>From what I am reading into this, amarex does business with both MCI Worldcom and British Telecom and CMVT bought amarex to use as a sort of trojan horse and try to weasel their way into two of the biggest accounts they don't really do business with.
NN.
your comments are echoed by tim luke (see below) -- albeit not as entertainingly, natch. his report also confirms your previously cited post-close mar 16 earnings release.
i do believe it'll give me reason to heft a bevvy a wee bit early. read: a pre-paddy's day pint o' guinness.
kampai!
-chris.
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Comverse Technology: Acquires IVR Provider Amarex Tech, Reit 1 Buy
Author: Tim Luke, Mark Sue 1(212)526-4993
Today's Date : 03/01/99
* This morning (March 1), Comverse Tech announced the acquisition of
privately held, New York City-based IVR provider Amarex Technology, Inc. in a stock-for-stock transaction estimated at $16 million.
* We view this acquisition as a strategic positive for Comverse as it extends its leadership in enhanced services to include Interactive Voice Response and call center applications.
* The acquisition also gives the company avenue into new customers such as British Telecom and MCI Worldcom (two of the top 20 service providers currently not on Comverse's roster).
* The acquisition is likely to be neutral to earnings. We expect a one-time charge of $1.5 million. Separately, we believe the company is likely to report strong 4Q98 earnings post-close on March 16, 1999.
* We reiterate our 1 Buy rating. Our price target is $85-$90, or just 25-27 times our conservative FY00 estimate of $3.32.
This morning (March 1), Comverse Technology, Inc. announced the acquisition of privately held New York City-based Amarex Technology, Inc. for approximately $16 million. Under terms of the agreement, Comverse will issue 231,000 new shares and will assume options and warrants to issue approximately 80,000 additional shares. Comverse is likely to post a one-time charge of approximately $1.5 million. This relatively small acquisition is likely to be neutral to earnings.
We view this acquisition of Amarex as a strategic positive for Comverse as it extends the company's leadership in enhanced services into interactive voice response (IVR) and call center applications. Furthermore, the partnering of Amarex allows Comverse to reach two currently untapped key customers, British Telecom and MCI Worldcom. Currently, Comverse's customer list includes 13 out of the top 20 largest telecom service providers.
With respect to synergy, we note that Comverse has previously worked with Amarex and has already integrated the company's product line into its own platform. Amarex will strengthen Comverse's R&D team with the addition of 50 engineers, and we believe the added product offering (which includes virtual private network services, 800 services, network announcement services, etc.) may offer residential and corporate customers a full suite competitive offering.
Separately, our recent discussions with the management and checks with a number of large customers indicate that current business trends remain robust for Comverse Technology. We believe the company has excellent visibility on orders through 1Q99, which ends in April. After closing 3Q98 with a record backlog level of approximately $155 million, we continue to expect this level to rise again in 4Q98 (which ended in January 1999). We consider our revenue and earnings forecasts for 4Q98 of $189 million and $0.63 may prove to be conservative when the company reports its full results post-close on March 16, 1999.
Stock Opinion: Valuation Remains Compelling, Reiterate 1 Buy
We contend that Comverse's valuation remains compelling at 25 times our conservative calendar 1999 estimates. Our price target of $85-$90 is based on our view that over the next 12 months investors are likely to focus on the company's earnings growth in excess of 25%, allowing the shares to achieve a multiple of approximately 25 times our conservative calendar 2000 estimate of $3.32. |
