Shares of Mitel (TSX:MNW) are up strongly today after the Ottawa-based company’s Q1, 2014 numbers revealed a better than expected contribution from recently acquired Aastra Technologies.
Mitel lost $13.6-million on revenue of $241.5-million, a topline that was up 69% over last year. Aastra, which was part of Mitel for just two months after the acquisition was completed on January 31st, contributed $89.3-million in revenue. The culprit for much of the losses was restructuring costs related to the pickup.
CEO Rich McBee talked about what drove the company’s performance.
“I am extremely pleased with the progress Mitel made in the first quarter, particularly the solid overall revenue performance. Our first quarter results reflect the traction we are gaining in our cloud business, with over 21,000 recurring cloud revenue seats being added in the quarter, representing 73% growth year-over-year, bringing our cloud recurring seats total to 142,600. These are both strong indicators that our employees, customers and channel partners see value and strength from the combination with Aastra,” he said.
Management says that supply chain efficiencies have enabled it to revise the synergy target it had pegged for Aastra from $50-million to $75-million. In a preview of Mitel’s quarter Tuesday, Cormark analyst Richard Tse predicted that would happen.
Tse, who rates Mitel as his “Top Pick” says the potential of Mitel to move Aastra’s legacy customers to the cloud has still not been priced into the stock. He predicted the company was poised for “meaningful valuation lift”.
At press time, shares of Mitel on the TSX were up 16.3% to $12.21.