Reuters reports that the billion-dollar UC providers Polycom and Mitel are currently in merger talks, at the behest of ‘activist’ hedge fund Elliott Management, which has stakes in both companies. Reuters cited an anonymous source with knowledge of the negotiations.
The investment giant has been calling for the two to join forces for nearly six months, in the belief that they have been outperformed by their peers in the UC&C space. A merger could create the beginnings of a new platform strategy for cloud collaboration, believes the company.
But it is better to have the strategy first, not to create it after the fact – so let’s hope that the two companies’ business leaders already have both the vision and the detail in place.
Elliott Management has long seen Polycom as a putative “M&A machine”, which could achieve annual growth rates of 15 per cent or more. But those are advantages to its investors, rather than its customers. And this is where the problem lies in the context of today’s UC&C technologies.
The inherent risk in all activist interventions is that the real value is to the money men, not to the users. In this case, the longer-term strategic goals the activists have in mind suggest that they may have been seduced by broad, trendy messaging rather than an in-depth understanding of technology convergence. And in this day and age, that’s the last thing the tech market needs.
As UCInsight reported in October, despite being in a broadly similar space with a similar ‘collaboration’ message, Mitel and Polycom are neither true competitors nor true allies when it comes down to the details.
Unified communications (the clue is in the name) are not best served by two large companies being thrown together for financial gain, leaving them to sort out how best to combine product and service lines.
Look at the recent history of the company formerly known as Hewlett-Packard. It recently split into two in an attempt to find out what each part of the company actually stood for in the first place, after years of throwing vast sums of money at acquiring influence and relevance across different markets.
To draw an analogy with its own beginnings in a garage, HP was beginning to look like a cut and shut vehicle made from dozens of different parts rather than a well-designed car that was actually going somewhere.
The lessons of the collaboration space – and of the cloud in general – is that competitiveness comes from innovation, agility, and the ability to combine lean processes with responsiveness and speed. In that specific context, greater mass and complexity are hardly the right solution, despite the increased spending power.
In short, activist investors should be wary of applying 1990s thinking – grow! buy! larger! – to 21st Century problems.