The technology industry is never short of intrigue and drama. There are always rumors of who might buy whom, which executive left to go where and what new product a certain vendor might come out with.
The fate of Polycom has been one of the storylines industry watchers have been keeping an eye on. Earlier this year, Mitel announced it agreed to acquire Polycom for $1.96 billion. But alas, all things aren't meant to be. In Hollywood, Bennifer broke up, and now Mitelocom will, too.
On the eve of the deal being finalized, Siris Capital came in, upped the offer to a cool $2 billion and broke up the proposed joint company. Like all things in life, there are some definite pros and cons to this announcement.
From an industry perspective, I think Mitel-Polycom is something the market needs right now. I've talked with Mitel executives about this for years, and I'm in violent agreement with them. The unified communications (UC) market is dominated by not one but two 800-pound gorillas (Cisco and Microsoft) that make it difficult for anyone else to have any kind of significant share. It's like being an NBA team and always having to look up and see Cleveland and Golden State. It's not much fun knowing your destiny is to lose to one of those two.
Oh sure, small vendor A might win the occasional deal here and there, but growing from $1 billion to $2 billion in revenue is significantly more difficult than hitting that first billion. Data from Synergy Research shows just how difficult this challenge is:
Mitel and Polycom combined would have made the company the #4 vendor, barely behind Avaya. It's important to note that this chart shows all UC segments. In some sub-markets, Mitel-Polycom would be #3 or even #2.
For now, the deal appears to be dead. So, what happens next?
What this means for Mitel
For Mitel, it's time to move on. Mitel CEO Rich McBee's thesis that the industry needs to consolidate is still correct. There are too many small vendors and not enough share to go around. That still holds true, and it's time for Mitel to look elsewhere and set its crosshairs on another vendor. This might bring a merger with ShoreTel back into play, or the company might try to do something a bit bigger and look at a company like Logitech.
Given the number of vendors in the UC market, there's no shortage of options for Mitel. Jennifer Garner and Ben Affleck moved on and so will Mitel. McBee is one of the sharpest people I have ever met, and he'll figure out where to go next. It's still my belief that industry consolidation is badly needed in the UC market, and Mitel will be one of the consolidators. It just looks like it will be without Polycom.
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