Unified Communications

Activist Hedge Fund Billionaire Pushes for Mitel, Polycom Combination

By Paula Bernier, Executive Editor, TMC  |  December 22, 2015

Rumor has it that Elliott Associates, whose parent company has holdings in a wide array of tech companies, is pushing for a combination of Mitel and Polycom.

The hedge fund in early October expanded its stake in Mitel by 2.31 million shares and followed that by filing a 13-D with the Securities and Exchange Commission disclosing a 5.84 million share stake in Polycom. Paul Singer, the billionaire who heads up Elliott Management, which oversees Elliott Associates, reportedly also sent a letter to Mitel’s board of directors suggesting the combination of Mitel and Polycom.

Mitel declined to comment on a potential Polycom deal during an Oct. 14 interview with INTERNET TELEPHONY. The company did, however, issue a statement Oct. 8 in response to Elliott Associates’ recent filing on schedule 13-D. Mitel’s statement, however, did not mention Polycom. 

"We welcome Elliott Associates' interest and ongoing investment in Mitel,” the Mitel statement reads. “We have reviewed Elliott's recent filings on schedule 13-D and share their views as to consolidation opportunities in our industry. Mitel's senior management has consistently discussed its intention to consolidate the market, and in recent years has proactively leveraged M&A activity to successfully deliver shareholder value. As always, we look forward to creating further value for all Mitel shareholders."

Indeed, Mitel has been clear for some time that it sees itself as one of the consolidators of the unified communications space. In fact, that was the theme of Mitel CEO and President Richard D. McBee’s keynote speech at ITEXPO Miami in January of this year.

In April, Mitel completed its acquisition of Mavenir, which is helping fuel the company’s new messaging about how smartphones have now become the center of the communications universe. Mavenir offered voice, video, and messaging solutions for the mobile carriers, with T-Mobile U.S. being its biggest customer.

Mitel has also done a few other deals in the past few years, and made a couple failed passes at ShoreTel. In March of 2014 Mitel bought contact center company OAISYS. In January of 2014 it snapped up Aastra (News - Alert), which sells desk phones. Contact center company prairieFyre joined Mitel by way of a deal in June 2013. And Mitel brought Inter-Tel into the fold in April of 2007.

Polycom would strengthen Mitel’s position in the endpoint (desktop phones) space and on the video front. Polycom, which was recently named a market leader in the Gartner Video Magic Quadrant, is best know for its room-based videoconferencing solutions and has been talking about how it’s branching out into cloud-based video solutions as well. It’s also noteworthy that both Mitel (on the contact center front) and Polycom (with its phones and wall-based ad hoc videoconferencing tablet) offer solutions related to Microsoft’s Skype for Business. Polycom was on stage with Microsoft at the October Skype for Business event co-located with ITEXPO (News - Alert) in Anaheim.

Adding Polycom to the mix would make Mitel a leader in the business endpoint space, Frank Stinson, a partner and senior analyst at IntelliCom Analytics, told INTERNET TELEPHONY in a recent interview.

“A lot of people have been predicting the demise of the endpoint, but that’s not been happening so far,” he said.

Like Mitel, Polycom has also been emphasizing its mobile strategy.

“Our newest solutions will allow for enhanced sharing of content and applications from a wide variety of devices to fuel the bring your own device movement,” Ashan Willy wrote in an August Polycom blog. “Polycom’s continued commitment to supporting a wide range of heterogeneous collaboration environments will enhance everything about the way we work, launching us into the workplace of the future. We are addressing customer needs before they become a problem, across all spaces. We are expanding the workspace from the break room to the boardroom, removing the boundaries of how we work.”

The cloud, mobility, and video are all becoming more important themes when it comes to unified communications, a space in which Mitel is already a top player in UC. Gartner recognized the company as a leader in both the UC arena and in UC for midsize enterprises.

“Mitel remained in the Leaders quadrant with both a good UC vision and market execution,” says Gartner. “Its acquisition of Mavenir provides a longer-term vision and potential as a cloud solution provider with strong mobile capabilities.”

Other UC leaders, according to Gartner, are Avaya (which just closed its acquisition of Esna), Cisco, and Microsoft. Challengers in the UC space, Gartner says, include Alcatel-Lucent Enterprise and NEC. The analyst firm considers IBM and ShoreTel as UC visionaries and Huawei, Interactive Intelligence (News - Alert), and Unify as niche players.

Several of these players – including Alcatel-Lucent Enterprise and Avaya – are now owned or owned in part by private equity companies, notes Stinson. (And in November European IT services company Atos Origin bought Unify.) If you remove Cisco, Microsoft, and Mitel from the mix, he adds, much of the rest of the UC market is up for grabs, so private equity has moved in to try to shake things up and make some money in the process.

Meanwhile Elliott Management has already done more than its fair share of shaking things up on the tech front. The company had holdings in EMC Corp., which Dell (News - Alert) in mid October announced plans to buy in the largest-ever ($67 billion) tech deal. Elliott Management, which manages two multi-strategy hedge funds that combined have more than $27 billion of assets under management, also has made its mark on Citrix Systems and Juniper Networks over the past few years. The company also has holdings in an array of other tech companies including Cognizant Technology Solutions, Comcast (News - Alert), Covisint, Microchip Technology, Sandisk, Time Warner Cable, and VeriSign, according to a list posted June 30 by Holdings Channel.

Edited by Kyle Piscioniere