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Mitel Networks Corp. Is on the Acquisition Trail Again: Time to Buy?

Mitel Networks Corp. (TSX:MNW)(NASDAQ:MITL) is a recognized global leader in the fast-growing world of cloud communications, and it’s getting bigger. Mitel announced on Monday the acquisition of mobile networking software maker Mavenir Systems Inc for $560 million in cash and stock.

Mavenir is Mitel’s second major acquisition in the past 13 months, suggesting the company is a worthy addition for investors looking for a strong and stable technology stock. In January of last year, Mitel acquired Toronto-based Aastra Technologies Limited for $392 million. Acquisitions of this size are a good indicator of a company’s financial health, and Mitel looks pretty robust, especially when you look at the latest earnings report released last week.

Mitel posted fourth-quarter revenue of $301.4 million, a 108% increase from the prior year. Fourth-quarter profits came in at $10.8 million, compared with a loss of $2.8 million in the same period in 2013. The company also posted record non-GAAP earnings per share of $0.36 for the quarter and $0.99 for the year.

Consider the fact that Mitel achieved these record numbers during a time of currency instability. Mitel generates more than 60% of its sales in currencies other than the soaring U.S. dollar. “We were especially pleased to record such solid profitability during a period of significant currency volatility, which impacted our quarterly revenue by approximately $14 million on a constant currency basis,” said Steve Spooner, Mitel’s chief financial officer.

In its earnings report, Mitel noted that it has surpassed the one-million mark in installed cloud seats, a type of cloud computing licence. “Our sales performance speaks to the fact that our broad portfolio of business communications solutions—premise, cloud and hybrid—is able to address the diverse and evolving needs of customers in markets around the world,” said company CEO Rich McBee in a statement.

In a recently released report, Synergy Research Group said Mitel has nearly 32% of the enterprise cloud communications market worldwide. “Based on worldwide subscribers and seats, Mitel is the fastest growing provider of cloud communications, trending upward and outpacing its competition,” said Jeremy Duke, founder and chief analyst, Synergy Research Group.

Despite Mitel’s acquisitions, its strong earnings report, and dominant market position, the company’s stock is down 10% year-to-date. But as long-term investors, we note the stock is up 5% since March 2013 and has more than doubled on a five-year basis.

Volatility is nearly always part of the package when you invest in technology. We all recall the collapse of Nortel Networks and the more recent ups-and-downs of BlackBerry Ltd. But Mitel’s decision to focus on cloud computing has been a prescient move—one that could make the stock a resilient performer for years to come.

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Fool contributor Doug Watt has no position in any stocks mentioned.

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