Enterprise Communications Featured Article

The shape of enterprise communications in the U.S. may change by the end of the year. Several weeks ago, news broke that industry giant Mitel had made a proposal to buy out ShoreTel (News - Alert) at a 24 percent premium over ShoreTel’s stock price. So far, however, ShoreTel seems to have staunchly refused the takeover despite the dwindling on-premises business phone industry.

Prior to the Oct. 20 offer, Mitel (News - Alert) had made several previous attempts to discuss a buyout with the Shoretel Board of Directors, but was met with similar opposition. While the current offer from Mitel has a Nov. 20 deadline, it doesn’t seem likely that ShoreTel will budge, based on its response to past attempts. Plus, as Randy Kremlacek pointed out in a recent blog for TeleDynamic Communications, tensions have been pretty high between the two companies since Mitel filed a patent lawsuit against Shoretel on the eve of its IPO—making it seem even less likely that ShoreTel will acquiesce to the offer.

One of the most obvious reasons for ShoreTel’s refusal is that it is in direct competition with Mitel for business, and they generally are appealing to the same potential customers. While consolidating would greatly benefit Mitel by gathering up all of ShoreTel’s customers under its wing, the deal would not mean the same profits for ShoreTel. Mitel has even admitted that ShoreTel is its main U.S. competitor, making the buyout offer appear all the more hostile given their history. In addition to a great monopoly on the U.S. enterprise communications market, Mitel would also gain access to some valuable hybrid PBX (News - Alert)/cloud intellectual property and marketing assets that ShoreTel currently holds.

There has been much speculation as to what ShoreTel will do, but at this late stage in the game, it seems that no matter which way the company turns, its days are numbered. If ShoreTel refuses the Mitel buyout as is, it could attempt to ask for a higher selling price, or go on the hunt for better offers elsewhere. The return on investment for Shoretel investors has been poor in the past, so selling to the highest bidder offers the company a relatively clean exit from the enterprise communications market.  

If Mitel succeeds in the end, users of ShoreTel equipment should be prepared for it to become defunct pretty quickly. Because Mitel offers a very similar product line, the company will likely opt to eliminate ShoreTel’s line of products and services rather than keep it in circulation.