Canadian IP PBX maker scores record sales

The purchase of the enterprise communications business from a competitor and a turn around in sales in Spain has given a Canadian IP PBX maker a record 2008 in sales.

Aastra Technologies of Concord, Ont., chalked up sales of $832.1 million last year, the company reported Tuesday, a 37 per cent increase over the previous year. In part the numbers were helped by the $107.7 million purchase of a division of Swedish telecom equipment manufacturer LM Ericsson last April.

Here’s just how big that deal was to Aastra’s bottom line: Without it sales last year would have only $617 million, or an increase of 1.7 per cent over 2007.

Profit for the year was $11.5 million, but that included an $11 million charge the company took for restructuring the Ericsson division after it lost $10 million in the third quarter, and the write-down of another $14 million of goodwill and other assets from earlier acquisitions.

The year ended with “surprising” fourth quarter sales, said chairman and co-CEO Francis Shen, leaving him to conclude that the company is well placed for what the rest of the world expects will be a troubled 2009. “We believe our restructuring is generally complete,” he told financial analysts on a conference call, “and we’re ready to handle the economic storm ahead.”

He wouldn’t make a revenue prediction for this year, but did maintain that “we’re prepared for the difficult climate that we expect in the quarters ahead.”

Aastra’s products include the Aastra 5000 IP PBX, that can host up to 150,000 users, the Clearspan VoIP platform and a line of desktop SIP wired and wireless phones and the former Ericsson MX-ONE communications servers and switches.

The bulk of the company’s sales come from western Europe (about 70 per cent), and relatively little from the badly hit developed economies such as the United States (9 per cent) and Britain. Combined with the fact that Aastra’s balance sheet is unleveraged and the company has good cash flow “has put us in an excellent position during this economic downturn, where others are looking to de-leverage.”

One of those companies burdened with debt is Nortel, now in bankruptcy protection. Shen said his company has benefited somewhat from Nortel’s years of trouble. “There’s a lot of interest [from telephony buyers] in companies supplying product that are financially healthy and right now – particularly in western Europe – we’re viewed that way,” he said. As proof he cited one win from Nortel last year, a sale to a university in Sweden whose phone equipment had largely been from Nortel. However, he also acknowledged that Nortel isn’t as strong in western Europe as Aastra.

Like all telephony equipment makers, Aastra is seeing falling sales of its older TDM-based systems and digital handsets. But Shen said what’s helping the company is that sales of its IP-based systems are growing faster than the drop in sales of other lines. In the U.S., for example, sales of IP gear doubled last year compared to 2007, while the legacy products saw sales drop 14 per cent.

He also said the company’s rent-to-own strategy, which wasn’t well received in Spain early last year and contributed to a plunge in revenue of almost 50 per cent, is now apparently looked upon better. Sales in Spain at the end of the year were up markedly.

The results impressed National Bank Financial analyst Kris Thompson, who figured the company’s stock, trading about $10 a share, should be twice its value. “Aastra delivered much stronger than anticipated revenue in the [fourth]quarter, bucking the trend seen at many other communications technology vendors,” he wrote in a note. “Aastra’s large installed base is proving to be a valuable asset in this tough economy.”

With stable revenue and improved operating margins, Thompson also thinks the company could become an acquistion target.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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