VANCOUVER -- Underdogs tend to get the royal treatment in Canada. Take the 1988 Winter Olympics in Calgary, for example. There, a raucous hometown crowd rooted for Jamaica's bobsled team and Britain's ski-jumping hero, Eddie "The Eagle" Edwards.

That fondness for the little guy extends to Canadian stock-market circles as well. While not exactly a small fry in the world of telephony, Kanata, Ontario-based

Mitel

(MLT)

, a producer of semiconductors and phone equipment, has parlayed its relatively diminutive stature into glowing analyst and media coverage.

Thanks to a new, Internet-focused strategic direction announced earlier this week, the firm is shaping up to be a David to some of its Goliath-like competitors such as

Nortel Networks

(NT)

,

Lucent Technologies

(LU)

,

Cisco

(CSCO) - Get Report

and

3Com

(COMS)

.

To skeptics, that lineup of technology names may sound like the Four Horsemen of any company's apocalypse, but Mitel has decided to relish its underdog status -- and the popularity that comes with it.

One of Canada's oldest tech outfits, Mitel is set to launch a suite of Web-based telephone products that work in conjunction with Internet protocol, or IP, a technology that combines Internet-based services with other communications tools. It's a bold move that both Bay Street, Toronto's financial district, and Wall Street are bullish on. IP, after all, is thought of by many to become the telecommunication industry's dominant technology.

Since the news, Mitel stock has been rising, gaining about 5% on both Tuesday and Wednesday. Shares, which year to date have traded as high as 34 1/4, currently hover around 26. By contrast, shares in the company languished below the $10 mark for almost all of 1999. Mitel stock was buoyed on Wednesday by feel-good analyst coverage:

CIBC World Markets

gave Mitel stock a strong buy rating, while

RBC Dominion Securities

restated an outperform position. RBC has underwritten stock offerings for Mitel.

The recent uptick for Mitel is good news for shareholders and owners of Mitel-invested mutual funds, like the

(DSCVX) - Get Report

TST Recommends

Dreyfus Small Company Value fund and the

(FMIOX)

FMI Focus fund.

While Mitel's core business of corporate telephony has served it well in recent years (the company controls about 25% to 30% of the North American market), the transition to IP was considered a no-brainer by management.

"The approach we're taking is revolutionary and evolutionary," says Ken Dumont, vice president of marketing for

Mitel Communications Systems

, a division of Mitel. Evolutionary, he says, because many of Mitel's IP customers are already in the door. "It allows our existing PBX

private branch exchange customers to switch to IP with few changes. The customer can make the decision when to move to an IP infrastructure at their pace, and not what the manufacturer dictates to them."

But amidst the euphoria over this foray into Internet products, concerns are beginning to emerge regarding Mitel's credibility, especially from those folks who've watched the firm evolve over the years.

"There are a lot of people in Canada who are very enamored with this company and their technology, but I would not be in that crowd," says a technology analyst at an investment bank, who requested anonymity. "They've had problems executing in the past."

The analyst points to Mitel's launch of computer telephony integration or CTI products from a few years ago, which failed to captivate the communications industry. "They focused so much on the CTI stuff that they dropped the ball on their core business. It was a total disaster."

In addition, serious challenges await in the convergence marketplace. The aforementioned competition looms large, with Nortel and Lucent awaiting on the networking front, and Cisco and 3Com poised to duel for customers on the enterprise side. But Mitel is no slouch of its own, and most analysts concur that the company's loyal client base and strong distribution channels should give it at least a fighting chance in the immediate future.

Mitel may very well succeed in the war for customers, but it'll likely face another uphill battle in its quest for information technology talent. The company is headquartered in the bustling high-tech corridor of Ottawa, where firms like Nortel, Cisco,

Corel

,

Newbridge Networks

(NN)

and

JDS Uniphase

(JDSU)

are either headquartered or maintain substantial operations.

"These companies want to grow at significant rates, so they have an IT-skills challenge," says Gerry Stanton, CEO of Ottawa-based human resources firm

E-cruiter.com

. "They're using every means possible to find the people."

Mitel seems ready and willing to play the game. The company's new head of hardware development, Jim Davies, was lured from the Nortel camp. That sort of scrappy approach to acquiring talent should go over well with Wall Street, though the same can't be said for the general public north of the border.

Unlike their affection for underdogs, Canadians -- ever-sensitive to wayward American boats in its fishing waters -- aren't amused by the art of poaching. But given its current reincarnation, Mitel may not have a choice on the matter.

Derek Moscato is a freelance financial journalist in Vancouver. At the time of publication he had no positions in any of the securities mentioned, although holdings can change at any time.