Mitel: Acquiring ShoreTel Doesn't Make 'Financial Sense'

Mitel is dismissing claims that it is seeking to acquire fellow unified communications vendor ShoreTel, saying the purchase doesn’t make "financial sense."

According to a report from financial news service CTFN Friday, sources predicted that Mitel and ShoreTel would begin M&A negations, with Mitel seeking to make another bid for ShoreTel. In 2014, Mitel made multiple offers to acquire ShoreTel with a high bid of $574 million, which ShoreTel ultimately declined.

A Mitel spokesperson said although Mitel is currently looking for potential acquisitions, ShoreTel "does not make financial sense for us."

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"Obviously the company looked at ShoreTel, along with others. … At this time, ShoreTel is not one of the companies we are evaluating," said the spokesperson.

ShoreTel declined to comment on the matter.

Last month, Sunnyvale Calif.-based ShoreTel formed a Strategic Advisory Committee to review "strategic alternatives," which included the potential sale of ShoreTel or selling company assets.

’The [committee] intends to evaluate all options thoughtfully and thoroughly,’ said Don Joos, president and CEO of ShoreTel, in a release. ’I can assure our shareholders, employees, customers and partners that we will only embark on a new course if it offers superior value for shareholders, but we remain fully committed to continuing to deliver innovative solutions."

In Mitel's recent quarterly earnings call in August, executives said the company is looking at acquisitions that will successfully deliver shareholder value. Ottawa, Canada-based Mitel nearly acquired fellow UC specialist Polycom for $2 billion, although the deal was terminated in the eleventh hour. Polycom instead was bought by private equity firm Siris Capital Group for around the same $2 billion price tag.

One top executive from a solution provider and longtime ShoreTel partner said ShoreTel is likely looking at potential offers as consolidation in the unified communications market continues.

’[ShoreTel] is probably looking at the open market right now,’ said one top executive from a solution provider and longtime ShoreTel partner, who declined to be named. ’It’s going to be hard to grow substantially in this market right now … and they need to show growth to their investors as a public company quarter after quarter.’

Research firm Gartner predicts that the UC market will only grow slightly from $41 billion in 2014 to $42.4 billion by 2019. The firm expects more UC consolidation and increased user expectations, prompting an emphasis on vendors’ financial viability.

’The integration of on-premises UC with cloud and hybrid UC services continues to play an increasingly important role,’ said Gartner unified communications analyst Bern Elliot. ’As the enterprise UC market continues to mature, we’re expecting more consolidation.’

For ShoreTel’s recent fourth fiscal quarter earnings, which ended June 30, the company reported revenue remained flat at $95 million year over year. Total revenue for fiscal year 2016 remained flat at $360 million compared with fiscal year 2015.