SHOR

ShoreTel, Inc. (SHOR)

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ShoreTel, Inc. (SHOR)

F1Q2013 Results Earnings Call

October 30, 2012 5:30 PM ET

Executives

Tonya Chin - Director, Investor Relations

Peter Blackmore - Chief Executive Officer

Mike Healy - Chief Financial Officer

Kevin Gavin - Chief Marketing Officer

Analysts

Sanjiv Wadhwani - Stifel Nicolaus

Rohit Chopra - Wedbush

Mike Latimore - Northland Capital

Greg Burns - Sidoti and Company

Trevor Bacon - Lazard Capital Markets

Christian Schwab - Craig-Hallum Capital Group

Presentation

Operator

Please standby. We are about to begin. Good day. And welcome to the ShoreTel First Quarter Fiscal 2013 Earnings Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Tonya Chin. Please go ahead.

Tonya Chin

Hello. And thanks for joining us today as we report our first quarter fiscal 2013 financial results. Before we get started, we wanted to say that our thoughts and concern with all those affected by Hurricane Sandy and its aftermath, including many of our customers, partners, employees and many in the investment community.

Joining me on the call today is ShoreTel’s CEO, Peter Blackmore; and Chief Financial Officer, Mike Healy. Additionally, Kevin Gavin, Chief Marketing Officer is joining us for participation in our question-and-answer session.

Before we begin, I will remind you that during today’s call management will make forward-looking statements within the meaning of the Safe Harbor provision of Federal Securities Laws regarding the company’s anticipated future growth, gross margin, operating expenses and other financial and business related information. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Additional information concerning the risk factors that could cause actual results to differ materially from those in the forward-looking statements can be found in the company’s annual report on Form 10-K for the fiscal year ended June 30, 2012, and in the current report on Form 8-K furnished today.

The information in this conference call related to the projections or other forward-looking statements is based on management’s current expectation. The company does not intend to update its forward-looking statements should circumstances change. As a matter of policy, ShoreTel does not comment on financial guidance during the quarter unless it’s done in a public forum.

We’ll be discussing both GAAP and non-GAAP results throughout this call, and I ask that you refer to our press release issued today for the reconciliation between these amounts.

Our non-GAAP numbers exclude stock-based compensation charges, amortization of acquisition related intangibles, other adjustments and the related tax impact, which we do not feel are core to evaluating our operating results.

And finally, ShoreTel management is planning on attending the Stephens Fall Investment Conference on November 13th in New York. We hope to see you all there.

Now, I’ll turn the call over to Peter.

Peter Blackmore

Thank you, Tonya, and welcome, everybody. Before Mike reviews the detailed financial results and key metric, I’d like to share my perspective on where the industry is headed, plus a few highlights on our business this quarter. So let’s start with the vision of the industry as we see it.

Our industry is at an inflection point and there are number of factors driving this. In fact we’ll change the dynamics of the industry and create a new paradigm, which will dictate who are the winners and losers in that industry. We believe several trends and unified communications have converged to create this opportunity.

But first of these, is that we are seeing a significant increase in the focus on the mobile worker. Frost and Sullivan estimates that 84% of customers now have mobile workers. Companies are embracing tools and technologies that support the productivity of their mobile work force. The key for us is that decision makers understand the opportunity to improve productivity and that unified communication tools are right at the center of that.

Second, the end-user is growing and influence and making a significant impact on many aspects of IT decision-making, ease-of-use has a key role and whether a technology is enthusiastically accepted or never lives up to its potential. ShoreTel has always led an ease-of-use but we are taking nothing for granted and are extending our advantage in this area.

And third, the move to the cloud is gaining speed. This represents a new business model. The cloud UC market is estimated to be growing at a compound annual growth rate of 30% over the next few years and is expected to be 40% of the combined premise and cloud UC by 2015.

ShoreTel is ideally positioned to capitalize on these trends. We offer a combination of premise, cloud, mobility and in the future, a hybrid solution that gives us significant advantage in the marketplace.

As it relates to mobility and bring your own device, our feature-rich and easy-to-use mobility solution enables us to help our customers empower their mobile work’s. We have two years experience in offering our mobility solution to the market and have continued to improve in it during this time to ensure it remains in a leadership position.

A recently acquired Cloud Solution is considered to be one of the best in the industry giving us a solid position with huge growth potential. We believe our product serves the Cloud business customers in ways our competition does not.

For example, our integration with business critical applications such as Salesforce.com linked to our voice and UC capabilities puts our solution and class by itself in terms of value add to businesses. We plan to have several other third-party integrated solutions over the coming quarters.

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