Mitel Blindsides its Partners

Mitel announced a partnership with RingCentral.

My interpretation is that RingCentral paid $650 Million to acquire Mitel tech, client list and sales force. The intellectual property concerns CloudLink which is a software connector for Mitel PBX’s can utilize some cloud functions. [NEC has a similar offering called UNIVERGE BLUE CONNECT BRIDGE that connects NEC PBX’s with NEC UCaaS functions.] This is the migration path for on-premise PBX customers have to UCaaS without an immediate forklift upgrade. As Mitel said: This is the key.

Mitel was acquired by PE money in 2018 for $2B. This is the PE firm getting $650M from RingCentral. The PE firm (SearchLight) will buy $200M in RNG stock as an investment. This is the best deal that SearchLight could get. There was no way that Mitel’s UCaaS business was going to catch up to even 8×8. So this was the best way to mitigate the losses.

This is a hard day for both Mitel partners and customers. This is end of life for all Mitel hardware. This is end of life for MiCloud. This is end of life for Five9’s partnership with Mitel.

This from MITEL Sales: This is a partnership, not acquisition! (Me: Sure because RNG doesn’t want the Mitel carcass.) RNG purchased Intellectual Property/patents from Mitel. MiCloud Connect NOT going away as Mitel will continue to service, support and honor ALL commitments (as usual). (Me: Just no more upgrades, bug fixes or anything new.) This is the killer: Net new opportunities we will transfer/partner with RC effective immediately. Mitel re-iterates that CloudLink is Key! It allows Mitel PBX customers to migrate to RNG MVP easily.

The Big Q from Partners:  Whose paper is this on?  If this is straight agency, they have no more customer control or top line revenue. And at any time these partners could have been selling RingCentral or any other UCaaS provider if they wanted to. Now they are forced to! That won’t end up well.

The media is claiming this is great — only for RNG stock holders. RNG stock is up! Big deal. They just coughed up $650M instock and cash to Mitel/SearchLight! SearchLight buys $200M in RNG preferred stock, which pumps the stock up. What does Mitel do now? And like the other 9 partnerships this won’t be a killing either. RNG is up 38% YoY this quarter. Zoom was up 54%!

Mitel partners now have to explain this EOL move to their customers (who will feel as betrayed as the partners). Then they have to sell their customers on CloudLink, then on RingCentral. This will be an uphill skirmish. PBX partners who are not already selling a UCaaS flavor, think hardware is the way to go and that cloud is only for some people.

“Product will continue to be branded RingCentral MVP, accelerating availability to Mitel’s entire customer base through RingCentral’s and Mitel’s combined channels. Additional product enhancements leveraging joint technologies beginning with Mitel phone and device support for RingCentral MVP is planned for the first half of 2022.” This sounds like RNG is billing – and the Mitel brand disappearing. Terry Matthews must be crying.

A little history story…

In 2013 at the Cloud Communications Alliance meeting in Clearwater (Florida), RingCentral’s CEO proposed to the members of CCA that they dump Broadsoft and use RingCentral. Eight years later AT&T, Verizon, Avaya, others and now Mitel have done so. [The long view for certain.] For ILECs it makes sense to leverage RNG with co-branding. This deal is not like that.

There are so many factors in play in the marketplace right now. Too many UCaaS providers, not enough sales/demand. Sure the TAM is huge but the sales are slow coming. Even with all its partners, RNG is only up 38% YoY.

PE money wants a return. This gets them $650M back on their $2B acquisition in 2018. That’s better than waiting to see if MiCloud can catch up to 8×8, which several agree it will not.

Most pundits are bullish on this – for RingCentral. For Mitel it must have been the best of really bad scenarios. The partners will suffer the most.

This is just another deal for RNG. They keep adding sales avenues but aren’t really seeing Microsoft or Zoom type results. One of their partners – Atos/Unify – is looking to sell. That doesn’t help.

There is also a market swing taking place probably as a result of the pandemic. Everyone talks hybrid solutions but in this case, UC providers have to work around Microsoft (or Google), so they sell Routing which is SIP Trunking or if you are fancy CPaaS.

Zoom and Talkdesk added phones without calling it UCaaS, because businesses are looking for phone like VoIP functions. On the CCaaS side, it is UC+CC or CXaaS. More and more UCaaS is being squeezed in favor of simple functions like Routing to Teams. Even twilio – one of the largest CPaaS providers – rolled out a CCaaS offering in the guise of customer experience – and skipped UCaaS. The market has shifted.


Per RNG’s 8-K SEC filing on 11/9/2021: “The Company will be Mitel’s exclusive provider of Unified Communications as a Service (“UCaaS”) offerings. The Company also acquired certain intellectual property rights for a total consideration of up to $650 million, of which $50 million is held back to cover potential claims and certain events post-closing. The Company paid $300 million in the form of cash and approximately $300 million in the form of 1,281,504 shares of Class A Common Stock…”

“The Company also entered into the Investment Agreement with Searchlight II MLN, L.P. (“Searchlight Investor”), pursuant to which the Company sold to Searchlight Investor, in a private placement under the Securities Act of 1933, as amended, 200,000 shares of newly-issued Series A Convertible Preferred Stock, for an aggregate purchase price of $200 million. The Series A Preferred Stock issued to Searchlight Investor pursuant to the Investment Agreement will be convertible into shares of the Company’s Class A Common Stock, par value $0.0001 per share, at an initial conversion price of $269.22 per share.”

To go back to the CCA story, RNG launched: “RingCentral Rise, a new platform designed exclusively for service providers around the world. By leveraging Resources, Innovation, System integration, and Experiences (Rise) from RingCentral, service providers can now offer their own unique, cobranded unified cloud communications solutions including team messaging, video meetings, cloud phone system, and contact center solutions to businesses around the world in a fast, flexible, and scalable manner.”

What is Mitel’s CloudLink? ““Through this strategic partnership, we are acquiring IP related to CloudLink, which enables us to integrate RingCentral MVP with on-premises infrastructure,” he said. “CloudLink is a clear bridge to the cloud. It provides middleware that enables customers to integrate their on-premises infrastructure with MiCloud cloud platforms, and is now being repurposed to integrate with RingCentral. With CloudLink, Mitel’s 35 million-plus customers will be able to use the RingCentral app for team messaging, video, and to make calls with the app that leverages existing Mitel on-premises PBX. Every strategic partner makes a difference, but this one in particular is unique because Mitel now has a leading cloud solution to upgrade its base to. There is now a new opportunity to leverage CloudLink to provide a more flexible path to a leading cloud solution.” [CF].

Source: ChannelPlaybook

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