ShoreTel directors had rejected an earlier bid, which is part of Mitel’s larger effort to grow while consolidating the UC market.
Mitel, which under President and CEO Richard McBee has aggressively expanded its business communications capabilities through acquisitions and internal development, is now taking aim at rival ShoreTel, offering to buy the company for $540 million.
Mitel officials said that ShoreTel’s board of directors had rejected an initial bid that was made Oct.2, and that they made a second offer—at the same price—in a letter from McBee to ShoreTel Oct. 20. That offer will stay open until Nov. 20, he wrote.
The CEO said in a statement that the unified communications (UC) market is ripe for consolidation, and that Mitel is determined to be one of the vendors that does the consolidating. Over the past two years, Mitel has rapidly grown its size through acquisitions, including its $392 million deal last year to buy UC solutions vendor Aastra Technologies, a move that greatly expanded Mitel’s size and market reach and made it into a $1 billion company.
The ShoreTel bid is part of that consolidation strategy.
“We see a compelling opportunity to bring together two market innovators with strong and complementary market footprints, particularly in the U.S., where ShoreTel does more than 90% of its business, in a way that delivers significant value and opportunities to the shareholders, customers and employees of both companies,” McBee said.
He said he was disappointed that ShoreTel’s directors turned down the initial offer, but hopeful they might reconsider. The deal would create a formidable player in the UC space and be a boon to ShoreTel shareholders, he told the board in a letter sent Oct. 20.
“We believe that a transaction between our two companies would be well received by your shareholders, and we are committed to providing them with an opportunity to express their views on our proposal,” McBee wrote.”We have a proven track record of successfully completing and integrating transactions and are firmly committed to bringing the benefits of a combined organization to our respective customers, employees and other stakeholders.”
ShoreTel directors, in a brief statement Oct. 20, confirmed that it had received the “unsolicited proposal” and said they are reviewing it. The company is being advised by Blackstone Advisory Partners and Fenwick and West.
McBee came to Mitel in 2011, and a year later began restructuring a company that was mired in poor financial numbers and dealing with an economy still trying to bounce back from the global recession. The restructuring included cutting 200 jobs—about 10 percent of its workforce—and shuttering some facilities. However, he and other executives then began to rebuild the company via internal work, outside partnerships and acquisitions.
Earlier this month, Mitel announced a new brand that keeps the company name but introduces a new logo that officials said better reflects the growing size of the company and its global reach. In a post on the company blog Oct. 1, Martyn Etherington, chief marketing officer and chief of staff, noted that over the past 18 months, Mitel had more than doubled in size and now powers more than 2 billion connections a day as well as another 33 million cloud communications.
“Our original brand was strong and served us well for 41 successful years,” Etherington wrote. “But it was a heritage brand that stressed our past. … The new brand has a fresh, contemporary feel that we believe is more approachable for customers, partners and employees. And it signifies that Mitel is a software company that provides business communications solutions.”
The data storage vendor will own more than 80 percent of VCE when the deal closes, while Cisco will retain 10 percent.
Data storage giant EMC is buying out most of Cisco Systems’ stake in converged infrastructure vendor VCE and will fold it into its federations of businesses.
The two companies and VMware—of which EMC owns about 80 percent—launched VCE in 2009, offering an integrated data center solution called Vblocks that included servers and networking capabilities from Cisco, storage from EMC and virtualization technology from VMware.
Since then, the joint venture has grown rapidly, and officials with both Cisco and EMC said that the increasing demand for VCE products coupled with the increasing competition in the converged infrastructure space calls for a more traditional business model that will enable VCE to be more agile and responsive.
As a joint venture, the company essentially had to answer to multiple parties on everything from product strategy to financial issues, officials with Cisco, EMC and VCE said Oct. 22 during a conference call with journalists and analysts. It was difficult for VCE officials “having to go to two different parents all the time for investments,” said Gary Moore, president and COO at Cisco and co-chairman of the VCE board of directors. “VCE will now be able to move much faster.”
As a part of EMC, it also will be able to more easily draw on the capabilities of other companies under the EMC umbrella, including RSA for security and Pivotal for big data and platform-as-a-service (PaaS), said VCE CEO Praveen Akkiraju.
Cisco—which had owned 35 percent of the company—will retain a 10 percent stake in VCE and will continue to have a voice in the firm’s direction. VMware will continue to own less than 10 percent of VCE, with EMC taking more than 80 percent share. Moore and Akkiraju said VCE will continue to leverage technologies only from EMC, Cisco and VMware, with the CEO saying that “we believe we have a winning formula here.”
“None of the three of us or the companies we work for want to screw this up,” he said.
Executives expect the deal to close this quarter.
VCE continues to see strong growth. It was surpassed a $2 billion-a-year run rate for Vblock and related products and services, and the third quarter was the sixth consecutive quarter of demand growth of more than 50 percent, the officials said. More than 2,000 Vblocks have been deployed, and executives said that an IDC study found that with Vblocks, customers can deploy new services five times faster than with traditional data center systems, as well as reduce downtime by 96 percent and lower their yearly data center costs by 50 percent.
VCE also is in a market that is expected to continue growing rapidly. IDC analysts have said the market for converged infrastructure will grow 32.8 percent a year and will hit $14.27 billion in 2017, a jump from $5.4 billion last year. Much of the growth is driven by enterprises and smaller companies as they continue to migrate their businesses to the cloud and look for efficient, agile and cost-effective data center solutions to handle such trends as big data and mobile computing.
A report released in 2013 by Emerson Network Power revealed that just one minute of unplanned system downtime costs the average company $5,000. And that was last year; applications are only getting more complex and harder to handle. Conventionally, a runbook would provide detailed instructions for what to do when something breaks, but modern applications now operate on too large a scale to anticipate every problem. Technically, none of the companies in this slide show did anything wrong; they just couldn’t plan for the causes that landed them on this list. All have global, Web-scale architectures, making it impossible for development teams to act before frustrated users speak up on social media. Is there a solution to this daunting task? There is. Artificial intelligence-based monitoring tracks down problems before they result in outages, giving people advanced notice of potential issues and providing peace of mind for an increasingly complex landscape. This slide show uses eWEEK reporting and industry information and commentary from Alois Reitbauer, chief evangelist for artificial intelligence-based performance monitoring and analytics provider Ruxit, to break down the top 10 avoidable application outages of 2014.