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A greatly slimmed-down Mitel Corp has realised that its fragile profits cannot be sustained by the PABX market alone and so is expanding into new but related areas. The Kanata, Ontario-based company’s primary aim is to focus on developing customised applications for niche markets – it is no longer looking to it’s core businesses for growth. And the first product to break the mould is the Radicall Set Handler – a small box that customers put on their wall to enable a central telecommunications switch to speak to Mitel telephones. Radicall is essentially a protocol converter that acts as an interface between a Centrex service and Mitel’s family of digital featurephones, the SuperSet 400. Supersets have interactive liquid crystal displays, which provide users with call information, status messages or feature prompts.

Forward or divert

They also have programmable soft keys, which, for example, enable customers to forward or divert calls. The appeal of Supersets, according to CST marketing manager, Gordon Jago, is that they are easy-to-use and have loads of features, while PTT telephones are mundane – with only a limited number of functions – and hard-to-use. Furthermore, a Centrex service provider can remotely re-programme the Supersets on his network by installing Mitel’s Telecom Spreadsheet package on a Sun Microsystems Inc Unix box. A picture of a telephone will appear on his screen and all he needs do is point-and-click to customise it – he can, for example, alter the functions of softkeys, customise the names of functions, or programme the telephone display with the time, date and company name. Radicall is in field trials at the moment and is due to be released in the UK and US in the summer. Although president and chief executive of Mitel, John Millard, doesn’t believe the product will sell much this fiscal year, he reckons it should start bringing in significant amounts of money by 1994. And given a few years more, he says, Radicall should generate revenues of about $100m, split fairly evenly between both countries. No pricing has been decided yet, but Radicall will be sold via telecommunications operators. Mitel is currently in discussions with British Telecommunications Plc and Mercury Communications Ltd in the UK to this end. The company has also focussed a lot of research and development spend on computer-supported telephony, which enables computers and PABXs to work together seamlessly. Users simply link their computer, which can range from a mainframe to a personal computer, to a Mitel SX-2000 PABX via a host command interface. This enabling technology consists of both a physical cable and software, which is installed on both machines. The interface passes request or status information between the SX-2000 and applications software resident on an external processor, using a bi-directional, peer-to-peer communications protocol. And via the applications software, a customer can manipulate and use information supplied by the PABX. But because Mitel has little expertise in the applications arena and has no credibility in the computer world, it has released a software development toolkit, the Mitel Telephony Applications Interface or MiTAI, for third party developers. Each licence costs UKP2,500. MiTAI runs on a Unix-based 80386 personal computer and so far, about 20 packages are being used in the UK at such blue-chip customer sites as the Royal Automobile Club and Barclays Bank. These include a tele-marketing application, Mitel Director; a real-time automatic call distribution management and statistical reporting application, Mitel Supervisor; and Mitel Ops Manager, an application to manage from two to 200 SX-2000 PABXs linked via a network. Each runs on Unix-based 80386 personal computers and is available now. No pricing was available.

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Millard reckons that, although computer-related telephony will take longer to make its mark than Radicall, it should start generating significant revenues by 1995. This, he says, will be helped by such applications as multimedia. And to exploit t

his market, Mitel is currently developing a small, modular broadband switch, which will interface with existing PABXs, and make telephony an application working on a personal computer or workstation. Millard expects the new switch to command between 25% and 30% of the market over the next few years, and believes it will take the steam out of the big guys such as IBM Corp. They, he says, will try and sell large expensive switches to customers that don’t need that much functionality. Within a year to 18 months, Mitel also intends to release boards that plug into the back of a computer to enable customers to plug into an Asynchronous Transfer Mode network. The company has even set up a separate operation to focus solely on computer-related telephony with ex-Northern Telecom man Ian Mumms, who will head up marketing and research and development. This is in line with Mitel’s general strategy of re-organising itself into small teams. These teams will look after all the marketing, product management and engineering work for different product groups so that we can more rapidly and effectively address the needs of the marketplace. But again, because the group is an unknown quantity in the computer world, it is keen to develop relationships with chip manufacturers, network companies, and applications developers – Millard feels the best path to market is via others’ distributors. Nonetheless, he is still keen to grow the company’s direct sales organisations for PABXs in the US and UK – the UK one was built from scratch, the US one via the acquisition of RCA Telephone Systems and Coradian. Millard believes they have been a key element in our success because they provide a much more stable arrangement than when Mitel was selling indirectly. Especially as, vice-president of UK sales, service and export Alan Kirkham said, many of the indirect channels are being bought up by others. Although the PABX market is now flat, the group boasts 160,000 installed switches in 80 countries. Kirkham claims Mitel has a 15% share of the UK market, between 6% and 7% in the US, and approximately 24% in Canada. But while in the past the company generated the majority of its revenues from hardware sales, the balance is starting to shift towards higher margin services. And it is this segment of our business, Millard says, that gives stability and growth potential to our business of today. For the year ending March 31, Mitel saw turnover rise 4.3% to $338.2m, due primarily to an improvement in direct sales of PABXs to US customers and strong growth at the firm’s semiconductor business. Of the total, some $131.8m was generated from selling PABXs, and a further $123m from services. Another $43.4m came from network access product sales into the US and Canada, an activity that Millard intends to expand internationally.

Margins of 50%

And the remaining $40m was earned via the firm’s semiconductor business, which generated only $29.8m revenues in 1992, but now sells to most major vendors, including AT&T Co, NEC Corp and Siemens AG. Millard reckons this operation will see exceptional growth in the next few years. Geographically, 49% of Mitel’s revenues came from the US, 11% from Canada, 21% from the UK, and 19% from Europe and the rest of the world. But the group does intend to broaden it’s base. It wants to set up a new business unit in Asia to take advantage of this heavy growth market and will actively look for distribution partners in Europe. As a result of all this activity, Millard believes that within five years, Mitel’s core businesses will generate about $400m, while the new products will bring in roughly the same. And he is confident that the firm can stay in profit. For the first time in a long while, Mitel made net profits of $2.1m due primarily to heavy cost-cutting – in 1992, it made losses of $4.6m. But over the past couple of years, it has slashed headcount by 1,100 to 3,600 and reduced the number of manufacturing plants from 13 to four – these are now located in both Kanata and Beaumont, Canada; Ogdensburg in the US;

and Caldicot, Wales. This has resulted in margins of 50% as well as profits, Millard said, compared with margins of only 30% three years ago, and losses.
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