CSPs, Mergers and Acquisitions

ShoreTel Explores Potential Company Sale

Don Joos
Don Joos

ShoreTel's board of directors has formed a Strategic Advisory Committee to explore strategic alternatives -- which essentially means ShoreTel is up for sale for the right price.

Updated Aug. 7, 11:45 p.m. ET: List of Potential Buyers for ShoreTel.

Although ShoreTel has worked overtime to address the shift from on-premises PBX phone systems to cloud-based unified communications, the market shift remains challenging. For its Q4 of fiscal 2016, revenues were $94.6 million -- up only slightly from $94.2 million in Q4 2015, the company said yesterday. The company also had a GAAP net loss was $0.7 million for Q4 2016, compared with a GAAP net income of $4.7 million.

The results beat Wall Street's tepid expectations but the situation isn't reassuring. Microsoft recently launched a cloud-based PBX integrated with Office 365, GoDaddy is in the process of buying FreedomVoice, and a range of telcos are pivoting to address the cloud-centric voice and collaboration opportunity.

ShoreTel Statement: Potential Company Sale

Amid those competitive headwinds, it's clear that ShoreTel's board is looking for a potential buyer for the company. According to a statement from the company, the Strategic Advisory Committee will evaluate a range of options that will include, but not be limited to:

"A company sale, the divestiture or acquisition of assets, licensing agreements, a realignment of our operations, joint ventures and partnerships and a continuation of our current strategic plan. There is no assurance that the review of strategic alternatives will result in any transaction or other strategic alternative. ShoreTel does not intend to comment further regarding this review until the review process is completed."

Eager to ensure ShoreTel remains keenly focused on partners and customers, CEO Don Joos offered this staement during the company's earnings call:

"In summary as the world shifts towards cloud services we are seeing more opportunities than ever before. To continue to ensure we are well positioned to maximize this opportunity ahead of us, we believe this is the right time to review the options for the next phase of the company's growth. I can assure our shareholders, employees, customers and partners that we will only embark on a new course if it offers superior value for our shareholders while continuing to deliver innovative solutions and an excellent experience to our customers."

ShoreTel's Strength: Channel Partners

While ShoreTel considers various options, one of its greatest strengths involves channel partners -- which are key to ShoreTel's five catalysts for growth.

Those five catalysts, according to Joos, include:

  1. the rollout of the ShoreTel Connect offering;
  2. the global expansion of our cloud offering;
  3. the scale of our channel partner community;
  4. our success with mid-market and enterprise customers; and
  5. our ability to leverage our premises installed base to drive cloud services.

During the earnings call, Joos shared progress points for each of the five catalysts. On the partner front, for instance, more than 90 percent of ShoreTel's new customer wins involved the channel. The company signed 550 new cloud customers in its most recent quarter -- a new quarterly high for the company. And the number of deals involving 50 or more seats was 36 percent higher in Q4 2016 vs. Q4 2015. Six of the new deals will each generate more than $10,000 per month in monthly recurring revenues, he said.

Amid all that partner praise the message is clear: Joos and ShoreTel know they need to keep channel partners loyal -- especially as the Strategic Advisory Committee explores a range of options... including a potential company sale.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.