Mitel Returns To Profitability In 3rd Quarter

by Gaurav Kheterpal on March 5, 2012

Last December, I covered Mitel’s Q2 results – which were largely a mixed bag; even though the company reported its highest level of quarterly revenues since going public, it still ended up with a loss on restructuring and other charges offset an increase in revenues.

When CEO Rich McBee joined Mitel more than a year ago, he promised to improve operations, shift focus to resellers and help the company swing back to profitability. To that effect, his company yesterday reported third-quarter net income of $4.6 million, or $0.08 per share, compared to net loss of $4.0 million, or $0.08 per share in the same quarter last year.

Mitel also announced that it plans to sell off non-core business units such as DataNet CommSource to further streamline business operations and focus on its strengths.

Mitel reported total Q3 revenue of $164.4M with a record gross margin of 50.9%. The company’s non-GAAP net income from continuing operations for the third quarter of fiscal 2012 was $12.0 million, or $0.21 per share, compared to non-GAAP net income of $7.4 million, or $0.13 per share, in the same period last year. Net income from continuing operations for the third quarter of fiscal 2012 was $4.4 million, or $0.08 per share, diluted, compared to a net loss of $4.9 million, or $0.10 per share in the same period last year.

“We are pleased to have delivered revenue, gross margin and non-GAAP operating expenses that were in line with or better than guidance,” said Richard McBee, chief executive officer, Mitel. “Furthering our strategy to simplify our business and streamline our organization, in the third quarter we made the decision to pursue the sale of our DataNet/CommSource business unit. We remain focused on our core business where demand remains solid for our Mitel solutions and our broad suite of virtualized UC applications software.”

When questioned on the company’s future, McBee says Mitel is “not for sale”. He admits that the DataNet business has been a disappointing avenue for Mitel and the company is now in active discussions to sell it off. The company is now forecasting fourth quarter sales will be between $152 million and $157 million, a marginal increase from the $152.2 million in the same period a year earlier.

On a separate note, the company’s CFO believes Mitel’s strategy to sell through reseller partners is beginning to pay off as the average deal size has bumped up to US$250,000 this year, from $40,000 last year. He believes resellers offer a distinct advantage as they have their own sales networks and are able to sell services on top of the company’s unified communications solution, which brings video, messaging, phone calls and other services in one package.

Of course, Mitel is still a distant third in the UC market behind Cisco and Avaya. None the less, a return to profitability augurs well for any company’s future and Mitel is no exception to that rule.

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Written by: Gaurav Kheterpal. Follow TheTelecomBlog.comby:RSS,TwitterFacebook, or YouTube.

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