Disappointing’ quarter for Mitel includes lower sales, layoffs

by | Sep 1, 2012 | UC

Published on August 31, 2012 in the Ottawa Business Journal

by Elizabeth Howell

Amid a “disappointing” quarter for Ottawa’s Mitel (TSX:MNW) that included halted orders and layoffs of as many as 200 people across its operations, CEO Richard McBee says he remains confident the company is poised for growth in the long term.

The telecom provider saw delays in its orders across all of its customers, ranging from education to business to government, particularly in its core telephony business. However, virtualization and cloud services grew.

Late Thursday, Mitel disclosed revenue from its continuing operations overall fell seven per cent to $138.5 million in the first quarter of fiscal 2013. Earlier this month, it announced there would be an immediate reduction in global headcount to contain costs.

While Mitel would not release numbers for how many were laid off in Ottawa, officials noted there are currently 485 people employed. In the OBJ Book of Lists published earlier this year, Mitel disclosed 510 employees.

Mr. McBee added the quarter saw declines despite the best attempts on the part of management.

“If you want to get five orders to make the quarter (targets), you usually put 10 in play and five or six or seven will go through,” Mr. McBee said in an OBJ interview.

“This time, it was like boom, they all paused simultaneously and it was concerning to us as a management team.”

When looking at other individual factors, the company noted one large $13 million order, initially booked for this quarter, was delayed. Further, two United Kingdom implementations worth about $2 million were not completed to schedule.

Certain customers also were looking to upgrade hardware such as phone systems, but classified that as a nice-to-have and pushed the orders into future quarters, said Mr. McBee.

Mitel says declines took place across most sectors, geographies and customer segments, and its competitors are also seeing their results affected. As such, Mr. McBee said the company believes it is the larger global uncertainty that is affecting Mitel’s bottom line.

He noted the company’s layoffs did not include employees in the virtualization and hosted/cloud services businesses, which are two areas of growth for the company.

“We’ve dusted ourselves off and we’re ready to get up,” he said.

Adjusted earnings fell to $12.8 million, down from $17.2 million last year, while Mitel’s net loss improved to $1.9 million, from $3.3 million.

Cash and cash equivalents increased by nine per cent year-over-year, up to $77.5 million from $71.3 million a year earlier.

This quarter’s results included $2 million in restructuring charges. The company forecasts revenue of between $140 million and $145 million in the next quarter.

Mitel’s stock has struggled since a soft initial public offering on the Nasdaq in 2010. Earlier this year, Mitel expanded to the Toronto Stock Exchange, a move that some analysts said would attract more Canadian institutional and retail investors.

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