If Portal is still considering a reverse split it's going to suck for shareholders, however, I still think there's a great deal of hope for this company. Check out this article:
Amdocs in transition
Changing markets mean a changing business model for the billing giant.
Hadass Geyfman 23 Dec 02 16:51
Sources inform “Globes” that Amdocs R&D division director Yaffa Shalit has decided to leave the company. The reason for the decision is not known at this time, but is probably not related to the lay-offs Amdocs (NYSE: DOX) is carrying out.
As first reported by “Globes”, Amdocs will probably continue laying off staff in January-March 2003. The company’s management is expected to review its workforce every quarter and decide whether to lay-off employees and if so, how many, based on the number and size of projects won or lost. Sources believe that in the best case, Amdocs will reach equilibrium in its tsaff numbers and start to grow againwithin a year. In the less good case, growth will begin in two years.
In a company like Amdocs, sales and contracts procedures take more than one quarter to be completed, and it is hard to imagine the company making quarterly management reviews. That means that Amdocs is apparently aware that the company has more employees than needed for its available work. One piece of evidence to this effect is that the hidden unemployment at the company is only worsening, even after the wave of lay-offs a few months ago and the continuing dribble of more lay-offs since then.
Moreover, the billing market’s transition from heavy tailor-made systems requiring major labor-intensive customization toless labor-intensive off-the-shelf products, Amdocs has no alternative but to reduce its workforce. In this context, it should be noted that the employees laid off in the latest wave received only six weeks notice, in contrast to the three months notice received by employees in the first wave. The reason seems to have been laid-off employees’ claims for accumulated overtime compensation, paid as part of their salaries.
Strategic loss
One prominent indication of the telecom market’s transition from heavy customized billing systems designed for each individual customer to off-the-shelf products was the victory by IP billing company Portal Software (Nasdaq:PRSF) over Amdocs in the tenderby Japanesemobile telephony company J-Phone. Portal Software currently has 600 employees, less than a tenth of Amdocs’ workforce.Its market cap has almost quadrupled in the past few months, while Amdocs’ share price has slumped to a nadir.
Until 12-18 months ago, off-the-shelf billing products were for specific needs, and werenot complete systems. 18 months ago, Portal Software’s products could not have replaced Amdocs’ comprehensive systems, except in minor projects. But Portal Software’s winning the J-Phone tender proves that things havechanged. Telecom industry sources estimate the J-Phone project at $40-50 million, adding that much higher amounts could have been charged for the project during the boom years.
In its tender, J-Phone demanded an off-the-shelf billing product.Amdocs offered itsEnabler system. An industry source said Amdocs had invested immense efforts and resources in the tender. J-Phone is currently Japan’s third largestmobile telephony operator, but expects to overtake KDDI to become the second largest in 2003. For Amdocs, the loss was not merely in revenue, but also strategic.
Changing model
The telecom market’s transition from customized to off-the-shelf billing products is forcing Amdocs to thoroughly revise its business model, management procedures, employee specializations and total workforce, at least for the near future. The change will probably cause Amdocs’ managers quite a few headaches, and not just because of the technological complexity of the new products demanded by the telecom industry.
An industry source explained that with systems that are rebuilt from scratch every time, requiringadaptation at the customer (the type that Amdocs makes), the communications operator (i.e. Amdocs’ customers) carries all the risk. Amdocs charges $150 an hour for each programmer’s labor. In other words, the customer pays for development and installation time, plus for every change Amdocs is asked to make in the system.
In contrast, the business model for off-the-shelf billing products, like with any product-based company, the risk falls on the billing company. The company finances all the development costs, including the development of new versions and alltesting. Afterwards, the billing company must sell enough of its systems to cover its costs. In other words, this is a significant change that requires Amdocs’ managers to make a 180-degree turn in policy.
Despite everything, the telecom and capital markets both believe Amdocs is strong enough to survive the change. The assessment is that if the companycarries out the necessary measures, and if managementmakes the right decisions and is uncompromising about the depth of change required,Amdocs will ultimately make it through the hard times.
globes.co.il |
