The following week, the company will come home, returning to trade in Canada for the first time since it was split into two in 2001 and the PBX division was reborn under founder Terry Matthews guidance and evolved into the company that became today’s Mitel.
M Partners analyst Ron Shuttleworth says this quarter is key because it is the first chance we get to look at an entirely restructured Mitel. Over the last twelve months, he points out, the company has spent approximately $16-million to restructure its business. The M Partners analyst says that, assuming gross margins stay constant, Mitel could see elevated earnings for the foreseeable future. In a research update to clients today, Shuttleworth, who initiated coverage of Mitel on April 3rd, maintained his BUY rating and twelve-month target of $7.
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Mitel’s roots in Canada run deep. In fact, the company might be considered one of the most important tech stories in our history. The founding of Mitel goes back to the bell-bottomed days of 1973 when Michael Cowpland and Terry Matthews, who had met at Nortel forerunner Bell Northern Labs, formed a company to import and sell cordless electric lawnmowers. When the very first shipment of lawnmowers was lost, the pair began to produce a telephony tone receiver product that was based on Cowpland’s Ph.D. thesis.
Using Mitel as a springboard, Cowpland went on to form Corel Software, which was once Canada’s largest tech company, and Matthews became a serial entrepreneur, forming Newbridge Networks, which he sold to Alcatel in 2000 for $7-billion. The Welsh born immigrant, who has founded or helped to found dozens of Canadian tech companies since, remains as Mitel Chairman.
Shuttleworth says one reason for Mitel’s middling share price is that is my be suffering from a wrong-headed association with companies like Cisco and Avaya, who have weak outlooks. But Avaya, he points out, is still primarily a hardware vendor selling to large enterprise. Its performance, he says, is directly related to the speed by which it can transition to a software vendor. Mitel’s software is already virtualized, says Shuttleworth,and that offers protection for its “modest growth trajectories.”
At press time, shares of Mitel were up 1.8% to $3.98.