ShoreTel Filling the Nortel Void?

Rich Tehrani : Communications and Technology Blog - Tehrani.com
Rich Tehrani
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ShoreTel Filling the Nortel Void?

Jeff Wiener at The Telecom Blog predicts 2011 will be a huge year for ShoreTel and as supporting evidence he cites distribution deals with Catalyst/Scansource and Westcon - traditional Avaya partners. He quotes ShoreTel's Kevin Gavin who says the company is looking to fill the void left at the table in the wake of Avaya's Nortel acquisition.

Indeed, ShoreTel has been seeing positive momentum in terms of perception - there is no question about that and I wouldn't be surprised to see them gaining market-share in the future.

Mitel could have certainly been the company to step up to the plate - they have always had great technology and the Inter-Tel acquisition of a few years back really broadened their product line and distribution. The challenge is the company's outward communications have been spotty - they promote themselves and then go dark. Mostly they're dark.

Moreover, Inter-Tel had a very strong US brand and Mitel allowed it to completely die without replacing it with their own brand. Most if not all of the $723M spend on the purchase is now down the drain.

In reality, Mitel's brand wasn't strong enough to support the success of its own product line, let alone the products of another company.

And when you have a company like ShoreTel leveraging its momentum and putting out consistent messaging, you start to lose sales. Obviously Cisco too is a strong branding company - and 9 times out of 10 the company with the best communications and branding is the winner.

This is a fact engineers who typically run tech companies fail to take into account.

ShoreTel One-Year Chart
shoretel-one-year-chart.jpg

It should subsequently come as no surprise that although ShoreTel and Mitel are both trading below their IPO levels, Shoretel's market cap is $392M while Mitel is worth only $275M. Moreover, the Mitel one-year chart is very similar to ski slope, down 57% while Shortel is up 44%.

Mitel One-Year Chart

mitel-one-year-chart.jpg

Mitel is addressing its challenges with a new CEO, Richard McBee. I've reached out for an interview but the company didn't make him available at this time.

If I were McBee the first thing I would do is focus on a five-year branding strategy with integrated PR and make it a capital offense to cut these budgets. Moreover, I would leverage Sir Terry Mathews to the hilt. He is Warren Buffet and John Chambers rolled up into one and yet his tremendous influence isn't leveraged in end-user sales. Dan York says Mathews has passionate power and he is right.

But a bigger challenge for the CPE market as a whole will be cloud-based solutions. Traditional telecom companies really need to be entrenched as cloud-enablers to be sure they can grow regardless of of how companies want to deploy their communications systems.

As always, I'll be sure to keep you posted on the latest happenings at Mitel, ShoreTel and the rest of the tech and communications markets.


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