Freeflight, I think the oxygen up there is a little thin just like your allegations.
Pat called your comments irresponsible I call them absolute lies. There is absolutely no truth to the allegation of TM or Cowpland Ever 'cooking the books'. (You also spelt Cowpland wrong). Unlike yourself I have something to back up my claim (do you? didn't think so)
The following is an excerpt of an article from the Ottawa Citizen unfortunately it is no longer available on their web site. Luckily I have it in hard copy and bought a scanner recently that can turn articles from newspapers into word files. The software isn't all that reliable so I went through copy and checked for spelling errors that the program made. I most probably missed some of the mistakes so if anyone needs clarification please message me.
Rhys
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Ottawa Citizen, February 23 1998
BY James Bagnall
By the early 1980s, when Mitel had graduated to producing sophisticated telephone Systems, a variety of events conspired to put the company in its place. AT&T Co. of New York, a major Mitel customer, agreed in 1982 to divest itself of its regional Bell telephone companies in order to end an antitrust investigation. The net result was fewer sales for Mitel. Then a recession hit. And, not least, Mitel ran into difficulty trying to design a major-league telephone switching system known as the SX-2000.
It added up to some terrific financial losses, not all of them the fault of the top two managers. But, as the money-losing months dragged on, it was clear the cofounders were having trouble adjusting - for the first time in their lives - to a new and disturbing era of slow growth.
Mr. Cowpland, who had been Mitel's chief executive all along, was increasingly distracted by a series of personal investments that had gone sour. His personal venture capital firm, Bytec Management Corp. of Ottawa had reported a $14.6 million loss on sales of $9.2 million for the fiscal year ended July 31, 1983 - thanks in part to development costs associated with the Hyperion portable computer. There was also the feeling that maybe he getting a little bored with telecommunications technology in favour of the much faster-moving world of computers.
In October 1983, Mr. Cowpland stepped aside to let Mr. Matthews run the show. Mr. Cowpland accepted the less hands-on role of chairman of Mitel while Mr. Matthews took over as president and chief executive. As Mitel losses accelerated through the fall of 1983 and early 1984, Mr. Matthews was a study in barely controlled anger. Mitel was his baby and nobody was going to take it away from him if he could help it.
However, some wondered even then whether he was the best person for the job of fixing the company. The task called for the imposition of corporate structure, discipline and retrenchment - and Mr. Matthews had little or no experience in any of these areas.
He was also very determined to preserve Mitel's independence at a time when it seemed clear it needed allies
- rich ones. One such alliance - a one-year old marketing and development pact with New York-based computer giant IBM Corp. - slipped through Mitel's fingers in mid-1983. IBM had been eager to get its hands on Mitel's switching technology but had been dismayed at the firm's lack of management controls.
After the IBM deal fell apart, Mitel's :board of directors hired New York based Salomon Bros. in 1984 to try to find a joint venture partner. Unisys Corp. of Blue Bell, Penn. and General Electric Co. of Britain, among others, 'had a l~ However Mr. Matthews reportedly thwarted would be buyers. H~ did so by refusing to vet any deal that would result in a new management team for the company he founded Mr. Matthews was also visibly irritated by having to pay what he thought were exorbitant fee's for outside advice.
What really annoyed him was the decision by a consortium of banks -led by Royal Bank of Canada and Barclays Bank of Britain - to chop substantially their line of credit to Mitel when the Kanata firm began running heavy financial losses. Mr. Matthews never forgave his lenders. "What's the point of a line of credit if it's cut just when you need it most?" he would complain to Mitel insiders.
'To break away from the banks, Mr. Matthews turned to New York to take advantage of what was then a fairly novel financial instrument known as junk bonds. These are high-risk loans that charge an appropriately high rate of interest. Mr. Matthews', now chairman of Newbridge Networks Corp., says he eventually secured a new line of credit anchored by New York-based junk bond king Drexel Burnham LamBert Inc. To this day, Mr. Matthews maintains extremely high cash balances at Newbridge - $3~ million as of Oct. 31 - and most of its affiliated companies. "I have enough to withstand any goddamn storm," he says.
But in 1985, he most certainly did not. That's when the hunt for a new investor took on new urgency. A key figure emerged from Toronto. John Plaxton, currently chairman of Toronto-based BZW Canada Ltd., then a vice-president of Wood Gundy initiated a series of meetings between BT and Mitel in the spring. And, when BT made it clear it wanted to install its own management team at Mitel in exchange for a $320 million investment, Mr. Matthews finally relented
"He had no choice," says Mr. Plaxton. "Mitel was in serious trouble and 'he really didn't have much leverage. In fact, it was the Mitel board of directors that made this deal, not Terry Matthews." In October 1985, BT tapped its own candidate to run Mitel
Anthony Griffiths, the new chief executive, was everything Mr. Matthews is not. Cooly 'cerebral, Mr. Griffiths had a Harvard MBA and plenty of experience running a variety of firm including Canadian Cablesystems Ltd. and Harding Carpets Ltd., where he spearheaded a successful restructuring. Just before he joined Mitel, he had been a financial and management consultant for Connor, Clark & Co. Ltd. He is currently an associate with Fair-fax Financial Holding Co.
Mr. Griffiths viewed his stint with Mitel as a short-term consulting assignment - one that would take a couple of years at most. It would not turn out that way because Mitel's problems were more intractable than he believed possible.
Surprisingly, Mr. Matthews wasn't done with Mitel even though Mr. Griffiths had displaced him. BT had tried to entice Mr. Matthews back to Britain with an offer to run their international business but Mr. Matthews says he declined because "I didn't like the politics of a big company." Instead, he stayed on as director of Mitel
However, this was not a full-time job and Mr. Matthews was nearly paralysed with indecision about what to do next. Engineers inside Mitel were trying to develop a new breed of communications switch optimized for handling data. And he was convinced there was a massive commercial opportunity here. But his loyalty to Mitel prevented him at first from striking out on his own
Instead, he pigeonholed colleagues for hours on end, sketching out his plans for developing this exciting new niche. Then he began trying to convince Mitel's new owners they had a potential hit on their hands.
"He made the proposals several times to the Mitel board," says Mr. Plumley. "He was not quiet about it. Finally, I and others suggested he should start his own bloody business." So, in the spring of 1986, that's what he did. |
