Mitel CEO Ends Channel Conflict in Reorg

By Khali Henderson

Rich McBee, the new president and CEO at Mitel Networks Corp., wasted no time shaking things up at the struggling company; in his first 90 days he has reorganized Mitel into logical lines of business and ended direct sales competition with its indirect channel.

These were key takeaways from McBees address to Mitels channel partners this week at the companys annual partner conference in Hollywood, Fla. Channel Partners spoke to McBee by phone from the event, which he said included more than 1,100 participants.

McBee, who joined Mitel in January, replacing retiring CEO Don Smith, said his strategy for the company is pretty simple.” Its called 3+1. The first three tenets are: 1. Simplify the business; 2. Focus the portfolio; 3. Align the channels for success. The last part of it the plus one is to exploit our leadership in virtualization,” he said. We are in a very unique position in that we are the only vendor that has a truly virtualized voice solution.”

As announced in May, McBee has simplified the organization by breaking its into three lines of business, including Mitel Communications Solutions, the $500 million business telephony vendor; Mitel NetSolutions, its $80 million CLEC; and Mitel DataNet, its $80 million data hardware/software distribution arm. Each has its own general manager that will be responsible for operating the unit.

If you know anything about Mitel, you know it has struggled to create growth. It has had six or seven quarters of flat [revenues],” said McBee. When he began looking at the root causes, McBee said he found it was suboptimized because it was partially a distributor and partially a CLEC and partially a product [vendor],” which each are businesses that should be run very differently. In addition, it made it hard to allocate resources, measure results and for the market to understand the company, he said.

By breaking them up, there is greater transparency and understanding of the performance of the company, McBee said. Youve got to be able to see which part of the company is doing good and which part of the company is doing bad,” he said. My intention is over time each one of these businesses is going to be growing profitably.”

As it concerns the partner channel, McBees impact has been no less dramatic. He has put an end to channel conflict in the Communications Solutions business. The company has earmarked a small number of accounts that it is retaining, primarily due to leasing arrangements, and turned all other accounts over to the channel. That means Mitel laid off about 50 employees in its national accounts and direct sales teams. Another 20 have been repurposed as Direct Touch” account managers, which cultivate leads for the Mitel channel. McBee said he plans to add another 30-35 such sales support during 2011.

The days of competing with us are over,” McBee said. The announcement was first made in May and reiterated Thursday at the partner conference.