Mihaylo 'confused' by Inter-Tel's latest earnings release

By Lisa Kerner

Charlotte, N.C., July 27 - Inter-Tel (Delaware), Inc. founder and former chief executive officer Steven G. Mihaylo said the company's most recent earnings release, along with revised third- and fourth-quarter 2007 forecasts, left him "extremely confused" and "troubled."

Mihaylo expressed his views in an open letter to Inter-Tel stockholders on Friday.

The revised forecast for full-year 2007 net sales are 8% to 10% below the projections in Inter-Tel's May 29 proxy statement. Earnings per share estimates dropped to $1.00 per share, or 31% below management's previous projections, according to Mihaylo.

"Although I have serious doubts as to whether the company's revised forecasts are reliable and whether or not they factor in what I believe may be positive recent material developments at the company, these events have forced me to reevaluate my recapitalization alternative."

Inter-Tel's actions have also left Mihaylo feeling "whip-lashed and deceived" and he rescinded his proposed recapitalization alternative.

The shareholder reiterated his 19% stake in Inter-Tel and his opposition to the sale of the company to Mitel Networks Corp. Mihaylo will vote against the merger at the shareholder meeting on Aug. 2.

On April 26, Mitel agreed to acquire Inter-Tel for $723 million.

As previously reported, Mihaylo recommended Inter-Tel use $200 million from its cash reserves and an additional $200 million of borrowings to begin a tender offer to purchase, after expenses and break-up fees, 13.4 million Inter-Tel shares at $28 per share.

In his prior letters to the board, Mihaylo suggested reducing the board to six members from the current 11 and naming him as chairman and interim chief executive officer. Mihaylo also wanted the current special committee to be disbanded and replaced with a new one that has a majority drawn from his directors, while an executive search firm would find a new CEO.

Tempe, Ariz.-based Inter-Tel specializes in applications using networks and server-based communications software.

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