in Polycom and a 6.3 percent stake in Mitel and is now recommending that Polycom acquire the unified communications vendor.

Elliott Management filed a scheduled 13-D statement with the Securities and Exchange Commission last week that said it would no longer be a passive investor in Mitel. Elliott Management said in the 13-D filing it believes the industry is ripe for consolidation and is encouraging Mitel and Polycom to combine their respective telecommunications and videoconferencing expertise in the form of an acquisition.

The suggested merger comes at a time of metamorphosis for the voice industry, according to a solution provider who requested anonymity.

[Related: Here's Who Made Gartner's 2015 Magic Quadrant For Unified Communications As A Service]

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"The old voice business is dead, we just haven't decided the date. Voice is still critical. … We are just redefining our use and need for it," the solution provider said.

In a letter to Polycom's board of directors, Elliott Management said it could help finance an acquisition, in which Polycom could pay between $1 billion and $1.2 billion for Mitel.

Polycom, based in San Jose, Calif., said in a statement that it plans to analyze Elliot Management’s suggestion but does not comment on shareholder discussions.

Mitel attempted to acquire UC competitor ShoreTel, another vendor backed by Elliott Management, at this time last year. Mitel, based in Ottawa, would not comment on specific M&A talks, but pledged in a statement that it would remain "open and transparent" to Mitel customers, partners and shareholders.

Mitel, a provider of VoIP, UC as a Service, and contact center solutions, was named a leader in Gartner's August 2015 Magic Quadrant report for UC alongside Cisco Systems, Microsoft and Avaya.

Mitel could be a good fit with Polycom because combined, the two could help fulfill the promise of unified communications by offering features such as single-number calling and messaging at the enterprise level, said Gary Berzack, CTO and COO of New York-based eTribeca, a solution provider and Polycom partner.

"There is a lack of depth in the mobile enterprise voice product set, so perhaps a consolidation between two large providers can re-energize that segment," Berzack said.

Mitel has a strong brand and has invested in developing its own UC as a Service (UCaaS) strategy as it moves away from premise-based technology, said Andrew Pryfogle, senior vice president of cloud transformation for Petaluma, Calif.-based master agent Intelisys, which uses Polycom’s telepresence technology in its Cloud Services University. "If Mitel can help accelerate Polycom's move to the cloud, that could be attractive," Pryfogle said.

The videoconferencing provider, however, has been playing in the cloud space for a while in partnership with large providers like Comcast and Vonage, he said.

"What's really the head-scratcher here is the fact that that some of Polycom's biggest customers are UCaaS service providers. In a world where they acquire Mitel, do they become their own service provider and compete with their largest customers?" Pryfogle asked.

Acquiring a VoIP provider would give Polycom call control, a beneficial feature the vendor doesn't have, he said.