Mitel Networks sees more growth in North America with lots of potential in U.S.

MONTREAL – Despite economic uncertainty in the United States, telecom company Mitel Networks Corp. expects growth from small and medium-sized American businesses with its communications and Internet Protocol telephony services.

“It still has tremendous potential for us,” president and CEO Richard McBee said of the U.S. market in an interview Thursday.

The “sweet spot” for Mitel’s telecom services is U.S. businesses with 25 employees and small enterprises with about 1,000 employees, he said.

Mitel (TSX:MNW) has customers in more than 100 countries, but McBee still sees plenty of growth in North America overall.

“The reality for Mitel is there’s a lot of room for us to run in the U.S. and Canada, so we’ll be focusing there first.”

The almost 40-year-old Ottawa company recently listed on the Toronto Stock Exchange to broaden its shareholder base after being traded on the NASDAQ since 2010.

McBee, who became chief executive 18 months ago, noted the amount of software in phones and networks is “very big.”

“Whether it’s any type of mobile device, whether it’s a mobile phone or whether it’s an iPad, or whether it’s a desk phone, we have software that link all of things together that allow a seamless experience for them to basically connect business,” he said.

Mitel also is known as a leader in what’s called “virtualization,” a software service that allows companies to have fewer data servers for all of their applications such as web meetings, voice communications, call routing and video.

The initial public offering for Mitel shares in 2010 listed the stock at US$14 on the Nasdaq market,, but they were trading at $4.43 in the U.S. and on the TSX at $4.51 on Thursday.

Mitel reports its first-quarter results on Aug. 30 after the markets close.

M Partners analyst Ron Shuttleworth, whose firm was the first to initiate Canadian coverage of Mitel, said the company is known for its software service that helps companies use fewer servers for their applications.

“When you’re not running a gigantic bank of servers, you don’t have to hire too many guys to watch the servers,” he said. “This is what’s giving them the winning edge in this space.”

He agreed with McBee’s assessment of Mitel’s future growth.

“Mitel is building a brand in the mid-market in the United States,” said Shuttleworth, who has a share price target of $7 for the company.

“In North America Mitel Networks ranks third behind Cisco and Avaya,” he said in a recent research note. “In the UK, due to a favourable channel relationship with British Telecom, Mitel ranks second behind only Cisco.”

Shuttleworth said potential headwinds for Mitel include competitors offering the same software services and the Canadian company’s future services missing the mark.

Mitel was founded in 1973 and was one of Canada’s early technology success stories with sales of office phone systems to companies and public sector agencies around the world.

A predecessor of the company was also publicly traded on Canada’s largest stock exchange before Mitel was purchased in the 1980s and taken private. It has since gone through numerous transformations, including its split from Zarlink Semiconductors several years ago.

Mitel is one of a few tech companies to list on the TSX in the last couple of years while companies such as RuggedCom, Miranda Technologies and Zarlink have been acquired.