excerpts from lehman's latest. estimating $0.45 and $1.88 for Q1 and FY99, respectively.
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Comverse Tech: To Continue Partnership With Cisco After Amteva Deal
Author: Tim Luke (212) 526-4993
Rating: 1
Company: CMVT
Rank (Old): 1-Buy
Rank (New): 1-Buy
Price : $62 15/16
52wk Range: $67-20
Price Target (Old): $66
Price Target (New): $75-80
Today's Date: 04/28/99
Price (As of 4/27): $64 1/2
Revenue (1999): 834.6 Mil.
Return On Equity (99): 45.8%
Proj. 5yr EPS Grth: 25.0%
Shares Outstanding: 76.5 Mil.
Dividend Yield: N/A
Mkt Capitalization: 4.93 Bil.
P/E 1999; 2000 : 34.3X; 28.7X
Current Book Value: $4.29/sh
Convertible: YES
Debt-to-Capital: 0.0%
Disclosure(s): C, A
* This morning, Cisco Systems extended its profile in the voicemail, email and fax messaging marketplace with the acquisition of Glen Allen, VA based middleware developer Amteva for $170 million causing some investors to question how Cisco will integrate this deal with its recently formed partnership with Comverse Tech.
* We believe Cisco and Comverse are likely to continue to work closely
together combining Amteva's middleware with Comverse's software applications and network systems expertise. Comverse has worked with Amteva for some time.
* We also consider Cisco's primary thrust in working with Amteva is to target the enterprise market and to integrate Amteva's middleware unified messaging solution with its recently acquired IP based PBX solution from Selsius and its call center solutions from new addition Geotel. Comverse does not compete in the enterprise market and is focused exclusively on the service provider arena.
* In our opinion, Comverse's competitive positioning remains excellent based on its ability to deliver a full suite of solutions for operators using circuit switched networks, IP (Internet Protocol based) or hybrid architectures. Cisco's offerings are likely to remain focused on greenfield IP based networks.
* We believe Comverse is continuing to expand its share of the global carrier messaging market despite the efforts of a larger competitor Lucent/Octel. We maintain Comverse's powerful combination of industry leading technology and an strong installed base of customers should position the company to retain its premier position in this fast expanding marketplace. Reiterate 1 buy Target price $75-80.
Stock Opinion: Excellent Visibility, Continues To Expand Share, Reit 1 Buy
We believe that Comverse's 1Q99 is progressing well with the company
experiencing robust business momentum. Following another round of excellent results, we recently raised our estimates once again. Our FY99 earnings estimates move from to $1.88 and our FY00 estimate is now $2.26. Our revenue targets for FY99 and FY00 and $845 million and $1.001 billion respectively. We believe these new estimates remain conservative and are likely to be subject to upward revisions throughout FY99.
We have been encouraged by CMVT's expanding customer list and impressive order momentum. With over 280 customers (10 added during the quarter) Comverse continues to offer compelling solutions to service providers who are seeking to generate additional sources of revenue with enhanced services platforms. We believe Comverse is continuing to strengthen its competitive position in the area versus its primary competitors such as Octel/Lucent and Unisys. We maintain that CMVT is continuing to expand its market share across the global enhanced services market.
With Comverse continuing to build its backlog to new record levels we believe visibility on 1H99 remains extremely strong. Beyond the impact of the robust revenue growth outlook, our earnings estimates may also be subject to upward revisions as gross margins continue to improve with Comverse continuing to benefit from a high level of repeat orders from its installed base of customers. Increasing software content may also help boost gross margins.
We are reiterating our 1-Buy rating. Our price target range of $75-80 is based on our view that over the next twelve months investors are likely to focus on CMVT's earnings growth in excess of 25% allowing the shares to achieve a multiple of approximately 30x our conservative calendar 2000 estimate range of $2.25-2.50.
Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities. |
