Summary Bullets:
- After a shaky start, Mitel’s acquisition and integration of Mavenir Systems has resulted in the launch of ‘Mitel Mobility.’
- While revenues have recovered, the next challenge is to show that the acquisition can exploit the promised IP-based service synergies.
On August 1st, after three months of integration into Mitel following completion of its acquisition, Mavenir Systems has emerged, re-branded as ‘Mitel Mobility.’ Until this milestone, the last five months of Mavenir’s history have been largely hidden from public view following its acquisition announcement at the beginning of Mobile World Congress in March. In terms of public perception, the acquisition didn’t get off to a very good start, with the company gaining the accolade of the “worst news conference” of the show from one reporter as well as most companies (and quite a few analysts) to which Current Analysis spoke, having real difficulty in working out quite what was the rationale for the acquisition. The bemusement was not just confined to outsiders; apart from Mavenir’s CEO seeming somewhat unprepared to talk about the acquisition, employees of Ulticom, which itself had recently been acquired by Mavenir, reportedly rushed to their browsers to find out who on earth it was that they were working for now.
Since then, the uncharacteristic silence of what was formerly an almost hyperactive and certainly bullish contender in the VoLTE space tended to foster the perception that Mavenir had simply been swallowed wholesale by Mitel, never to be seen again (it happens sometimes). The portents of doom were not exactly mitigated when Mavenir Systems Inc., as it was at the time, broke its silence in early April to report a Q1 revenue expectation of $27 million to $28.5 million, far below its prior guidance of $39 million to $41 million. Things were not looking good, and Mitel also suffered at the hands of the stock market.
Now, however, the news is better. Earlier this month, Mitel’s Q2 2015 results held up and Mavenir’s specific revenue contribution was seen to recover to $45 million. Perhaps more significantly, Mavenir’s 17 pre-acquisition carrier accounts had grown by a very respectable 10 new accounts since the end of April. Mitel put this down to increased customer confidence in the company as a whole, and by implication, earlier carrier concerns about Mavenir as a standalone company being dispelled. It’s also clear, in terms of margins, that Mitel is applying its rigorous financial discipline to the former Mavenir, transforming it from, in Mitel CEO’s words, “growth at all cost to a profitable growth model.”
So far, so good (actually very good); the marriage looks to be working and ‘Mitel Mobility’ is pressing ahead, and judging by its pre-CTIA communications, recovering some of its mojo. But, that’s just the beginning; the next goal is to realize the promised wider benefits of the acquisition. According to the CEO, the critical link between the company’s ‘Cloud’ business (the original “premises-based but migrating to cloud” enterprise communications piece) and the ‘Mobility’ business is IP technology. In theory, enterprise IP services can now move into the company’s new carrier accounts and, vice versa, carrier IP services can now move into the company’s enterprise accounts. That’s still not easy to envisage. Yet, after a seemingly shaky start, Mitel/Mavenir surprised us; perhaps it will again.