Mitel Networks Corp (NASDAQ:MITL)
Shares of Mitel Networks Corp (NASDAQ:MITL) continue to edge higher even after the company reported Q2 results that failed to meet Wall Street expectations. Fuelling momentum on the stock is the proposed acquisition of ShoreTel Inc. (NASDAQ:SHOR) for $430 million, expected to strengthen the company’s core business.
Mitel Networks Corp (NASDAQ:MITL) has recorded an impressive run in the market ever since it tanked to lows of $6.21 a share in May. A breakout from a key support level of $7.50 a share has seen the stock rise to highs of $8.52 a share, near its 52-week highs of $8.53 a share.
The company bills itself as a provider of business communications and collaboration software. Mitel’s product portfolio includes premises and cloud-based enterprise communications infrastructure products and solutions. The company also operates an enterprise segment focused on selling and supporting products and services for premise-based customers.
The acquisition of ShoreTel for $430 million is part of an effort that seeks to strengthen the company’s cloud business. The merger should accelerate the company’s growth path as it continues to invest in Unified Communications as a Service (UCaaS). The acquisition should also provide the company the much needed firepower for moving customers to cloud-based UC products.
The combined company will be the second biggest player in the UCaaS market. The company will have about 3,200 channel partners as well as industry leading portfolio of communications and collaborations solutions.
“This is a very natural combination that enables us to continue to consolidate the industry and take advantage of cost synergy opportunities while adding new technologies and significant cloud growth to our business,” said Rich McBee, Mitel Networks Corp (NASDAQ:MITL) CEO.
The all-cash transaction values ShoreTel at $7.50 a share representing an equity value of $530 million and enterprise value of $430 million. The acquisition comes barely a year after Mitel divested its mobile unit for $385 million. The divestiture marked the first step in the company’s push to focus on its core business of unified communications.
Separately, Mitel Networks Corp (NASDAQ:MITL) posted a net loss of (-$100,000) in the second quarter. Revenues in the quarter totaled $238.6 million. For the current quarter, the company expects its revenue to be in the range of $225 million to $250 million. During the quarter, the company signed an agreement with a U.S.-based food processing company for the use of its Cloud applications. The five year contract has a value of about $8 million.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.