Mitel’s merger with Aastra puts investors before customers
At the start of 2014, Mitel completed its $400 million merger with Aastra Technologies. The newly-formed company retains the Mitel name, and will have a board of directors composed of appointees from both Mitel and Aastra.
Not surprisingly, the merger was lauded by Mitel and Aastra investors. Both companies had suffered through years of declining revenue – Mitel’s revenue reached six-year lows in 2013, while Aastra’s 2012 revenue was the lowest since 2007 – and the merger provided investors with some hope of driving top-line growth.
Mitel and Aastra customers, however, should be less enthusiastic about the merger. The combined company features a bloated portfolio of over fifteen solutions, many of which are redundant. This portfolio transforms Mitel’s promise of a “single software stream” into a confusing mix of aging hardware, software and cloud solutions. Mitel and Aastra customers can look forward to years of uncertainty as Mitel consolidates this product portfolio, and many of these customers will be forced into costly migration decisions.
Customers should also be wary of the synergies that Mitel promises from the merger. While investors praise synergies due to their positive effect on the bottom line, customers experience synergies in terms of decreased spending on innovation, research and development, customer service and support. For example, in the years following its acquisition of InterTel, Mitel slashed R&D spending by 20%, and eliminated over 800 jobs, or 35% of its workforce.
Mitel and Aastra investors have already realized gains from the merger. However, these gains come at the expense of Mitel and Aastra customers, who will face years of uncertainty, the potential of significant migration costs, and declining service, support and innovation funding.
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