in Telephone System

Reviewing Mitel’s Q4 2014 Results

Mitel had a pretty good quarter.

Mitel is giving every indication that this is a company on the move, taking full advantage of its competitive strengths:

  • very strong cloud story, with a single software stream no matter how you deploy the system
  • a lot of options for direct manufacturer support for deployment, including vertically integrated, top-to-bottom provisioning of internet service, telephone carrier service, data center hosting, software development and manufacturing of internet phone systems
  • handsome looking telephones with more in the pipeline
  • great out of the box integration with popular applications such as SalesForce and Lync

From the highlight real of results, we are looking at Mitel:

  • Doubling their cloud seats to over a million
  • Posting $1.1 Billion in revenue for the year
  • Posting $57.9M in EBITDA for Q4
  • Posted $10M of honest-to-God GAAP profit. Pretty sure the competition did a double take at that.
  • And earning a 55.1% gross margin, a result many in any industry would envy. I know I do.

Overall, a pretty great result, even with top line revenues slipping 5% year-over-year. Mitel says currency effects are to blame. I think with the rest of the results looking this strong, they get a pass on that, though top line growth in a challenging market is, er, a challenge.

We will see if the economy picks up steam and Mitel translates that macro momentum into renewed top line growth, or if it is possible that – directly or indirectly – cloud seats are cannibalizing traditional PBX sales. My hunch is that they are, slightly, only because Mitel has refocused their attention on cloud. So yes and Mitel does not care, because the future of the company is in cloud. As soon as the phone industry turned into a software product, the pricing model needs to resemble that of software, which in 2015 means a SaaS model.

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