>Lehman is saying that rumors are BS.
luke's report below confirms! like we ever doubted you, NN. <vbg>
>the baseball game was a bit of a snoozer but memorable as I went home with a baseball. I had to wrestle an 8 year old for it ...
aren't there bars on the lower east side where you have to pay to do that? not that you'd really know, of course.
enjoy the weekend. i might do some wrasslin' myself (with a sailboat).
notsurewhereyourloftisbutisuspectitsnotinchelsea,
-chris.
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Comverse Technology: Unfounded Merger Rumors Create Opportunity,
Reit Buy
Author: Tim Luke (212)526-4993
Rating: 1
Company: CMVT NICE
Ticker: CMVT
Rank (Old): 1-Buy
Rank (New): 1-Buy
Price: $70 5/16
52wk Range: $74-20
Price Target (Old): $80
Price Target (New): $80
Today's Date: 05/14/99
Price (As of 5/12): $73 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: 5.62 Bil.
P/E 1999; 2000: 39.1X; 32.5X
Current Book Value: $4.29 /sh
Convertible: YES
Debt-to-Capital: 0.0%
Disclosure(s): C, A
* We believe recent weakness in Comverse's shares following unfounded merger related rumors may have created an opportunity. Shares of the global messaging leader have been under pressure following articles in the Israeli press that have inaccurately suggested CMVT is poised to acquire digital recording leader NICE Systems.
* Having spoken yesterday to the CEO's of both Comverse & NICE systems, we can confirm that 1) There has been no contact between the two companies in the last several weeks 2) There are currently no plans for any form of merger or combination between the two companies.
* We believe the rekindling of this familiar CMVT/NICE merger rumor may have been prompted by Comverse's long awaited confirmation (announced Wed May 12th) it is formally separating the operations of its slower growth government and commercial digital recording business, Comverse Infosys,(approx 9-10% total sales) from the core voicemail/messaging business, Comverse Network Systems.
* Comverse has frequently stated it may consider several strategic options for the Infosys unit including a formal spin-off or possible additional acquisitions to increase its scale. While some form of cooperation or alliance between the two global leaders in digital recording may remain a possibility at some point in the future, we can confirm there are currently no contacts between the two companies nor any plans to work together.
* With Comverse currently seeing excellent business trends and strengthening visibility, we continue to believe our estimates may prove conservative and would use any weakness to acquire the shares. We maintain NICE's ($26, rated 1 Buy) 2Q99 is also progressing well. Our price target for Comverse is $80.
Summary:
Stock Opinion: Excellent Visibility, Ests Remain Conservative, Reit 1 Buy
Following conversations, with senior management of both Comverse Technology and NICE systems, we can confirm that contrary to reports in the Israeli financial press there have been no recent merger discussions between the two companies. We believe this rumor may have been fanned by the recent much anticipated formal separation of the operating activities of Comverse two primary units Comverse Network Systems and Comverse Infosys. Comverse's Infosys unit and NICE represent two of the global leaders in digital recording for commercial and governmental applications and it may remain possible that the two companies could cooperate in some form in the future,
however, we believe investors should be aware that there are currently no initiatives.
In the meantime, Comverse continues to benefit from an excellent demand outlook notably across its wireless operator customers. Based on strengthening business trends and excellent visibility we believe our estimates remain conservative. Our FY99 and FY00 estimates are $1.88 and $2.26 and our revenue targets for FY99 and FY00 and $845 million and $1.001 billion respectively. We believe these estimates remain conservative and may be subject to upward revisions throughout FY99.
CMVT's expanding customer list and the company's impressive order momentum has encouraged us. With approx. 300 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 remains at $80 and 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 35x our calendar 2000 estimate of $2.26.
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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. |
