Mitel to buy Polycom for $1.96 billion

Mitel is set to purchase Polycom, the second largest supplier of videoconferencing equipments, in a cash and stock transaction valued at approximately $1.96 billion.

Polycom ranked second in enterprise videoconferencing equipment with 19.2 percent share in the fourth quarter of 2015. Enterprise networking major Cisco is the market leader in the global videoconferencing market with 45.3 percent share in Q4 2015.

Videoconferencing market

IDC says the enterprise video equipment market revenue in Q4 2015 was $627.5 million against $612 million in Q4 2014.

Videoconferencing units sold increased 16.3 percent quarter over quarter and fell 0.2 percent year over year.

While Polycom’s revenue increased 3.4 percent quarter over quarter and fell 17.3 percent year over year, Cisco revenue from videoconferencing increased 21.1 percent quarter over quarter and 12.3 percent year over year.

Huawei, the third largest videoconferencing vendor, achieved 64.9 percent quarter over quarter and 6.6 percent year over year growth in revenue. Huawei ranked third with a 16.6 percent share of the worldwide enterprise videoconferencing market, up from 12.3 percent in 3Q15.

The market for unified communication and collaboration (UC&C) solutions totalled $22.6 billion and $26.5 billion in 2014 and 2015 respectively. The market is expected to reach nearly $62 billion in 2020, posting a compound annual growth rate (CAGR) of 18.5 percent from 2015 to 2020.

ALSO READ: Cisco, Huawei up videoconferencing share, Polycom dips

Deal details

Following the closing of the deal, Polycom shareholders will hold nearly 60 percent and Mitel shareholders will hold approximately 40 percent of Mitel.

The combined company will be headquartered in Ottawa, Canada, and will operate under the Mitel name while maintaining Polycom’s brand.

Richard McBee, chief executive officer of Mitel, will lead the combined organization.

Steve Spooner, chief financial officer of Mitel, will also continue in that role.

Polycom directors will have two seats on the Mitel board. The combined company will have a workforce of approximately 7,700 employees.

The combined global company will be

#1 in business cloud communications

#1 in IP/PBX extensions in Europe

#1 in conference phones

#1 in Open SIP sets

#2 in video conferencing

#2 in installed audio

The combined entity will have an installed customer base in more than 82 percent of Fortune 500 companies, said Mitel in a statement on Friday.

It will have mobile deployments in 47 of the world’s top 50 countries. The size of combined portfolio will be more than 2,100 patents and more than 500 patents pending.

The combined company will have a larger financial platform with the scope, scale and operating leverage needed to strategically expand in an actively evolving market.

The combined entity will have a diverse revenue base with pro forma 2015 sales of approximately $2.5 billion.

There will be operating synergies of approximately $160 million by 2018, driven by supply chain optimization, facilities consolidation and economies of scale.

Baburajan K