Cisco, Nortel, Avaya, Microsoft and... Shoretel?
Cisco, Microsoft, Avaya and Nortel are familiar names, but John Combs would like to make sure people keep Shoretel in mind as well, even if he has to throw a few sharp elbows to get a seat at th
e table.
Combs is the chairman and CEO of Shortel, which makes IP-based unified communications (UC) systems for enterprise customers. Those systems are gaining in popularity because they allow companies to reduce communications costs by cutting out traditional phone lines, and can also improve productivity by allowing customers to consolidate and managing voice and data communications using a single software client.
Shoretel has more than eight thousand enterprise customers and generated $128 million in revenues in 2008.
The company announced today that the Verizon Center in Washington, D.C., home to the NBA’s Washington Wizards, has selected Shoretel’s UC system for its 108 luxury suites and office operations.
Combs noted over coffee that Shoretel gained a point of market share in the last quarter of 2008 despite flat sales growth — because the rest of the market lost ground. The company has been profitable for the past 14 consecutive quarters and Combs boasted that Shoretel is “the fastest growing company in the market among [UC] companies of over $100 million [in sales].”
The company is also on fairly sound financial footing, with almost no long-term debt and $100 million in cash. Andy Rachleff at Seeking Alpha wrote:
Gross margins remained steady at 63% and significantly, incremental operating margin was 85%, showing the potential leverage in the operating model as revenue scales. The company intends to invest this financial leverage in additional development & sales resources in fiscal 2009. This will suppress growth in operating income, but should translate to a higher revenue growth rate and ultimately, operating leverage in fiscal 2010.
Combs isn’t above playing hardball either, often offering to remain in the bidding even after a customer has told him they’re buying Cisco instead, causing Cisco to offer steeper discounts to get the win, thus costing it money.
He also claimed that Shoretel wins over 50% of the deals for which it bids. “My only real competition is not being included at the table,” he told me.
That said, Shoretel is dwarfed by its principal competitors. Cisco is a $40 billion company, Microsoft reported more than $60 billion in revenues for its most recent fiscal year, and Avaya generated $5.1 billion in 2007, the last year for which figures are available because it was taken private by Silver Lake Partners and TPG Capital for $8.2 billion in 2007.
But when all is said and done, Combs expects to be among the three unified communications (UC) vendors standing.
The other two are Cisco, of course, and Microsoft, which despite being a recent entrant in the telephony space, “has got a great shot to be a player in this business.”
When Microsoft first entered the UC space, it partnered with Nortel to gain credibility with customers. But according to Combs, “Microsoft is past the point where they need validation from a telecom vendor.”
That’s a good thing because Nortel is operating under bankruptcy protection, and is “weakened or dead,” according to Combs.
He says he suspects Avaya of having shaky financials as well, but that’s probably wishful thinking, because Avaya’s balance sheet was free of debt as of its last full-year filing.
In fact, I could almost suspect of Combs of just sowing the market with a bit of FUD (fear, uncertainty and doubt). Almost.
Michael Hickins is a professional writer and journalist with a passion for ferreting out the intersections between technology and culture.
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